Second round of delinquencies hits home

by Justin da Rosa17 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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