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Tag Archives: HELOC

Attention All HELOC Issuers: Please Report to CFPB

The CFPB announced Thursday that the Home Mortgage Disclosure Act (HMDA), enacted in 1975, has been temporarily changed for banks and credit unions that offer Home Equity Lines of Credit. Take a look at some of the changes that were made in the final ruling.

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Credit Unions in Need of Relief

Many proposed changes have taken place within the CFPB as of late, including those associated with Home Equity Lines of Credit. Take a look at what the National Association of Federally-Insured Credit Unions has to say about the propositions.

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CFPB Increasing Thresholds

The CFPB has proposed changes to reporting regarding HELOCs and it will majorly affect certain banks and credit unions. Read on to see what could be adjusted.

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What’s a HELOC Again?

Though a standard industry term, many homeowners are scratching their heads when it comes to HELOCs. In fact, recent studies show that many homeowners don’t consider HELOCs because they simply aren’t aware of how they work. How can lenders better explain them in order for homeowners to take advantage of the opportunity?

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Higher Interest Rates Spur Interest in HELOCs

Whether they’re considering taking out a home equity line of credit (HELOC) or already in the process, nearly half of homeowners say interest rates are the most influential factor to consider. Almost half of borrowers listed interest rates as the most influential factor when deciding on a HELOC, which is over twice the second most influential factor: loan amount. Additionally, 36 percent of borrowers list the lower interest rates as the most valuable aspect of a HELOC compared to other options.

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Many Borrowers Face Higher Payments When HELOCs Reset

In raw dollars and cents, take this example from Bankrate: A $30,000 balance at 3.25 percent interest (the current prime rate) equals a minimum payment of $81.25. But after the 10-year mark, that balance resets to a 20-year repayment schedule and the minimum due each month bloats to $170.16.

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HELOCs Increase 15.8 Percent Year-Over-Year

In 2014, more than $120 billion worth of HELOCs were originated, which is a 21.5 percent year-over-year increase. In addition, more than 1.2 million new HELOCs were opened in 2014, a 15.8 percent increase from the year before. These represent six year highs for HELOC originations.

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Fraud Risk Grows as HELOC Lending Rises

Property data firm CoreLogic reported that both the sources and frequency of mortgage fraud have transitioned from an alarming level after the crisis to a more "normal" state. There is one exception, however: Home equity lines of credit (HELOCs), which have seen fraud risk rise along with demand for loans over the past year and a half.

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Rising Home Values Spark HELOC Activity

TD Bank reported Monday the results of its inaugural Consumer Borrowing Index, a survey of more than 1,300 U.S. HELOC borrowers created to provide insights into their motivation, usage, and perceptions of the loan. According to the bank's survey, 53 percent of homeowners polled said the value of their home has increased in the past few years, giving them more equity to pull from.

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