Home Equity Loan Report
by admin ~ August 18th, 2010.Home equity loan programs have certainly had more stable years with fewer defaults. Just a few years ago millions of homeowners were using equity loans to refinance their credit card debt in what seemed to be a responsible financial move. Once property values plummeted, so did the ability for homeowners to consolidate debt into a fixed home equity loan. According to Freddie Mac, 22% percent of homeowners who refinanced their first- mortgage in the 2nd quarter selected a cash-out refinance for getting access to money rather than taking out a home equity loan.
The home equity loan delinquency rate is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association. Many borrowers are in the process of getting approved for a home equity loan modification and most of the borrowers are at least 30-days late on their 2nd mortgage. Home equity lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.
Home equity loan lenders wrote off as uncollectible $11.1 billion in fixed rate home equity loans and $19.9 billion in home equity credit lines in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter.
