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HELOCs’ Lost Luster

The lingering effects of the Great Recession continue to be felt, as a report by Insider and says the number of Home Equity Lines of Credit (HELOC) have been cut in half since 2008.

Bloomberg reported Monday this change in mentality is hurting banks, which were once counted on by homeowners taking loans as a source of revenue. The report added that at Bank of America, HELOCs produced $552 million of interest income during Q3 2019—down almost 70% from a decade ago. 

Insider says that the volume of HELOCs doubled in the years leading up to the financial crisis, as homeowners could borrow against their homes to boost consumer spending. 

However, when the housing market crashed those who had taken out “piggy bank” mortgages were unable to repay debts when home prices fell. 

According to data from the New York Federal Reserve, the number of HELOCs has fallen by nearly half over the past decade. In 2016 just 4% of homes had an open home equity line, which is down 10% during the 2000s. 

Insider states that low mortgage rates and access to different types of personal loans make HELOC’s less appealing. 

Freddie Mac’s latest Primary Mortgage Market Survey revealed last week that the 30-year fixed rate mortgage rose to 3.75%—the highest its been in 12 weeks. 

“The outlook for a favorable resolution to the trade dispute between the U.S. and China is still unclear, introducing some volatility into financial markets and the benchmark 10-year Treasury yield,” said Sam Khater, Freddie Mac’s Chief Economist. “Mortgage rates are following suit but are at near historic lows, while mortgage applications to purchase a home remain higher year over year.”

Ellie Mae announced in August that it expanded functionality with additional automation capabilities for greater efficiencies in home equity line of credit (HELOC) lending.

Ellie Mae said that the new capability will help lenders acquire HELOC customers and originate and sell HELOCs with greater efficiency at a higher return on investment in a single platform.

About Author: Mike Albanese

A graduate of the University of Alabama, Mike Albanese has worked for news publications since 2011 in Texas and Colorado. He has built a portfolio of more than 1,000 articles, covering city government, police and crime, business, sports, and is experienced in crafting engaging features and enterprise pieces. He spent time as the sports editor for the "Pilot Point Post-Signal," and has covered the DFW Metroplex for several years. He has also assisted with sports coverage and editing duties with the "Dallas Morning News" and "Denton Record-Chronicle" over the past several years.
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