Steel Curtain Capital: News & Blog

Here you’ll find the latest articles and interviews with the SCCG team. In addition, other article’s included on our website — written while with previous firms — will be properly noted.

We realize that the home mortgage loan business is constantly shifting. To stay on top of the latest analysis, we’ve highlighted pertinent articles by other experts, with links to the respective news websites.

How to Stay Afloat in the Coming HELOC Reset Tidal Wave

By Erica Abendschoen and Frank T. Pallotta
JUL 21, 2015

Resetting home equity lines of credit to the tune of $150 billion over the next 48 months, combined with a near-certain increase in short term interest rates over that same period, could very well be a bad situation for institutions who hold these assets.

Simply creating a preemptive solution, or series of solutions, for borrowers facing hardship is not enough. While it’s important to know that borrowers fully understand the reset risk they face as well as the options available to them; it’s critical that those consumers actually follow through to reduce their risk — and yours.

In a perfect world, the consumer who is facing a significant increase in their monthly HELOC payment would not only be aware of the coming increase, but would be mindful of all available options before moving quickly toward a solution that benefits all parties.

However, this does not tend to be the case. It is entirely reasonable to assume, for example, that a borrower who has made timely payments over a 10-year period, simply may not know, or realize, that their monthly HELOC payment might soon double or triple, until it’s too late. Automated phone calls, website pop-ups, email blasts and generic marketing flyers all continue to be the marketing tools of choice for the lending industry. As a result, consumers are much more likely to tune out than they are to pay attention to a simple notification from their bank – especially if the borrower happens to be current on their payments.

Underwater HELOCs that are more than 60 days delinquent have a greater than 75% chance of eventually defaulting and losing nearly 100% of their value. With this in mind, it’s not surprising to see that regulators are keeping an extremely close eye both on these assets as well as the institutions who own them.

Consumer outreach methodologies and paths can vary dramatically depending on multiple risk factors. For example, the outreach message and methodology for a lower-risk borrower (780 FICO score), with a medium-risk loan (80% combined loan-to-value), facing severe payment shock (300%) may be entirely different than that of a high-risk, underwater borrower facing only moderate payment shock. Continue reading at National Mortgage News.

56 Percent of 3.3 Million HELOCs Scheduled to Reset With Higher Payments Over Next Four Years Are on Underwater Homes

March 05, 2015 00:01 ET

Estimated Balance of Resetting HELOCs at $158 Billion, $88 Billion on Underwater Homes; Average Payment Increase of $146 a Month; California, Florida, Illinois With Most Resets

IRVINE, CA–(Marketwired – March 05, 2015) – RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its first-ever U.S. HELOC Resetting Report, which found that 56 percent of the 3.3 million Home Equity Lines of Credit potentially resetting with higher, fully amortizing monthly payments from 2015 to 2018 are on properties that are seriously underwater.

For the report, RealtyTrac analyzed open HELOCs originated between 2005 and 2008 with the assumption that these loans will reset with fully amortizing monthly payments after a 10-year period of interest-only payments. RealtyTrac used average HELOC utilization rates from the New York Federal Reserve and the prime interest rate of 3.25 percent to calculate the outstanding balance of the loans and to calculate the interest-only and fully amortizing monthly payments. See full methodology below.

Continue reading at Market Wired.