U.S. Regulators Warn Banks on Home Equity Loan Defaults

July 1, 2014
mortgage lending news
Banks should work with borrowers to avoid massive defaults on home equity lines of credit taken out during the housing bubble, according to U.S. regulators.

More than $221 billion of HELOCs at the largest banks will reach their 10-year anniversary over the next four years -- roughly 40 percent of such loans now outstanding -- at which point borrowers usually must start paying down the principal balance as well as accrued interest. The number of borrowers missing payments in year 10 of the loan can double by the 11th year, according to data from Equifax.

"When borrowers experience financial difficulties, financial institutions and borrowers generally find it beneficial to work together to avoid unnecessary defaults," the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corp, the National Credit Union Administration and the Conference of State Bank Supervisors said in a joint statement.

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