Home equity lines of credit, or HELOCs, were all the rage in the early 2000s. People borrowed against their homes to fund all types of things: New cars, college educations, even second homes.
Now, HELOCs are making a slow return to the market after all but disappearing during the recession.
The resurgence is slow because, as financial journalist Ilyce Glink says, "The idea of a home equity line of credit is, get this, you have home equity. You don't have home equity, which is a problem for most Americans, unless you were very lucky and bought in 2009-2012.”
For those who were able to secure a HELOC back in the day, Glink says that they may find themselves in a precarious and surprising financial situation as the bill comes due for these loans. “Many of the home equity lines of credit that were set up back in the early [2000s] were interest-only for the first ten years. And then they have a little clause in them that says either you pay them off or whatever the balance is converts to a 15-year rate loan,” Glink says.
Glink says that this means that millions of people who were only paying interest on their loans will essentially be hit with a 15-year mortgage that now includes billions of dollars in principal. Some homeowners could see their payments triple.
Refinancing is a great option for people who find themselves in this situation, but Glick says that many people wouldn’t qualify for a refi in the current market.
“Ten million people are still functionally underwater with their mortgages. That means if they tried to [refinance] today, they wouldn’t have enough equity in the house or they literally have zero or negative equity, and there’s no way for a regular lender to refinance them.”
For a few years, at least, Glink suspects that there will be a number of people who will not be able foot the bill and this could have a larger affect on the economy.
“From now through 2017 when the big bulk of these HELOCs start to convert and come due, we’re going to see an increased amount of people who can’t pay them. So there’s going to be increasing defaults and maybe an increase in the level of foreclosures due to HELOCs…,” Glink says.
Ilyce Glink is a financial journalist and the founder of ThinkGlink.com
State media reports that Jeffrey Edward Fowle acted "contrary to the purpose of tourism" and is being investigated. North Korea is known to be holding at least two other Americans.
Here's an extended look at the Marketplace Datebook for the week of June 9:
Let's begin with something musical. Musician, inventor, and Rock and Roll Hall of Fame inductee Les Paul was born on June 9th, 1915.
On Tuesday, the Commerce Department reports on wholesale inventories and sales and the Labor Department issues its job openings and labor turnover survey for April.
June 10 is the 79th anniversary of Doctor Bob and Bill W founding Alcoholics Anonymous.
And remember that action film with the bus that would blow up if it didn't maintain 50 MPR on LA highways? "Speed" was released 20 years ago.
Mid-week we get a look at the nation's balance sheet. The Treasury Department is scheduled to release its monthly statement for May.
A House subcommittee on Communications and Technology holds a hearing on "Media Ownership in the 21st Century."
On Thursday the Commerce Department reports on retail sales for May.
It's a bird...It's a plane...It's the 36th annual Superman Celebration getting underway in Metropolis, Illinois.
And on Friday the Labor Department issues its Producer Price Index for May. That's Friday the 13th. Sounds like a movie rental opportunity.
Lastly, look up in the sky to see the Full Strawberry Moon. The name is related to strawberry harvesting season. Now picture a giant strawberry in the sky.
Farmed fish production will have to more than double by 2050 to keep up with global demand, a report finds. And aquaculture can be far more sustainable than meat production, the researchers say.
Hot off their success in directing Captain America: The Winter Soldier, the Russo brothers are diving into a type of directing not normally associated with creativity, technological innovation, and narrative storytelling. They’re starting a company that makes commercials.
The pair have launched Bullitt, a branded entertainment company that will make long-form commercials with ‘Fast and Furious’ franchise director, Justin Lin. The company is named after the Steve McQueen film from 1968 which they call a great advertisement for Ford Mustang.
Joe and Anthony Russo directed a three and a half minute commercial for Smirnoff Vodka earlier this year. The commercial ran as a 30-second spots on television while the full version was posted online, with the hopes that it would go viral.
The pair has directed commercials since they first got into filmmaking – it was something they did between TV and film projects. “We kind of fell in love with the creative possibilities that you have shooting commercials, “says Anthony. The process is faster than a feature length film or television show and there’s more freedom to be experimental.
The two draw a line between traditional product placement and what they plan to do. Joe points to FX’s Sons of Anarchy as a sort of commercial for Harley Davidson where the product is seamed into the storyline – it’s not overt product placement. “It’s finding new ways to use money to advance creativity.”
And they’re pretty sure advertisers will get on board as services like Netflix get more popular. Joe says, “these are non-advertiser based services, right? So the brands are going to have to find new ways to reach eyeballs.”
When a girl's business got shut down for lack of a license, lawmakers decided the rules went too far. With states regulating so many professions, even consumer groups wonder if they should cut back.
Some 150,000 Allied troops landed in Normandy and began the liberation of France from Nazi occupation during World War II. World leaders, including President Obama, gathered to mark the anniversary.