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News & Press: Industry News

HELOC Delinquencies Anticipated by CLTA

Tuesday, August 16, 2016  
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The CLTA sponsored Assembly Bill 1770 in 2014 to set up a process to terminate a HELOC so that a home equity lines of credit would be suspended and closed to allow for accurate payoffs. The new process became operative last July. Not coincidentally, the Wall Street Journal recently reported a rise in HELOC delinquencies because of HELOC resets. As the Journal reported, “Resets can lead to payments jumping by hundreds, or in some cases, thousands, of dollars a month.”

Assembly Bill 1770 was necessitated by loan payoff statements that were rendered inaccurate when borrowers continued to access their lines during and after the sale of their home. Regardless of why borrowers continued to use their lines, title companies found that financial institutions were not suspending lines of credit when receiving loan payoff requests. The title industry was concerned that this could turn into an even bigger problem once HELOCs started to reset.

According to the Journal, borrowers were at least 30 days late on $2.8 billion of HELOCS taken out in 2006, just four months after principal payments kicked in this year. Unfortunately, one result from the coming resets may be that some borrowers try to maximize their HELOCs up to, and after, the sale of their home. Assembly Bill 1770 was designed to suspend accounts so that lines of credit could be paid off and liens properly released.

California Land Title Association

1215 K Street #1816 Sacramento, CA 95814-3905
Email:  |  Phone: 916-444-2647  |   Fax: 916-444-2851