Banks Warn Borrowers of Looming Higher Payments on Home-Equity Lines

Banks Warn Borrowers of Looming Higher Payments on Home-Equity LinesDid you exhaust your home-equity line of credit at the height of the housing boom before 2008?
If you did, you are not alone. But there is something important you should know.
Your monthly bill for that big chunk of credit will likely jump by several hundred dollars. That’s because you probably signed up for the popular low-payment option of paying only interest for a ten-year term.
And the formula that comes up with how much you have to pay every month is about to shift or “reset” from paying only interest to paying down the actual loan principle.
Bank regulators are concerned that this will push many borrowers into default. And, of ourse, banks are worried what this will do to their bottom line.
The Office of the Comptroller of the Currency estimates that $171 billion in home equity lines carried by the biggest banks will “reset” from 2014 through the start of 2018, compared to just $28 billion in the previous four years.
“We’ve really been trying to get the word out that this is coming,” Bob Piepergerdes, director for retail credit risk at the Office of the Comptroller of the Currency, told MarketWatch. The OCC regulates national banks and has been pushing them to help borrowers whose home-equity lines are about to reset. “Our message is this: They shouldn’t wait to start addressing it.”
Wells Fargo and Bank of America, among other big banks, have been contacting customers with home equity lines that are about to reset. The banks are making phone calls, sending letters and posting notices at branches or electronic reminders on ATMs.
The banks say they want to ensure borrowers are aware that their bills are about to go up — and they want to see if they can help the borrowers who won’t be able to afford the reset.
For example, a bank might be able to roll a borrower’s home-equity bill into their regular mortgage bill, which is likely to have a lower interest rate.
Brad Blackwell, portfolio lending manager at Wells Fargo, told MarketWatch that many borrowers are surprised about the home equity line changes.
“They might have understood the line of credit when they got it,” said Blackwell, whose bank has developed a program called HEMAP, or Home Equity Maturing Accounts Program, to notify customers as much as three or four years ahead of time. “But that was seven to 10 years ago. Time goes a lot faster than I think any of us plan on it going.”
If you haven’t done so already, your best course of action is to call your home-equity line servicer, or visit your nearest bank branch, to review your options.
Banks Warn Borrowers of Looming Higher Payments on Home-Equity Lines

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