Will the banks ever lend again?

During the early part of the last decade banks seemed to have unlimited money available to lend. Credit card offers poured into my mailbox, "no doc" loans for buying property were common. 100% financing for investment property was easy to obtain.

No more - during the past 18 months all of my HELOC's have been cut to zero. Funny, in my location (western NY) property values never sky-rocketed as they did in other parts of the country. And while other housing markets are seeing a big burst of the bubble, my market has continued to climb in value. Despite this, the automated valuing programs that banks use to assess property value seem to use a "one size fits all" approach.

I had several unsecured lines of credit available to me that have also been cut. In fact, every time I make a payment, the credit limit is cut some more. Despite my debt load dropping 10% during the past year and never being late for a single payment, my credit score is dropping like a rock as my balance increases relative to my total credit available.

What to do? Actually, I am reducing paying off debt and increasing the amount I send to my emergency cash reserves. It seems like not what Dave Ramsey would advocate, but if something major happens I can no longer count on borrowing from a bank.

Even Peer to Peer Lending sources like LendingClub have become more selective.

Despite what our government officials tell us, the money lenders tell us not to expect much of an economic recovery for a long time to come.