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Stories about non-QM products. Coverage of subprime, Alt-A and
hard money lending. Home-equity loans and home-equity lines of credit.

HELOC Production Forecasted to Double

Changing market conditions driving growth

Oct. 24, 2017

By Mortgage Daily staff

The origination of new credit lines secured by residential properties is expected to double over the next five years thanks to improving market conditions.

This year, U.S. consumers with equity in their single-family properties are forecasted to open 1.4 million new home-equity lines of credit.

Production of HELOCs, which moved up from 1.2 million in 2016, is forecasted to ascend to 1.6 million during all of next year.

TransUnion reported the findings Tuesday.

Debt consolidations account for 30 percent of HELOCs opened, while large expense was cited for 29 percent, and rate-term was the reason for a quarter. Another 9 percent were used as subordinate financing concurrent with a first mortgage origination, and 7 percent maintain lines in case of unexpected expense.

Aggregate home equity stood at $13.3 trillion in 2005. That year saw 4.9 HELOCs opened.

By 2011, when home equity had plunged to $6.3 trillion, HELOC production sank to 0.6 million.

But with home-equity having risen back to $13.3 trillion as of 2016, originations still lagged at 1.2 million.

TransUnion Senior Vice President and Mortgage Line of Business Leader Joe Mellman said that a "the 'hangover effect' of a once-in-a-lifetime mortgage crisis" could be a factor in the lack of a robust HELOC recovery.

"Another factor could be limitations in supply, as many lenders exited or reduced their HELOC operations during and after the last recession," he continued. "Other factors such as competition from other credit products -- like the remarkable surge in personal loans over the past few years -- doubtless also have had some impact.

"But we believe those effects have and will continue to abate, allowing for a resurgence of this compelling credit product."

From 2018 through 2022, the Chicago-based credit bureau expects that between 9 million and 11 million new HELOCs will be opened.

The projection for the five-year period is more than double the HELOC production that was generated from 2012 until 2016, when the total was 4.8 million.

Mellman noted in the statement that aggregate home equity has surpassed levels during the housing boom in the mid 2000s. Continued growth in home equity and a relatively robust economy will drive HELOC growth.

TransUnion indicated that there are currently around 65 million potential borrowers who have loan-to-value ratios less than 80 percent.

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