Salient to Investors:

  • TransUnion said as much as 20% of home equity lines of credit are at increased risk of default as they switch from interest-only to include principal, causing monthly payments to rise more than 50%.  Ezra Becker at TransUnion said more than half of the outstanding HELOCs have a balance above $100,000,  but most debtors can refinance or absorb the payment increases.
  • Mark Fleming at CoreLogic said an impactful risk to the mortgage finance system or our housing market is harder to see.
  • Ira Rheingold at the National Assn of Consumer Advocates said HELOCs are not sold to investors, so banks have more flexibility to ease terms and have little incentive to foreclose or force a short sale for a loss. Rheingold said settlements between banks and regulators often require lenders to forgive debt or modify mortgages, which borrowers can use to strike better deals.

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