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NEW YORK -- Homeowners have been tapping into their home equity to get the cash needed to pay down credit card debt incurred not for luxury expenses but for basic needs. This strategy leaves them on precarious financial footing after two years of interest rate hikes and the largest drop in home prices in 35 years, according to "House of Cards 2006 Update: Still Refinancing The American Dream", a report published today by Demos, a non-partisan public policy organization based in New York.
"House of Cards 2006" is based on extensive analysis of government, industry and academic research, and provides a comprehensive analysis of the causes and impact of the mortgage refinancing boom in the United States since 2001. The report shows that, as mortgage interest rates fell to record levels during the refinance boom, many Americans cashed out home equity to pay down debt and finance living expenses -- a quick-fix that compounds the long-term economic burdens of the average family. The net result: The financial well-being of many Americans is at risk as the refinancing boom blurred the line between good debt -- debt that results in an appreciable …