Why HELOCs will disappear

Why HELOCs will disappear…again

It was just two short years ago that several major banks stopped offering HELOCs or home equity lines of credit. Wells Fargo and JP Morgan Chase were the most notable lenders who cited an uncertain economy in the early days of the Covid-19 pandemic as the rationale for hitting the pause button on home equity loans. While the pandemic may be behind us we may see HELOC lending suspended again.

Today banks remain wary of the risks of home equity loans, especially those that are in a second-lien position which exposes them to the increased risk of loss should their borrowers suffer a financial setback that makes repayment impractical or impossible. The previous curtailment of HELOC lending has been a minor inconvenience with most opting instead for cash-out refinances. However, with mortgage rates two percentage points higher than they were a year ago, cash-out refis are no longer practical.

Suspended HELOCs

Even homeowners who’ve already secured a HELOC are at risk of…

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3 comments

John A. Smaldone May 2, 2022 at 5:14 am

Shannon,

Very valuable information, good job, this is very important, especially for the reverse mortgage industry.

Thanks for the broadcast,

John A. Smaldone

Reply
The Cynic May 2, 2022 at 1:14 pm

Shannon,

Why do so many seniors keep exposing themselves to potential cash flow problems by originating or refinancing mortgages that require monthly payments of interest and principal. Some even require require monthly payments of PMI or MIP as well.

Cash outflow can be a cruel and ruthless tyrant in retirement.

Great subject matter!

Reply
Shannon Hicks May 2, 2022 at 1:49 pm

Thank you Cynic.

Reply

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