MReport December 2019

TheMReport — News and strategies for the evolving mortgage marketplace.

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36 | M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION HELOC Debt on the Downswing According to a study, Q2 2019 marked the first time the total had dropped below $400 billion since 2004. A study by the Urban Institute states that while mortgage debt is at its highest-recorded level ($9.4 trillion), outstanding HELOC debt during Q2 2019 was less than $400 billion for the first time since 2004. HELOC debt peaked at $714 billion in 2009, and the decline of HELOC reveals "high-risk aver- sion" among lenders and consum- er awareness. The U.S. housing market has a total value of $29.1 trillion—sig- nificantly higher than the market's pre-value crisis of $24.1 trillion. "The low level of cash-out refinancing and HELOC debt today suggests that both banks and consumers are remembering the les- sons from the past, contributing to a stable and secure housing market overall, and offering the housing market a substantial cushion in the event of a recession or an economic downturn," the report states. The 20 largest banks account for more than half of the total HELOC volume since 2003. Aiding to the decline is the lack of volume of cash-out refinances. Between 2003 and 2007, the total amount of cash-out refinances averaged $223 billion. Since 2008, the cash-out refi- nance volume has averaged $52 billion annually, ranging from $25 billion in 2014 to $96 billion in 2008. Cash-out refinance volume reached $87 billion in 2018, and it is on a slower place during the first three quarters of 2019. Insider reported last month that the number of HELOCS had declined by half since 2008. Bloomberg reported that this change in mentality is hurting banks, which were once counted on by homeowners taking loans as a source of revenue. The report added that at Bank of America, HELOCs produced $552 million of interest income during Q 3 2019—down almost 70% from a decade ago. Insider says that the volume of HELOCs doubled in the years leading up to the financial crisis, as homeowners could borrow against their homes to boost con- sumer spending. According to data from the New York Federal Reserve, the number of HELOCs has fallen by nearly half over the past decade. In 2016, just 4% of homes had an open home equity line, which is down 10% during the 2000s.

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