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8/11/2014

HELOC In Trouble?




TransUnion's completed a research study on Home Equity Lines of Credit in the United States. Study here:
http://www.transunioninsights.com/helocstudy/

There are almost eight billion dollars outstanding on HELOC loans. Fifty percent of the total were originated from 2005 through 2007 at the height of the mortgage boom. Most have a ten year draw period with interest only payments until the end of the ten years. 
Some lenders in 2007 closed down HELOC available lines of credit. For example Bank of America reviewed Countrywide HELOC’s that they took over and on borrowers who were not using lines available, they arbitrarily closed the balance down, or decreased the line to the existing balance. Reasoning for this was most HELOC’s were underwater. Lenders used Broker Price Opinion valuations and online appraisal tools to mark properties with at risk HELOC’s. Many of those HELOC’s are now coming into time framed in the promissory notes that require principle and interest payments and catch up clauses. Will Americans be able to handle the jump in payments? Is there trouble ahead?
Certain market areas: Coastal with view, California Bay Area, and states where there was not a big bubble in property values will not be at risk. Borrowers can refinance the second into a new low rate first. 
Borrowers in pocket areas where the value has risen back to 2006 levels, can even find HELOC products that are amortized over thirty or forty years rather than the standard HELOC that will roll to a principle and interest payment amortized over fifteen after the ten year interest only time period. 
Others in markets that still have a long way back to valuations of 2006 (Arizona, Florida and Michigan) may see defaults.
If you have a HELOC that is adjusting and you want free advice how to fix it, please contact me I am happy to help




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