With half his department recently laid off and his employer's budget for next year shrinking, Randy Holyfield, an executive for a nonprofit group in Highlands Ranch, Colo., was desperately seeking a safety net. He found one in his home. Holyfield refinanced his mortgage at the lowest rates in 30 years, cashing out a $40,000 cushion while holding his monthly payment steady. "The newspapers say unemployment is still low," offers Holyfield, 43. "Well, I have friends out of work, and others who had to leave the state for a job. It's worse than the numbers indicate."
Millions of homeowners are doing what...