I say "banks hate this" as unsubtle shorthand here. Obviously they don't hate it enough to refuse people additional mortgages (it's all secured by tangible assets at the end of the day) but they certainly aren't as happy about it as if people had a 20% downpayment in cash rather than pulling it from a line of credit.

For who? Banks don’t hold mortgages on their books, they sell them to investors. I don’t think you understand how modern finance works.

I am not a financial expert, but I have been told by professionals, and read in credible publications, that financing entities are not thrilled about the idea that people can effectively 100% finance additional home purchases using HELOCs, rather than having a cash downpayment.

That's the point I was making. My apologies for drawing an incorrect conclusion on the unrelated details.

This puts the "bank" (read: bank and the investors the bank sold the loans to) in a precarious position, as a slight downturn in the market could result in a large percentage of loans defaulting.