Home Equity Loans Spike As Americans Scramble For Cash

Tyler Durden's picture




 

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

With real incomes stagnant and the cost of everything from food, school tuition and healthcare premiums skyrocketing for millions of Americans, it appears that borrowing against one’s home is once again a key source for consumption, if not survival, for the nearly extinct socio-economic demographic known as the middle-class.

The Wall Street Journal reported yesterday that home-equity lines of credit (Helocs) had increased at a 8% rate year-over-year in 1Q14. Some banks are more aggressive than others, and perhaps we shouldn’t be surprised to see TBTF government welfare baby Bank of America leading the charge, with $1.98 billion in Helocs in the first quarter, up 77% versus 1Q13.

What could possibly go wrong?

 

As HELOC delinquencies are off their highs (for now) but remain elevated... (we are sure this renewed ATM usage on the back of created wealth and stagnant wages won't harm that downward trend at all...) - will we never learn?

 

From the WSJ:

A rebound in house prices and near-record-low interest rates are prompting homeowners to borrow against their properties, marking the return of a practice that was all the rage before the financial crisis.

 

Home-equity lines of credit, or Helocs, and home-equity loans jumped 8% in the first quarter from a year earlier, industry newsletter Inside Mortgage Finance said Thursday. The $13 billion extended was the most for the start of a year since 2009. Inside Mortgage Finance noted the bulk of the home-equity originations were Helocs.

 

While that is still far below the peak of $113 billion during the third quarter of 2006, this year’s gains are the latest evidence that the tight credit conditions that have defined mortgage lending in recent years are starting to loosen. Some lenders are even reviving old loan products that haven’t been seen in years in an attempt to gain market share.

 

Some individual banks have seen their Heloc originations rise much faster than the national average. Bank of America Corp., which has increased marketing for Helocs, said customers opened $1.98 billion in Helocs in the first quarter, up 77% from the first quarter of 2013. Matt Potere, who leads Bank of America’s home-equity business, said many customers are taking out Helocs to pay for home-improvement projects that were delayed during the housing bust.

 

Some lenders are even bringing back “piggyback” loans, which serve as a second mortgage and cover part or all of the traditional 20% down payment when purchasing a house. Piggybacks nearly vanished during the mortgage crisis.

 

For consumers in need of cash, Helocs offer an alternative to “cash-out refinancings” in which a homeowner taps equity by taking out a new loan that is bigger than the existing mortgage.

 

Ian Feldberg planned to open a $200,000 Heloc this week with Belmont Savings Bank to help pay his son’s college tuition. The medical-device scientist purchased his home in Sudbury, Mass. for a little over $1 million in 2004, and estimates that its value dipped as low as $800,000 during the financial crisis. However, after applying for the line of credit, he found that its value had completely recovered.

 

“I’m very pleased about that. My options for tuition fees were either that or to cash in on my pension prematurely,” he said.

Think about that for a minute. A “medical-device scientist” can’t send his kid to college without either a Heloc or cashing in on his pension.

The new American Dream.

Full article here.

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Sat, 05/31/2014 - 13:30 | 4812658 Village-idiot
Village-idiot's picture

I reckon these people have been conviced that inflation is going to take off, along with interest-rates rising.

And if deflation happens? They're screwed (and homeless).

If you don't think we're going to deflation look at this : http://research.stlouisfed.org/fred2/series/M2V

The currency-creating by the Fed is simply an attempt to offset deflation. I don't think they do it forever, as the deflationary forces are just getting started. As more Baby-Boomers retire they'll cut back their spending causing that money velocity to drop even further.

 

Sat, 05/31/2014 - 13:30 | 4812664 QQQBall
QQQBall's picture

I don't think that's it. I think this time might be different - people are still trying to sustain (for them) an unaffordable lifestyle. If you cannot pay $200k to send your kid to a certain college, then you need to consider other options. The new normal is different.

Sat, 05/31/2014 - 13:31 | 4812665 Bunga Bunga
Bunga Bunga's picture

IT'S DIFFERENT EVERYTIME!

Sat, 05/31/2014 - 13:48 | 4812685 Handful of Dust
Handful of Dust's picture

I’ve maxed out my credit cards….trashed my 401(k)….robbed my kids Piggy Bank….sold my daughter to the local Pimp….applied for my 8th Student Loan….

 

What’s left?

 

Mi Casa !

 

It's all ... BoooYaaahhhh !

Sat, 05/31/2014 - 14:06 | 4812705 BlindMonkey
BlindMonkey's picture

Shit. You can still sell your soul to the devil.

Sat, 05/31/2014 - 14:14 | 4812714 edotabin
edotabin's picture

And how are all these loans any different?  On the plus side, just when you think it's all over, Squidman Golds will probably think up another great way to expand the economy. It will all be fixed. Nothing to worry about.

Sat, 05/31/2014 - 14:29 | 4812732 Village-idiot
Village-idiot's picture

https://www.youtube.com/watch?v=d-diB65scQU

Now I can see why marijuana is being legalized!

Sat, 05/31/2014 - 15:45 | 4812851 Headbanger
Headbanger's picture

Yep, I'm tapping my HELOC out before the ten year window closes on it and I bet many other home owners are doing the same.

I think this surge in HELOC borrowing is fantastic cause it will help crash the entire financial system and hasten the economic reset we need!

And I recommend older home owners especially max out their HELOCS while they can cause what fucking difference will a poor credit rating make when you're over 70 anyway!!?

 

In other words..  Fuck the system  cause it's fucked us up real bad now!

And I think I'll finally burn my draft card!

 

Oh wait...  They're even our friends now too!

 

Sat, 05/31/2014 - 15:47 | 4812855 COSMOS
COSMOS's picture

LOL @Handful, you know what is still LEFT, well you have a BUTHOLE you can make some money with LOL, I hear some Hollyweird movie directors like a strapping kind of guy hahahah

Sun, 06/01/2014 - 00:55 | 4813812 Harbanger
Harbanger's picture

Easy for you to say, your butthole may have some mileage but you're still cute.  Handful looks like he's on chemo.

Sat, 05/31/2014 - 15:51 | 4812864 Bunga Bunga
Bunga Bunga's picture

If you still have some small piece of a brain, this is the lesson to be learned from last time: Cache out as much as you can. Don't worry, they can't go after the debtors anyway, otherwise they would crash the system immediately. And in the end it will crash anyway, but enjoy the party as longs as it's on.

Sat, 05/31/2014 - 15:55 | 4812870 Headbanger
Headbanger's picture

BING-FUCKING-O!!

Over...

Sat, 05/31/2014 - 21:59 | 4813609 Bunga Bunga
Bunga Bunga's picture

BUNGA-BUNGA!!!!

Sun, 06/01/2014 - 11:10 | 4814195 Calmyourself
Calmyourself's picture

Yeah that is great advice now if you could lay out the exact timing of this crash that would be peachy..

Sat, 05/31/2014 - 14:38 | 4812746 slotmouth
slotmouth's picture

Ain't got no soul to sell.

Sat, 05/31/2014 - 14:58 | 4812778 eurogold
eurogold's picture

Prepping for Real Estate Crash 2.0 !

Sat, 05/31/2014 - 15:24 | 4812813 ebworthen
ebworthen's picture

It's all so 2007.

Sun, 06/01/2014 - 01:01 | 4813818 Harbanger
Harbanger's picture

Sum ting wong with my chinese calendar.

Sat, 05/31/2014 - 15:36 | 4812841 stocktivity
stocktivity's picture

Where is the location?

Sun, 06/01/2014 - 10:19 | 4814103 The_Ungrateful_Yid
The_Ungrateful_Yid's picture

no thanks my heroin days are over

Sun, 06/01/2014 - 11:42 | 4814251 Offthebeach
Offthebeach's picture

Hell's full up.
You can't get squat for a common soul. Mass murdering serial pedofile, maybe. Bankers, yes. The doors are wide open for them. The rest of us common sinners rot in Limbo.

Sat, 05/31/2014 - 13:59 | 4812701 drendebe10
drendebe10's picture

Standing round of applause for the policies that enable this for the arrogant narcissistic illegal indonesian kenyan alien muslim sociopathic liar in chief and the corrupt elected ruling politucal for bringing this to all hard working US citizen taxpayers.  Maybe our honorable men and women in the servuces are targeting the wrong enemies. Ya think?

Sat, 05/31/2014 - 14:04 | 4812704 blabam
blabam's picture

Deflation on a paper money standard when everybody loses faith in .gov institutions.. thanks for tha laugh.

Sat, 05/31/2014 - 16:58 | 4812995 Frilton Miedman
Frilton Miedman's picture

 

 

I've been observing Velocity for years now.

It all boils down to wage growth, and if that pipe dream (wage growth) happens, how well the Fed can counter inflation in light of excess reserves being @ astronomical levels.

Either I believe the end of days is near, or that Winston Churchill was right, that America always does the right thing once all options are exhausted.

In case Churchill was right, I'm short a small amount of treasuries.

 

 

 

Sat, 05/31/2014 - 22:23 | 4813655 yogibear
yogibear's picture

Winston Churchill is dead, eventually so will the Ponzi-scheme called the Federal Reserve system.

Sun, 06/01/2014 - 07:07 | 4813953 FredFlintstone
FredFlintstone's picture

Maybe he meant the Winston Churchill who posts here?

Sat, 05/31/2014 - 20:01 | 4813408 christiangustafson
christiangustafson's picture

teh deflations, bitchez!  yes yes!

Sat, 05/31/2014 - 13:23 | 4812659 The Merovingian
The Merovingian's picture

A “medical-device scientist” can’t send his kid to college without either a Heloc or cashing in on his pension.  

 

Sounds to me like that guy's kid needs to apply to a good trade school instead.

Sat, 05/31/2014 - 13:42 | 4812670 Village-idiot
Sat, 05/31/2014 - 14:10 | 4812709 BlindMonkey
BlindMonkey's picture

I have been trying for years to become a speculum design scientist. I still haven't found my dream job yet.

Sat, 05/31/2014 - 15:24 | 4812808 ebworthen
ebworthen's picture

Lots of hands-on tactile research I'm assuming?

Sat, 05/31/2014 - 15:53 | 4812868 Headbanger
Headbanger's picture

Agggghhhh!!    Are you CRAZY!

One of em around the house is MOAR than enough after numerous decades!

So PLEASE PLEASE PLEASE do research on perfecting the "Stepford Wives" but with a REMOTE that has a big red MUTE BUTTON!!

TIA!  And please hurry.

Sun, 06/01/2014 - 07:05 | 4813952 FredFlintstone
FredFlintstone's picture

I heard a good "bit" on the radio a few years ago where they were discussing the talking Japanese sex robots that were being sold for $7,500. The DJ said he would pay $8,000 for one that did not talk.

Sun, 06/01/2014 - 07:03 | 4813949 FredFlintstone
FredFlintstone's picture

15 years ago I was involved in the design of about 8 fashion design studios in the garment district in lower Manhattan. One of the studios was for a lingerie company. The architectural floor plan had offices and cubicles with labels such as "Bra Designer", "Panty Designer", "Senior Bra Designer", etc. 

How do you get a job like that? I would love to assist one of those guys. Maybe doing "field measurements".

Sat, 05/31/2014 - 15:49 | 4812860 COSMOS
COSMOS's picture

How about at home schooling, the dad's a scientist, I am sure he can teach the kid, why not bring him to work and have the kid act as an intern for a few years.

Sat, 05/31/2014 - 16:44 | 4812990 F22
F22's picture

What if one used his HELOC to purchase physical gold?

....and then lost it in a tragic boating accident..

Sat, 05/31/2014 - 22:00 | 4813614 Bunga Bunga
Bunga Bunga's picture

It means maximizing your survival rate after the big crash.

Sat, 05/31/2014 - 18:36 | 4813245 CrazyCatLady
CrazyCatLady's picture

More disturbing than that, this "medical device scientist" has had a job for the last twenty years at least designing vital medical equipment.  Makes you wonder who really makes pacemakers, hope i dont need one.

Sat, 05/31/2014 - 20:44 | 4813476 11b40
11b40's picture

....but he has a $1,000,000 house.

Think about that.

Sat, 05/31/2014 - 22:54 | 4813692 10mm
10mm's picture

Never. Trade school is beneath him. That's for the common man. A fuckin house at 1 million in shit ass Mass.No way trade school, but your right.

Sun, 06/01/2014 - 06:23 | 4813930 GCT
GCT's picture

I am glad someone said it Merovington!  + 100!!!  200k to send your child to school obviously he ot she is not the sharpest tool in the shed or they would be getting academic assistance.  Part of the problem is the parents are even stupider then their offspring.  Take out an equity loan sure why not, but I would not be sending my under achiever to college with the money.  Let them children become debt salves before they even get a job and go buy a nice boat with that money or the car you always wanted hahaha.  80% of the kids these days have to take remedial classes to even take college level course!!  Maybe that is why daddy wants to take out the loan!

I am sure the kid will be getting the degree in basket weaving.  Oh I forgot you can become a government employeee with any type of degree these days.  WTF the parents going to do when they get laid off as they continue to offshore the good paying jobs. 

 

Sat, 05/31/2014 - 13:28 | 4812661 QQQBall
QQQBall's picture

few will be refinancing their homes for a while. Second TD, home equity, LOCs against the crib is what is left. Bundle them, get them rated AAA and sell the "no risk ports" to yield starved pension funds.

Sat, 05/31/2014 - 13:38 | 4812672 duo
duo's picture

My mortgage is at 5.5%, but my BofA HELOC is at 2.75%.  I'm seriously considering using my HELOC to pay off my mortgage.

Sat, 05/31/2014 - 17:08 | 4813055 yellowsub
yellowsub's picture

Isn't a HeLOC adjustable rate?  Not sure if that would be a good idea but then again if the economy collapse it wouldn't matter.

Sun, 06/01/2014 - 06:58 | 4813948 FredFlintstone
FredFlintstone's picture

I did that about 8 to 10 years ago when my mortgage was at 5% and HELOC was maybe 3.3%. I then paid the HELOC off in 18 months. Just have homeowners insurance, property taxes and utilities to pay. Why pay a bank all of that money :)

Sat, 05/31/2014 - 14:42 | 4812662 buzzsaw99
buzzsaw99's picture

NOTIONAL sfh prices are rising. NOTIONAL.

Sat, 05/31/2014 - 13:29 | 4812663 sessinpo
sessinpo's picture

A friend of mine lost his job and was unemployed for a while. He sold his PMs and other stuff just to get by. Perhaps this story will make PM bugs understand why PMs go down in a deflationionary period. Cash is king until the beast is killed. In the mean time ,everything else gets sold off or borrowed against to raise cash.

Sat, 05/31/2014 - 13:45 | 4812681 Renewable Life
Renewable Life's picture

I agree, had lunch with a former stock broker, turned stock info entrepreneur yesterday, he said most of his "old big money guys" are prepping for DOW 17,500 at which time the flush will be biblical (for westerners) and in the flush GLD and SLR will get plunged too, at which he stopped and said, "I hope you have enough cash at that point to go all in on physical PM" because that will be the high in the DOW and the low in PM's for our lifetime!!!

I told him he was preaching to the choir, he laughed and said, "it's a small choir were part of on Wall Street and Main Street right now" but big money guys are getting ready right now, 2007 style!! I think he's right, it's the only explanation for bond plunge too, short positions are closing like crazy!!

Sat, 05/31/2014 - 14:31 | 4812736 Winston Churchill
Winston Churchill's picture

They will be competing against 'new' eastern money at that point.

Its a new game ,and the 'old' players might get a surprise unless this is planned

for the very near future.The timeline for the endgame is running out fast.

Sat, 05/31/2014 - 13:52 | 4812689 Tinky
Tinky's picture

The problem with that thesis is that the vast bulk of privately held PMs in the U.S. is owned by wealthy individuals, and they ain't selling, even during a deflationary collapse.

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