Home values are up, but just try getting a line of credit

Banks pull back on “helocs” despite booming market

National /
Apr.April 30, 2021 09:38 AM
Lenders are being stingy about granting home equity lines of credit. (iStock)

Lenders are being stingy about granting home equity lines of credit. (iStock)

Remember the financial crisis? Banks do.

Lenders are being stingy about granting home equity lines of credit even as home values have soared, the Wall Street Journal reported.

Blame the pandemic and memories of the late 2000s, when millions of homes went into foreclosure.

Citibank stopped accepting new applications for home equity lines of credit, or helocs, on March 3, because of “market conditions,” according to the Journal.

J.P. Morgan Chase and Wells Fargo halted helocs a year ago as the U.S. economy shut down for Covid. Wells Fargo cited “market risks and prudent balance-sheet management.”

Bank of America did continue extending home equity lines of credit, although it tightened standards briefly during the pandemic.

Unlike cash-out refinancing, which amends an original mortgage loan, helocs constitute a second mortgage, payable only after the first mortgage is satisfied — if enough equity is left over. Lines of credit are also different from home equity loans, in which a single chunk of cash is borrowed against a home’s value.

Home values have skyrocketed in the past year, but the scars of the financial crisis and Great Recession run deep among lenders and homeowners.

“Homeowner psychology has changed a bit,” said Mike Fratantoni, chief economist of the Mortgage Bankers Association. “Customers seem a little more hesitant about tapping their home equity.”





    Related Articles

    arrow_forward_ios
    (Photo Illustration by Steven Dilakian for The Real Deal with Getty)
    Borrowers are back: Mortgage applications rise
    Borrowers are back: Mortgage applications rise
    (Illustration by The Real Deal with Getty Images)
    How to sell a building today: Package it with cheap debt
    How to sell a building today: Package it with cheap debt
    Haven Realty Capital's Sudha Reddy, JPMorgan Chase's Jamie Dimon and Bella View in Atlanta, GA (Getty, Haven Realty Capital, JPMorgan Chase)
    JPMorgan aims to acquire $1B in single-family rentals
    JPMorgan aims to acquire $1B in single-family rentals
    KPMG chief economist Diane Swonk (Getty Images, KPMG, YouTube/LAI)
    US home prices falling 15% looks “conservative”: KPMG
    US home prices falling 15% looks “conservative”: KPMG
    JPMorgan Chase's Jamie Dimon, Deutsche Bank's Christian Sewing and Barclays' Nigel Higgins (JPMorgan Chase, Deutsche Bank, Barclays, Getty)
    Office lenders looking for an off-ramp
    Office lenders looking for an off-ramp
    Rocket Mortgage CEO Bob Walters (Getty)
    Rocket Mortgage looks to pivot as rates rise, refis dry up
    Rocket Mortgage looks to pivot as rates rise, refis dry up
    Sam Yen of JPMorgan Chase (LinkedIn, Illustration by The Real Deal with Getty)
    JPMorgan wants you to rip up your rent checks
    JPMorgan wants you to rip up your rent checks
    Boston Properties CEO Owen Thomas and 200 Fifth Avenue (Getty, Boston Properties, Metro Manhattan Office Space)
    Boston Properties pays $280M for L&L’s stake in Flatiron offices
    Boston Properties pays $280M for L&L’s stake in Flatiron offices
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...