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Report: Home Equity Loans Face New Risk


CNBC’s “Reality Check” writer Diana Olick reported on Thursday that many homeowners are beginning to feel the pinch leftover from taking out a home equity line of credit (HELOC), which was popular between 2005 and 2008 when the financial crisis hit.

According to Olick, after 10 years, the initial low interest rates can reset to higher interest rates. And now, many homeowners still owe more on their mortgages than what their home is worth.

“Homes purchased or refinanced near the peak of the housing bubble between 2005 and 2008 are much more likely to still be underwater despite the strong recovery in home prices over the last three years,” said Daren Blomquist, vice president at RealtyTrac. “Furthermore, many homeowners with HELOCs who have positive equity likely already refinanced to mitigate the payment shock from a resetting HELOC – and option not readily available for homeowners still underwater.”

Image via flickr/GotCredit

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