Lenders Increasingly Write Off Home Equity Loans
Mortgage companies are handling home equity loans carefully, moving away from delinquent loans for fear that calling the loan will drive borrowers into foreclosures.
At the same time, they are scaling back lines of credit on borrowers who are still paying but who look like they might be risky. And they are making fewer home-equity loans.
Lenders extended an estimated $456 billion of new home-equity loans and lines of credit in 2007, down from a peak of $504 billion in 2006, according to SMR Research.
Writing off the loans doesn’t let the borrower off the hook, says Bob Caruso, Bank of America Corp.’s national servicing executive. The lender keeps the lien in place in the hopes that it will receive some money when the property is sold.
Source: The Wall Street Journal, Ruth Simon (01/16/08)