In years past, home equity lines of credit, or HELOCs, were part of the reason so many homeowners ended up underwater on their loans. We’ll get our latest glimpse at that type of borrowing when the Federal Reserve Bank of New York releases its quarterly Household Debt and Credit Report Tuesday.
But don’t look for a return of the “home as ATM” phenomenon any time soon. Housing values are coming back, but both borrowers and lenders remain cool on HELOCs.
Brian Jacobsen, chief portfolio strategist at Wells Fargo, says homeowners remain gun-shy from the recession, and that’s not the only reason: “Perhaps their incomes aren’t able to support it. Or maybe their credit ratings are such that they’re able to qualify for those loans,” Jacobsen says.
Tighter regulation is also part of the story, says Stan Shipley, a managing director at Evercore ISI.
“The consumers would like to borrow more,” Shipley says, “but because of Dodd-Frank laws the banks are not going to let them become as leveraged as they were in 2006-2007.”
Still, if you do qualify, you can still get these loans, and some forecasts point to a slight rebound.
Erin Lantz, vice president of mortgages at Zillow, says going forward all those low-rate montages people got five to seven years ago could help people tap home equity in the future.
“Consumers have all of these low-rate, first-line mortgages and they’ll look at home equity lines of credit as the way to tap equity in their homes without touching that low-rate first mortgage,” Lantz says.
According to data from the New York Fed, the real movers on household debt these days, are student loans and car loans.
If you’re a member of your local public radio station, we thank you — because your support helps those stations keep programs like Marketplace on the air. But for Marketplace to continue to grow, we need additional investment from those who care most about what we do: superfans like you.
Your donation — as little as $5 — helps us create more content that matters to you and your community, and to reach more people where they are – whether that’s radio, podcasts or online.
When you contribute directly to Marketplace, you become a partner in that mission: someone who understands that when we all get smarter, everybody wins.
make public service
Thank you for doing your part!