Home Equity – Line of Credit

6-1-2014: According to a recent Wall Street Journal article, in areas of rising prices, HELOCs are rising as well. This time maybe to people with good credit and in areas of rising home prices, not just anywhere. But are people actually putting this additional loan into the home, or buying children’s college tuition, cars, vacations and personal items with the money? Time will tell when another bubble hits.

During the height of the real estate boom of the mid 2000’s, these HELOCS as they are called, allowed people to borrow against their remaining home equity within the first 10 years and pay it back over the subsequent 20 years.

With the number of homeowners who took advantage of these loans to either improve their homes or buy cars, college tuition, vacations, etc…about $210 Billion are coming due in the next 4 years.

So far so good, right? Well, yes if (a) homeowners can afford the payments and (b) interest rates don’t rise too fast as the loans are normally adjustable rates and can rise faster than they can afford to pay.

Now here’s the US Government to the rescue as the Office of the Controller of Currency (OCC) is now asking lenders to make plans to help homeowners refinance into lower interest rate loans.

Will the government save us?

Will this be the next crisis?

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