[quote=bearishgurl]
I just don’t see how it’s possible for a lender to “police” what a borrower does with his/her HELOC proceeds.
[/quote]

I personally don’t think lenders should police what you do with the money. I do think the lenders should establish the interest rate at a level that corresponds with the risk. Of course when you have the tax payers to bail you out risk pricing goes out the window.

The problem with lending these days is nobody bothers to price the risk anymore. Everyone expects the tax payer bailout. If you actually made the lenders eat their losses when things went bad than you’d probably see HELOCs with 10% interest rates rather than 5%.