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Lending

Is the next wave of mortgage trouble about to reset?

Springboard: Nearly half of all HELOCs will reset in next few years

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Springboard Nonprofit Consumer Credit Management is expanding services available for home loan borrowers that need help with recent or upcoming increases on their Home Equity Line of Credit or second mortgage payments.

More than $221 billion of HELOC loans at the largest banks will reset over the next four years, about 40% of the home equity lines of credit now outstanding. 

Springboard said it's preparing for the worst. It will have counselors for those facing an unaffordable increase in their loan payment amounts, as well as a dedicated website, which will provide information and references. The nonprofit highlights this article in Reuters as evidence for their concerns.

“Borrowers have reported their HELOCs have reset to fully amortizing loans and fear missing payments on HELOCs they acquired during the nation’s housing bubble. This web portal is designed specifically to address questions and provide direction for borrowers with resetting HELOCs,” said Aaron Horvath, executive vice president for Springboard. “We anticipate that many homeowners who acquired a HELOC now have less equity in their home than when they originally took out the loan and may not qualify for refinancing now in order to afford the resetting loan.”

More than three quarters of HELOCs outstanding today were taken out between 2004 and 2009, according to data from Lender Processing Services, now doing business as Black Knight Financial Services. A great many of these loans have lower payment terms for the first 10 years before resetting, in most instances to fully amortizing loans, resulting in substantial increases in monthly payment amounts. 

Depending on the amount and terms of the loan, borrowers with payment changes on their HELOCs could see their monthly mortgage payments rise considerably.

“Springboard has helped more than 2.5 million consumers in its 40-year history,” said Horvath. “HELOCHelp.org is a further extension of the services that we are able to provide to the community.” 

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