HELOC Payment Shock – Is your bank in the cross-hairs?

Many home equity lines of credit (HELOC) originated during the 2005-2008 period, when property values were at record highs, are about to transition from an interest only payment requirement to a higher interest plus principal amortization payment (Payment Shock). The regulatory agencies are concerned over the potential increase in credit losses given the delinquency trends observed so far, consequently banks should anticipate more intensive examination processes on HELOC portfolios. This article discuss key steps that banks can take to mitigate payment risk shock.


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