by Justin da Rosa
17 Jun 2015
Many Americans who have only had to
pay interest on HELOCs taken out ten years ago are set to struggle with massive
upticks in monthly payments, and delinquencies are already increasing as a
result.
“There are some early signs of
choppy waters ahead,” Dennis Carlson, deputy chief economist at Equifax told
The Wall Street Journal.
Equifax provided the Journal with
stats showing just how many Americans are struggling to make payments on HELOCs
signed up for in 2004. According to the data, borrowers who took on HELOCs in
2004 are 30 or more days late on $1.8 billion in outstanding balances four
months after principal payments kicked in.
That figure accounts for 4.3 percent
of the balance of all HELOCs originated in 2004.
Luckily, HELOCs account for a small
number of outstanding mortgage products, so the effect these delinquencies have
on the recovering U.S. housing market isn’t as dire as it could be.
According to the Wall Street
Journal: “Helocs account for a relatively small share of lenders’ exposure to
the housing market. Lenders carried $536.9 billion in Heloc balances at the end
of last year, compared with $1.8 trillion in traditional mortgages, according
to Inside Mortgage Finance, a trade publication.”
Still, the issue could be
exacerbated as more HELOCs come to maturity and holders are forced to take on
principal payments as well as interest payments.
And the banks who have a large
number of outstanding HELOCs are currently being reviewed by the regulator that
oversees the nation’s largest banks.
“We have been actively reviewing
banks that have significant exposures to Helocs,” Darrin Benhart, deputy comptroller
for supervision risk management at the OCC told the Wall Street Journal.
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