HELOCs, as they’re known in the industry, are typically open-ended revolving credit products, with interest rates pegged to the prime lending rate, which banks offer their best customers.
In recent years, when the real estate market was strong, many homeowners used HELOCs to draw cash from their homes. At its peak, in November 2008, 13.3 percent of residential loans were home equity loans and HELOCs, according to Mortgagebot, a Mequon, Wis., company that tracks mortgage activity. But in April 2009, home equity lending dropped to 3.2 percent of the overall market. It rebounded slightly in November, to 5 percent.
Other sources suggest an even bleaker recent picture. First American CoreLogic, a mortgage industry statistical and consulting firm that tracks a wider range of lenders than Mortgagebot, said that in November 2009, HELOC originations slid to $3.8 billion, the lowest level in the last two years and far below October’s $6.6 billion.
Some mortgage industry executives says they also see continued reluctance from the nation’s biggest banks to offer HELOCs, even to those with substantial equity in their homes. Regional banks, however, may be more willing to offer HELOCs, because they typically suffered fewer losses during the subprime mortgage collapse.
TD Bank increased its HELOC lending in 2009, according to Gregory Braca, the bank’s regional president in New York. The institution’s overall lending activity grew by 10 percent over 2008, and home equity lending “drove that growth,” Braca said.
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