New Report Finds Frightening Rise In Home Equity Loan Delinquencies

Posted on June 15, 2015 at 12:00pm by

Last week we wrote about the struggle for older homeowners who are facing foreclosures in high numbers, but a new report from The Wall Street Journal suggests housing problems are affecting a much wider demographic. According to the report, banks across the country could face billions in losses because homeowners are falling behind on home equity lines of credit.

Home equity lines of credit, also known as HELOCs, are when homeowners borrow against the equity they have invested in their homes. HELOCs become more popular during a healthy housing market when real estate prices are higher.

For years, borrowers will only have to worry about interest payments. However, payments on interest alone do not reduce the principal balance of HELOCs. Once the interest-only period ends, homeowners can find themselves owing payments on both the principal balance and the interest. This can add up to hundreds of dollars more in payments per month.

According to Equifax, one of the three main credit-reporting agencies, 4.3 percent of homeowners who took out HELOCs in 2004 are 30 or more days late on payments. Data from Experian, another credit-reporting agency, shows that borrowers who took out HELOCs in 2004 were also more likely to be behind on other loans.

How Can Homeowners Behind On HELOC Payments Stop Foreclosures?

Unfortunately, homeowners who fall behind on HELOC payments could lose their homes. Depending on the circumstances, borrowers in danger of losing their homes to delinquent HELOCs could benefit from Chapter 13 bankruptcy.

In a Chapter 13 bankruptcy, homeowners with HELOCs might be able to save their homes by stopping foreclosure proceedings or with lien stripping. Lien stripping can become an option when mortgage balances exceed the value of a home.

Contacting a bankruptcy attorney will allow borrowers in danger of foreclosure to find options to save their homes. Our readers can learn more about lien stripping and discharging HELOCs by exploring our website.

The Sader Law FirmKansas City Bankruptcy Attorneys