JACKSONVILLE, Fla.–A decade after the mortgage mania of the mid-2000s, there is still one bill that has yet to come due—home equity loans.
When home values were soaring many homeowners took out some of the equity in their increasingly valuable homes. But as Black Knight Financial Services has noted, HELOCs come with 10-year grace periods, and many of those loans are now coming due. According to Black Knight, in March delinquencies were up 87% compared to a year ago among 2005 second lien HELOCs – those that stand behind a mortgage on the property.
The company reported that HELOCs taken out in 2005, 2006, and 2007 make up 52% of all active lines of credit, suggesting delinquencies could remain elevated for some time.
Black Knight reported there are approximately 850,000 2005 home equity lines, and 1.25 million each for 2006 and 2007, totaling about $192 billion in all.
If there is any good news, it is that more borrowers with 2006 credit lines have prepaid their HELOCs, possibly thanks to ultra-low interest rates in recent years. A similar pattern may continue with the 2007 loans, according to Black Knight.