Banks face a high financial risk if they do not take the steps needed to identify borrowers who are at risk of falling short on payments.
More than $221 billion of these loans at the largest banks will hit this mark over the next four years.
Monthly payments on home equity loans are set to rise in about two years, due to the abundance of home equity loans made before the financial crisis and the terms associated with them, an article in the American Banker claims.
Among the nation’s four biggest banks, Wells Fargo (WFC) has the greatest home equity exposure, followed by Bank of America, JPMorgan Chase and Citigroup.
Think about the information you are giving this stranger: all your financial information, your children’s names, bank accounts and your social security number. You do this without the slightest guarantee that the information will be kept safe.
According to the report, borrowers with a $210,000 mortgage and a $40,000 home equity loan can expect their monthly payments to jump about 26% when principal payments on the home equity loan come due.
“Most of these [home equity lines of credit] were originated at the height of the crisis between 2005 and 2007 when credit-underwriting standards were dismal,” wrote Thuy Nguyen, a Moody’s Investors Service analyst. “As such, they are a particular concern.”
Lenders with the largest exposure to home equity loans include: First Horizon National (FHN), American Savings Bank (HE), TCF Financial (TCB), Citizens Financial Group (RBS), Webster Financial (WBS), First Citizens (FCNCA), Huntington Bancshares (HBAN), Susquehanna Bancshares (SUSQ), Regions Financial (RF), M&T Bank (MTB), SunTrust Banks (STI), Fulton Financial (FULT), PNC Financial Services Group (PNC), First Niagara Financial Group (FNFG) and TD Bank (TD), Moody’s said.
We have several videos on our web site. Below are a few that might be of interest:
- “Lender’s Foreclosure Rights in Arizona”
- “Should I keep my home or let it go into foreclosure?”
- “Meet Ms. Drain and Suggestions on How to Hire an Attorney”
Home equity lines of credit (HELOC) were handed out like candy in 2006 through 2009. Originating lenders made commissions on the loans, then sold them in mass to mortgage companies and banks. There was little to no obligation for the originating lender to verify the borrower could afford to the new payment. Many of these HELOCs come due between 2015 and 2017. Can you say “new foreclosure cycle”?