HELOC Resets Still a Concern
Home Equity Lines of Credit or HELOCs are one area of focus of the July Mortgage Monitor issued by Black Knight Financial Services on Tuesday. The company said there is still concern about possible payment shock for homeowners with HELOCS as the millions put in place during the housing boom reset and begin to amortize.
Black Knight estimates that at least 2.5 million borrowers face these resets over the next three years. At that point the period during which borrowers can draw down on their home equity through these loans will end and the loans will convert from an interest only payment schedule to a fully amortizing one. The average increase in payments is estimated at $250 per month.
According to Kostya Gradushy, Black Knight’s manager of Research and Analytics, this average could increase if homeowners continue to draw on their HELOCS until they reset. “Black Knight’s analysis of outstanding HELOCs that have yet to reset is based upon current utilization ratios,” said Gradushy. “Currently, borrowers whose HELOCs will reset over the next three years are utilizing just under 60 percent of their available credit. Further draws on these lines – for those that have not been locked – could result in ‘payment shock’ after they are reset that is even higher than the national average of $250 per month. Looking further down the road, HELOCs not likely to reset until 2019 are exhibiting even lower utilization ratios – about 40 percent of available credit. Upon reset, those borrowers are currently facing average monthly increases of $200. Should their drawing pattern match that of older vintages, we could be looking at a significantly higher risk of ‘payment shock’ for this segment.”
More here…
Let’s not forget about all those 10 year interest only firsts that are going to start to pop as well…
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What about the ‘payment shock’ that is going to take place in 2015 with all of those modifications that were done in 2010 that has a reset of interest rate after 5 years? Anybody out there that did these modifications read the fine print……again? That 1, 2 or 3% interest rate is not a forever rate people. What happens when those get reset? Another flux of foreclosures? Oh no, we know that the lenders wouldn’t do anything like that, right?! Only difference being that these borrowers have signed the modifications with an ‘acknowledgment’ that the statements herein are tried and true….can’t use the fraud to fight on the 2nd round of foreclosures! Maybe they will be able to refinance; that is if the property values have gone up about 30% to cover the delinquent payments that were added to the back end of the mortgage principal balance..We are in for another tide of foreclosures all over again….