HELOC Lenders Reporting Losses
Posted on 20 March 2008 by Jamie Beck
As the real estate market is declining, so are the earnings of major HELOC lenders. Many home equity borrowers now have credit lines higher than their homes’ current value. When these customers default, the HELOC lender often has difficulty recovering any of their money. The Wall Street Journal reports:
“David Hilder, a banking analyst at Bear Stearns, last week cut his 2008 and 2009 earnings estimates for National City Corp., SunTrust Banks Inc., Washington Mutual Inc. and Wells Fargo, citing rising home-equity losses…
Each of those lenders has 12 percent to 19 percent of its total assets tied up in home-equity loans.
Now, the steep decline in housing prices and weak economy are turning the home-equity business upside down.
About 4.65 percent of fixed-rate home-equity loans were delinquent in the fourth quarter of 2007, up from 3.11 percent a year earlier, according to Equifax Inc. and Moody’s Economy.com.”
HELOC lenders are responding by lowering some limits, canceling some lines, and tightening lending standards for new home equity customers.
See Also:
What Happens to a HELOC in Case of Default or Foreclosure?
Tags | Heloc, home equity loan, lenders, lending standards