Newsletter - October 2015
We’ve dissected the HELOC market a fair bit in this space, but it’s time to return our focus as a new batch of numbers has recently emerged. In June 2014, we highlighted the two opposing opinions financial experts were touting in regards to coming HELOC resets ($200 billion to reset between 2014 and 2019). Those opinions have had surprising staying power, and you can read the full article here. But here’s a quick summary:
Gloomy Opinion: The HELOC resets will “reset” the housing markets recovery, in a bad way.
Sunny Opinion: The HELOC resets will be a bump in the road, but no biggie.
Then, in November 2014, the market threw us another curveball. Even with resets looming, HELOC originations were beginning to tick back up! And naturally, there were two opinions on what that meant. You can read the full story here, but this is the gist:
Gloomy Opinion: People use HELOCs as a cover-up for bad financial decisions, or as funding for bad financial decisions. Seeing more of them is bad.
Sunny Opinion: People use HELOCs to lower (or keep low) their mortgage rates when they are confident in the direction the economy is heading. Seeing more of them is good.
The Latest on HELOCs
According to this DSNews article, the current HELOC landscape looks like this:
HELOCs originated from 2005 to 2007 make up more than half (54 percent) of the current HELOC universe. These borrowers are facing full amortization of outstanding balances for the next two and half years, which means that approximately three million borrowers will see their monthly mortgage payment increase by an average of $250. About 550,000 to 600,000 borrowers will experience that increase within the next six months.
The stat that jumps right out of this report is that MORE THAN HALF of all current HELOCs come from a two-year period, 2005-2007. In case the significance of those years hasn’t hit you yet, that means that the rates on 54% of the entire HELOC universe are due to reset over a two year period ten years removed from that time period.
In other words... Right now.
Bottom Line: Whether you choose to opt for a sunny view of the coming resets or prefer the gloomy outlook, there is no denying that a serious force is about to exert itself on the market – and we all need to be prepared.
AND regardless of your disposition, you need to be ready to produce a paper trail for every financial move you make. And on that front, Blue Streak Docs can help. If you haven’t worked with us yet, you can try us out and get your 5th order FREE!
Employee Of The Month
Jennifer is our Employee of the Month for August. From the start, Jennifer has been a stellar employee - so much so that when she announced she was moving to Jacksonville we just couldn’t let her go. Since then, she has continued to do amazing work. She cares about the company and its goals so much that she continues to work Friday’s and the weekends even after being granted a 4 day work week. We’re lucky to have such a dependable and willing member on our team.