Data Reference Page
I ran internet searches and pasted a bunch of links to articles in the section below. The numerical info from the linked articles is ALL OVER THE MAP. Remember that some of the web info found via the links below may have actually been posted as distractions (publishers paid to publish misleading information).
15 Billion = 3.3 Million accounts, average payment increase on $80k line of $400/month. This assumes Bank of America style 288% payment increase and it assumes no one can refi out. Reports I saw indicated as many as 58% of HELOC accounts were known to be underwater. Even if not underwater, no guarantee one could refi out as banks often view consolidating 1st and 2nd mortgages as cash out refis with more stringent rules.
Per Bank of America foreclosures are running at 3% for post Reset Accounts vs 1% for pre-Reset accounts. 2% increase in defaults on 3.3 Million accounts is 66,000 foreclosures
Based on the reports below, the numbers are all over the map.
This website has the best graph, but it's data seems brutally low compared to other sources
$80,000 x 750,000 HELOCs = $60 Billion (less than the 65 billion quoted)
Average monthly increase
FOCUS ON THE REALITIES OF THE INDIVIDUAL SITUATIONS AND ADMIT THAT 1000'S ARE AFFECTED AND THE TRUE NUMBERS ARE IRRELEVANT.
15 Billion = 3.3 Million accounts, average payment increase on $80k line of $400/month. This assumes Bank of America style 288% payment increase and it assumes no one can refi out. Reports I saw indicated as many as 58% of HELOC accounts were known to be underwater. Even if not underwater, no guarantee one could refi out as banks often view consolidating 1st and 2nd mortgages as cash out refis with more stringent rules.
Per Bank of America foreclosures are running at 3% for post Reset Accounts vs 1% for pre-Reset accounts. 2% increase in defaults on 3.3 Million accounts is 66,000 foreclosures
Based on the reports below, the numbers are all over the map.
- Total outstanding HELOCs range from 158 billion to 691.5 billion
- On report says 2007 alone was 300 billion.
- 2014 - $23 billion
- 2015 - $41 billion
- 2016 - $49 billion
- 2017 - $54 billion
This website has the best graph, but it's data seems brutally low compared to other sources
- http://www.realtytrac.com/news/mortgage-and-finance/heloc-resets-report/
- I'm going to use this data for number of HELOC borrowers. It is likely the most conservative
- 3.3 million resetting HELOCs
- Bank of America, Wells Fargo and JPMorgan are the largest owner of HELOCs and Bank of America is the leader
- This report says there is only 158 billion in resetting helocs, yet one report states Bank of America alone is looking at 65 Billion in resets from 2015-2017 which would put them at 41%
- I'm going to assume Bank of America has 750,000 HELOCs (750,000, was referenced in one of the articles ~= 22.7% of all outstanding).
- I'm going to assume the average outstanding HELOC is $80,000. Actual quotes range from $50-100k.
$80,000 x 750,000 HELOCs = $60 Billion (less than the 65 billion quoted)
Average monthly increase
- My situation vs average = 1700/month / 315,000 = x / 80,000 ==> x = 431.70/mo increase
- Total monthly increase = 431.70 x 750,000 = 323 Million/month = 3.88 billion / year
- this assumes everyone gets stuck...
- 2% increase in defaults. 2% of 750,000 = 15,000 ( BofA quoted as indicating HELOC resets are above 3% for HELOCs post reset vs under 1% for normal operating situation).
FOCUS ON THE REALITIES OF THE INDIVIDUAL SITUATIONS AND ADMIT THAT 1000'S ARE AFFECTED AND THE TRUE NUMBERS ARE IRRELEVANT.
Articles
internet search: heloc crisis OR heloc reset crisis OR heloc reset crisis bank of america
http://www.advisorperspectives.com/dshort/guest/Keith-Jurow-131216-HELOC-Resets.php
http://www.bloomberg.com/news/articles/2014-08-07/default-risk-rises-on-20-of-boom-era-home-equity-loans
http://www.fool.com/investing/general/2013/12/01/a-new-kind-of-mortgage-trouble-is-brewing-at-bank.aspx
http://www.realtytrac.com/news/mortgage-and-finance/heloc-resets-report/
http://blog.credit.com/2015/05/the-265-billion-wave-thats-about-to-crush-homeowners-117507/
http://www.dailyfinance.com/2015/03/09/disaster-looms-home-equity-lines-credit/
http://www.nytimes.com/2014/02/09/realestate/repaying-home-equity-loans.html?_r=0
http://www.nationalmortgagenews.com/news/origination/feds-lack-options-to-help-heloc-borrowers-as-resets-loom-1041508-1.html
http://www.americanbanker.com/issues/179_66/feds-lack-options-to-help-heloc-borrowers-as-resets-loom-1066707-1.html
http://www.dailyfinance.com/2015/03/09/disaster-looms-home-equity-lines-credit/
http://hffo.cuna.org/21410/article/3886/html
http://finance.yahoo.com/news/pnc-ceo-fed-forcing-americas-174354606.html
http://www.advisorperspectives.com/dshort/guest/Keith-Jurow-131216-HELOC-Resets.php
- December 16, 2013
- For three years, I have been writing about the looming home equity line of credit (HELOC) disaster. The media pundits paid little attention. Then a Reuter's article about HELOCs resetting to fully amortizing loans appeared last month. Finally some commentators took notice of the problem. Unfortunately, most pundits have tried to reassure their readers that it will not be much of a problem. One influential writer actually said that many of these HELOCs were already paid off, refinanced or extinguished because of foreclosures and short sales. Really? What nonsense.
- In the first quarter of 2003, there was only $242 billion in HELOCs outstanding according to the NY Federal Reserve Bank. By early 2005, it had skyrocketed to $502 billion. That number did not finally peak until late 2009 at $672 billion according to Equifax.
http://www.bloomberg.com/news/articles/2014-08-07/default-risk-rises-on-20-of-boom-era-home-equity-loans
- August 8, 2014
- The three biggest home equity lenders -- Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co. -- held 36 percent of the $691.5 billion debt as of the first quarter, according to Federal Reserve data.
- More than half of the outstanding HELOCs have a balance above $100,000, Becker said.
- Bank of America, which had $89.7 billion in outstanding home equity loans as of June 30,
- “If a customer does have a hardship that would impact their ability to repay the principal on their loan, we have several programs to assist them based on their individual circumstances,” Potere said in an e-mail. Those programs include loan modifications which could entail principal reduction, he said.
- About 76 percent of Bank of America’s HELOCs have yet to end the interest-only period, according to a July 29 filing. The 30-day delinquency rate was about 3 percent on loans after the reset period compared with a 1 percent rate for loans in the interest-only phase.
- Pamela Simmons, a mortgage and tax attorney, who represents struggling borrowers, including many immigrants, in Santa Cruz County south of San Francisco. “They think something bad’s going to happen to them right away,” Simmons said in a phone interview from her office in Soquel, California. One of her clients who responded to a notice was able to refinance a Wells Fargo HELOC, which was “a good outcome,” she said.
http://www.fool.com/investing/general/2013/12/01/a-new-kind-of-mortgage-trouble-is-brewing-at-bank.aspx
- 12/1/2013
- In 2007, banks racked up $310 billion in Helocs, the biggest one-year tally.
- This could turn into a big headache for Bank of America, which holds a larger share of these loans hitting that benchmark date than its peers. WRONG. They are looking at this as a 'boon'
- The "reset" value of these payments can be large, adding another $500 to $600 to each monthly payment.
- Banks seem to be responding to this possible threat to their balance sheets by ramping up Heloc lending again. Analysts estimate that the value of these loans will reach more than $90 billion for this year, and will climb to $97 billion in 2014.
- Bank of America is right out front in Heloc origination, having increased home equity lending nearly 70% this year, compared to 2012. By the end of September, the bank had $4.4 billion of new Helocs on its books.
- Then, there's the issue of how much of those legacy Helocs will be coming due in the next few years. For Wells Fargo, about $30 billion will reset by 2017, and for JPMorgan, the amount is similar -- around $31 billion.
Bank of America, however, is looking at approximately $65 billion in resets during a similar time period.Bank of America will likely be mopping up the biggest mess. WRONG. Cash flow boon. They also WANT homes as is evident from this experience....
http://www.realtytrac.com/news/mortgage-and-finance/heloc-resets-report/
- March 5, 2015
- 3.3 Million Home Equity Lines of credit
- 158 Billion in HELOCs
- $88 Billion on Underwater homes (56%)
- Average payment increase of $146 (flawed...see below)
- Per this report avg HELOC is: $47,000 (158 Billion / 3.3 million)
- This report assumed a 20 year amortized repayment period. That is a several flawed assumption and grossly underestimates the risk of the situation. The HELOCs I'm familiar with all had non-amortized repayment period and/or interest rate increases. PNC's initial payment increase was 211% and Bank of America's was 288%. This report was claiming ~30-40% increases. With PNC, they did offer a modification into a 30 year term which resulted in a ~40% increase and that was the lowest increase available. Bank of America, of course, worked hard to keep me in the 288% increase situation.
- The numbers in this report are so low compared to all other numbers, it seems like a staged report to under report the problems...
http://blog.credit.com/2015/05/the-265-billion-wave-thats-about-to-crush-homeowners-117507/
- May 29, 2015
- $265 Billion in HELOCs
- 10 million HELOC Agreements
http://www.dailyfinance.com/2015/03/09/disaster-looms-home-equity-lines-credit/
- the average payment increase will be $140 per month. However, the average is deceiving. I have spoken with a senior risk manager at a large bank, and he told me stories about payment shocks as high as $700 a month.
- This product should have never existed. Revolving lines of credit to subprime borrowers, with interest-only draw-down periods followed by dramatic payment shocks make absolutely no sense. Hopefully the banking sector has learned its lessons. FALSE STATEMENT. HELOCs are in house "credit" products. Never issued to sub prime borrowers.
- It looks like the old playbook has been revived. Experian Decision Analytics provides regular reporting on consumer credit trends, and it has identified HELOCs as an area of rapid and dramatic growth during 2014. For many years after the crisis, you couldn't find a HELOC anywhere. Now it is hard to walk by a bank without seeing a HELOC advertisement in the window. Banks originated $37 billion of HELOCs in the last three months of 2014, up from just $20 billion in the last three months of 2011.
http://www.nytimes.com/2014/02/09/realestate/repaying-home-equity-loans.html?_r=0
- Bank of America, Wells Fargo and JPMorgan Chase hold the bulk of the Helocs, the Moody’s report said. But 15 regional banks are seen as having greater exposure because of their high concentration of Helocs relative to their assets. At the top of the list are TCF Financial, American Savings Bank, First Horizon National and RBS Citizens Financial.
http://www.nationalmortgagenews.com/news/origination/feds-lack-options-to-help-heloc-borrowers-as-resets-loom-1041508-1.html
http://www.americanbanker.com/issues/179_66/feds-lack-options-to-help-heloc-borrowers-as-resets-loom-1066707-1.html
- The Office of the Comptroller of the Currency estimates $23 billion in HELOCs held by the largest banks are due to reset in 2014, followed by $41 billion in 2015, $49 billion in 2016 and $54 billion in 2017.
- Bob Piepergerdes, the OCC's director of retail credit risk. "The interest-only payments should only be extended in cases where the borrower goes through full underwriting and qualifies for interest-only terms."
(BofA has no excuse for not renewing HELOCs because of government guidelines...)
http://www.dailyfinance.com/2015/03/09/disaster-looms-home-equity-lines-credit/
- The next three years will see 3.3 million borrowers facing steep resets, with 1.8 million borrowers at a very high risk because they do not have the option of refinancing.
- BUT...not sure how reliable this is because he/she has numerous erroneous facts....like HELOCs convert to amortized loans - FALSE, and his comments about revlolving lines being issued to sub-prime borrowers is totally incorrect...he/she has no clue what they are talking about...95% of HELOCs went to primer and super prime borrowers..
http://hffo.cuna.org/21410/article/3886/html
- The comptroller for the currency office predicts that $171 billion in home-equity loans held by the biggest banks will reset over the next four years, compared with just $28 billion in the previous four.
http://finance.yahoo.com/news/pnc-ceo-fed-forcing-americas-174354606.html
- PNC CEO: The Fed is forcing America's retirees to bail out the younger generation
- BUT he's increasing HELOC payments by over 200% to increase cash-flow for his bank....that's the pot calling the kettle black..
Ignorant as Hell or the Devil in Sheeps clothing...
Wells Fargo Home Mortgage Executive Vice President Brad Blackwell is quoted as telling the WSJ that getting rid of interest only HELOCs is the right thing to do for their customers. With that statement we are to believe 1) He is totally clueless as to the original nature of pure HELOCs and the derivative nature of our current products OR 2) He is deviant as HELL, and he's just using the current derivative situation to continue to build the perception that interest only products are bad, further padding the pockets of bankers. Is he a financial idiot or the devil? Those are in fact our only 2 options for categorization. The truth of the matter is simple. Put Home Equity Line of Credits back into the "credit" Executive Vice Presidents hands and return the product to it's glory, and the consumer will be much better off. But in that case, mortgages would become almost obsolete. When I see something like this stated in a website called "the truth about mortgage", my first thought is that it is likely a planted story intended for brainwashing the public. And if that was the case, it would not get planted without Brad's knowledge and desire to create a false article. http://www.thetruthaboutmortgage.com/wells-fargo-vows-to-fix-the-flawed-heloc-product/