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Th e M Rep o RT | 37 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t ORIGINATION the latest Payment shock looms for HelOc Borrowers With 2.5 million loans poised to reset, many borrowers aren't going to be ready. P ayment shock among holders of home equity lines of credit (HELOCs) is a growing concern, as 2.5 million HELOCs are sched- uled to reset over the next three years, according to the Mortgage Monitor Report released by Black Knight Financial Services last month. In fact, the average HELOC holder faces a monthly payment increase of $250 sometime in the next three years as he or she reaches the end-of-draw period and has to begin making princi- pal and interest payments on the loan, according to Black Knight Financial Services' data. Furthermore, the analysts at Black Knight Financial Services point out that the average HELOC borrower is currently using a little less than 60 percent of his or her available credit, leaving open the possibility of borrowing more before the HELOC resets. "Further draws on these lines—for those that have not been locked—could result in 'payment shock' after they are reset that is even higher than the national average of $250 per month," said Kostya Gradushy, manager of research and analyt- ics at Black Knight Financial Services. Looking ahead, things don't get much better, according to Black Knight Financial Services. Beyond the next three years, the company predicts still-high pay- ment increases as the next phase of HELOCs resets. Borrowers with HELOCs scheduled to reset in 2019 are using an average of about 40 percent of their available credit and will incur payment increases of about $200 per month based on their current rates. "Should their drawing pattern match that of older vintages, we could be looking at a significant- ly higher risk of 'payment shock' for this segment," Gradushy said. TransUnion expressed similar concerns recently, stating de- fault risk for about $79 billion in HELOCs may grow over the next few years. Those with equity in their homes will be best able to absorb any "payment shock," according to TransUnion, as they may have the options to refinance their loans or sell their homes. Meanwhile, borrowers are flocking to HELOCs with in- creasing magnitude. Originations of HELOCs are up 18 percent from last year at the national level and as much as 74 percent at the state level. Nevada, Michigan, Rhode Island, and Florida charted the greatest increases in HELOC origina- tions—at least 50 percent in each state—while a few states demon- strated sizable declines. Mississippi, Nebraska, Wyoming, Iowa, and North Dakota have all experienced declines of at least 27 percent this year in HELOC originations, ac- cording to Black Knight Financial Services' Mortgage Monitor. The average HELOC holder faces a monthly payment increase of $250 sometime in the next three years.