Payments on home equity lines of credit set to spike

Borrowers who opened home equity lines of credit at the top of the housing bubble are in for sharp increases in their monthly payments. These lines of credit, commonly known as Helocs, were marketed aggressively to borrowers between 2004 and 2007, and allow them to pay only the interest on a loan for a 10-year period.

At the end of the period, borrowers must begin paying both interest and principal on the outstanding balance, resulting in an increase of hundreds of dollars in monthly payments.

About $30 billion in outstanding Helocs will hit the end of the interest-only period in 2014, according to data from the Office of the Comptroller of the Currency seen by the New York Times. In 2017, $68 billion in Helocs will hit the end of the interest-only period, according to the newspaper.

To fend off another round of delinquent payments, the comptroller’s office is asking lenders to be proactive about reaching out to borrowers and assessing their level of Heloc risk, according to the newspaper. [NYT]  – Hiten Samtani