A U.S. Supreme Court ruling this week ensuring banks can pursue home-equity borrowers for payments in bankruptcy may give a boost to lending, Bloomberg News reported yesterday. The Court overturned a decision by a federal appeals court that extinguished a home-equity mortgage on an underwater property in Florida. The practice, known as lien stripping, had become common in some states after the Court of Appeals in Atlanta approved it more than two years ago, according to bank lawyers. Banks are originating home-equity loans at the fastest pace in seven years as Americans tap into rising home prices to pay for home renovations, college and cars, according to Equifax Inc. The unanimous court decision may spur even more home-equity lending by reassuring lenders they can try to recoup losses in a chapter 7 bankruptcy, said Thomas Norton, president of Norton Group, a bank consulting firm in Princeton, N.J. The court’s ruling on June 1 comes as rising home prices make it more likely that lenders can collect payments from bankrupt borrowers. The median price of a U.S. existing home has surged 42 percent in the last three years, according to the National Association of Realtors. Almost 1.2 million properties regained equity in 2014, according to CoreLogic Inc.
