Hocking the house for quick cash is a lot harder than it used to be, and it’s causing headaches for homeowners, banks and the economy.

During the housing boom, millions of people borrowed against the value of their homes to remodel kitchens, finish basements, pay off credit cards, buy television sets or cars, and finance educations.

Banks encouraged the borrowing with ads touting the ease of unlocking the cash in homes to “live richly” and “seize your someday.”

Now, the days of tapping your house for easy money have gone the way of soaring home prices. A quarter of all homeowners are ineligible for home equity loans because they owe more on their mortgage than what the house is worth. Those who have equity in their homes are finding banks far more stingy. For many with home equity loans, the credit limits have been reduced dramatically.

The sharp pullback is dragging on the economy, household budgets and banks’ books. It also is another sign that the consumer spending binge that powered the economy through most of the decade is unlikely to return anytime soon.

At the peak of the housing boom in 2006, banks made $430 billion in home equity loans and lines of credit, according to the trade publication Inside Mortgage Finance. From 2002 to 2006, such lending was equal to 2.8 percent of the nation’s economic activity, according to a study by Atif Mian and Amir Sufi, finance professors at the University of Chicago.

For the first nine months of this year, only $40 billion in new home equity loans were made. The impact on the economy: close to zero.

“The home as ATM is yesterday,” said Keith Gumbinger, vice president of HSH Associates Financial Publishers, which publishes consumer loan information.

Millions of homeowners borrowed from the house to improve their standard of living. Now, unable to count on rising home values to absorb more borrowing, indebted homeowners are feeling anything but wealthy.

The situation also is a mess for the banking industry.

Home equity lending gained popularity after 1986, the year Congress eliminated the tax deduction for interest on credit card debt but preserved deductions on interest for home equity loans and lines of credit. Homeowners realized that tapping their home equity for home improvements or other cash needs was easier or cheaper than using funds from savings accounts, mutual funds or personal loans.

Banks made plenty of money issuing these loans. Home equity borrowers pay many of the costs associated with buying a home. They also may have to pay annual membership fees, account maintenance fees and transaction fees each time a credit line is tapped.

In 1990, the overall outstanding balance on home equity loans was $215 billion. In 2007, it peaked at $1.13 trillion. For the first nine months of this year, it was at $1.05 trillion, the Federal Reserve said. First American CoreLogic puts the current number of outstanding home equity loans and lines of credit at more than 20 million.

But delinquencies are rising, hitting record highs in the second quarter. About 4 percent of home equity loans were delinquent, and nearly 2 percent of credit lines were 30 days or more overdue, according to the most recent data available from the American Bankers Association.

A rise in home equity defaults can be particularly painful for a bank because the primary mortgage lender is first in line to get repaid after the home is sold through foreclosure. Often, the home equity lender is left with little or nothing.

Banks are applying the brakes.

Bank of America, for example made about $10.4 billion in home equity loans in the first nine months of the year — down 70 percent from the same period last year, said Rick Simon, a spokesman.

Last year, it also started sending letters freezing or cutting lines of credit and will disqualify borrowers in areas where home prices are declining.

“This was just solid risk management,” he said.

Jeffrey Yellin is in the middle of remodeling his kitchen, dining room, living room and garage at his home in Oak Park, Calif. He planned to pay for the project with his $200,000 home equity line of credit, which he took out in January 2007 when his house was valued at $750,000.

In October, his lender, Wells Fargo, sent a letter informing him that his credit line was being cut to $110,000 because, the bank said, his home’s value had fallen by $168,000.

He is suing the bank, alleging it used unfair standards to justify its reduction, incorrectly assessed the property value, failed to inform customers promptly and used an appeals process that is “oppressive.” Jay Edelson, a lawyer in Chicago who is representing Yellin, says homeowners are increasingly challenging such letters in court. He reports receiving 500 calls from upset borrowers.

Wells Fargo declined to comment on Yellin’s lawsuit but said it reviews customers’ home equity lines of credit to make sure that account limits are in line with the borrowers’ ability to repay and the value of their homes.

“We do sometimes change our decisions when the customer provides sufficient additional information,” Wells Fargo spokeswoman Mary Berg said in a statement e-mailed to the Associated Press.

Work has stopped at Yellin’s home. Materials and equipment fill the backyard, used as a staging area for the project.

“Now, I’ve got a backyard that looks like ‘Sanford and Son’ almost,” he said.