Our HELOC (home equity line of credit) was frozen in July. Many customers of Chase had this happen to them regardless of their credit rating (ours are both over 800) because Chase made blanket assumptions about the actual percentage of declining values in particular areas.
Many lines of credit that use real estate as a collateral will be at risk, because the value of real estate has declined so significantly. So, if you have a line of credit (not a loan, but the ability to take one out) that is, say, 75% of the value of your home, and the value of your home declines significantly, then the bank would certainly not want to lend against collateral that is no longer there. So...TUGgers that may have been affected are ones who are currently drawing on their line. If someone is in the middle of a large home remodeling project (which theoretically will at some point increase the final value of the home but hasn't yet) and is using the line to write checks to the contractor, they may find that the next check can't be written. Some TUGgers don't use their line but have it there for emergency purposes and have now found it is no longer usable at a time when they may need it. (Think of all the "middle/upper class" folks who work for Lehman Brothers.)
In this economy, I cringe when I see folks who have an "us versus them" mentality when it comes to these issues. (To be clear, I am not accusing anyone on this thread of doing this.) Anyone can lose their job. My daughter's best friend's father lost his lucrative job several months ago. Eventually they could no longer afford their house, it was foreclosed on, and they moved into a rental. They were not living beyond their means, but at some point the money runs out.
I too am surprised at the large amount of credit card offers we receive in the mail every day, but the only thing I can say is that it's probably somewhat low risk for the banks at a 20% interest rate and on a card that they can whip away after the first late payment. Still, it is amazing....
P.S. Just adding that it's a bit easier to get credit on a new loan, because the loan is technically backed by the value of what you are paying. The value of what you are paying is clear because you have just paid for it, whereas a home equity line is based on the value of your home if you were to sell it today. However, I recently heard of someone who tried to get a mortagage on a vacation home and was told that the bank would not finance it because the appraiser had declared the value to be less than what they just paid.