New Mortgage Bubble? Equity Lines of Credit Hit 10-Year Mark

New Mortgage Bubble? Equity Lines of Credit Hit 10-Year MarkA remnant of the housing bubble that harkens to the early 2000s could help derail the current market recovery as more borrowers are missing payments on home equity lines of credits.
Those so-called HELOCs are hitting their 10-year mark, at which time borrowers must start paying down the principal on interest-only loans taken out during the housing bubble buildup.
Reuters reports that more than $221 billion of these loans at the biggest banks will reach this anniversary over the next four years, about 40 percent of the home equity lines of credit now outstanding.
The delinquency rate among borrowers missing payments around the 10-year point can double in their eleventh year, according to data from the credit bureau Equifax shows.
From Reuters:
“For a typical consumer, that shift can translate to their monthly payment more than tripling, a particular burden for the subprime borrowers that often took out these loans. And payments will rise further when the Federal Reserve starts to hike rates, because the loans usually carry floating interest rates.”

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