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How long can banks keeps ignoring home equity loans?

October 29, 2010

 US_MORTGAGEA1010

By Matthew Goldstein

The $425 billion in home equity loans and other second mortgages sitting on the balance sheet of the  four biggest U.S. commercial banks is the big gorilla in the room that no one wants to talk about. (See our latest special report here.)

The banks, for their part, generally have downplayed concerns about so-called second liens on mortgages. Bankers point out that less than 5 percent of home equity loans and other second mortgages are delinquent and lenders have been taking charge-offs for second liens deemed uncollectable.

But critics argue the banks are whistling past the graveyard in dealing with their large exposure to second liens and pinning too much on an economic rebound to keep these loans above water.  The critics say that with so many borrowers underwater on their primary mortgage, it is inevitable that banks will have to take writedowns on home equity loans, especially when the first loans are modified and reduced in size.

The big worry then is that any substantial writedowns by banks could eat away at precious capital they’ve built up since the financial crisis nearly brought many big lenders to the brink two years ago.

Also, housing experts suggest that until banks confront their second lien exposure, it will be hard to craft meaningful solutions to the mortgage mess and stem a wave of  foreclosures on financially-strapped borrowers.

To read the special report in PDF format.

Some nice feedback from the Columbia Journalism Review.

 

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Comments

A home equity loan, also known as a second mortgage, allows homeowners to borrow money from their home’s available equity. These are commonly used for debt consolidation, home improvements, educational expenses, unplanned emergencies, vehicle purchases, and other gifts and purchases.

Home equity loans are a popular financing option for homeowners who need additional cash. These loans usually offer a lower interest rate than credit cards. In addition, the interest you pay may be tax deductible

The two most popular types of home equity loans are a home equity line of credit (HELOC) and a home equity fixed loan. If you do decide that a home equity loan is right for you, remember to do your homework. There are a variety of loan options available so it’s important that you compare lenders and rates in order to find the best deal.

Here, I would recommend Carfinance.org to you. It make it very easy to get multiple quotes, compare rates from around a 100 companies & find out the best rates to avail affordable instant home equity loan (second mortgage) at absolutely no cost and obligation.

Carfinance.Org compares home equity rates, gets multiple quotes on home equity loan rates and offers services for both home equity line of credit (HELOC) and home equity fixed loan at incredibly lower interest rates.

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