According to a Federal Reserve report released earlier today, most HELOC lenders have tightened their standards for new borrowers and / or changed terms for existing borrowers.

A vast majority of lenders have made it more difficult for borrowers to qualify for HELOCs during the past three months:

“About 70 percent of domestic respondents—a somewhat higher fraction than in the January survey—indicated that they had tightened their lending standards for approving applications for home equity lines of credit (HELOCs) over the past three months. Regarding demand for these lines, about 20 percent of domestic banks, on net, reported weaker demand over the past three months.”

Many have also changed their terms for existing HELOC customers during the past six months:

“About 50 percent of domestic respondents reported having tightened terms on existing HELOCs over the past six months. Nearly all respondents pointed to declines in the value of the collateral significantly below the appraised value for the purposes of the HELOCs as reasons for tightening terms on these lines. Large majorities of respondents also cited increased defaults of material obligations under loan agreements, as well as significant changes in borrowers’ financial circumstances, as additional reasons for tightening terms on the existing HELOCs.”

For anyone following the mortgage crisis, none of this comes as a surprise. Fewer people are applying for HELOCs and fewer loans are being granted. However, HELOC lenders are continuing to advertise and credit-worthy customers have reported success in securing lines (now with lower interest rates, thanks to recent federal cuts).

See Also:

Which Lenders Are Freezing HELOC Lines?

Is the HELOC in Decline?

Tags | Federal Reserve, Heloc, heloc freeze, lending standards, mortgage crisis