Get ready for HELOC payment shock

In the heyday of mortgage lending just before the financial crisis, HELOCs were widely marketed as a credit source for homeowners seeking to remodel their homes, take a vacation, or fund education needs. The attraction for borrowers was the HELOC's interest-only payment period, which allowed th...

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Bibliographic Details
Published in:The RMA Journal 2014-03, Vol.96 (6), p.8
Main Author: Loughlin, Michael J
Format: Article
Language:English
Subjects:
Economic crisis
Home equity loans
Interest rates
Lines of credit
Loan workouts
Mortgages
Payments
Regional banks
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Summary:In the heyday of mortgage lending just before the financial crisis, HELOCs were widely marketed as a credit source for homeowners seeking to remodel their homes, take a vacation, or fund education needs. The attraction for borrowers was the HELOC's interest-only payment period, which allowed them to borrow a significant sum and enjoy a low monthly payment for up to 10 years before the loan converted to interest-plus-principal payments, at which point the monthly payment increased substantially. After the financial crisis, regulators sought to overcome customers' lack of knowledge by placing greater responsibility on banks to protect customers. So in the last five years, they've worked with customers to sort out loans, develop different lending practices, and earn back the public's trust.
ISSN:1531-0558