Humans can sometimes have a selective memory. So, take yourself back to 2005. The housing market was rapidly on the rise, and mortgage mania was rampant. 2005, as well as 2006, were the height of borrowers taking out Home Equity Line of Credit (HELOC) loans. Not coincidentally, it was also near the height of the real estate market before the nationwide housing market crash. A majority of these HELOCs had what is called a 10-year “Grace Period”. In other words, a 10-year period of time that the HELOC could be used before it had to eventually be paid off.

Fast forward to 2016, where we find ourselves nationwide at the end of the Grace Period for many of the HELOCs written in 2005 and also 2006. According to data provider, Black Knight, delinquencies on HELOCs are up 87% from this point last year. This is very significant. Black Knight data also indicates that HELOCs from 2005, 2006, and 2007 make up 52% of all active lines of credit. There are 850,000 HELOCs from 2005, and 1.25 million HELOCS from both 2006 and also 2007; totaling $192 Billion in home equity lines of credit.

What does this mean for our housing market? Just as many people think that we have moved past the bulk of foreclosures nationwide, the Black Knight data clearly shows that we are poised for another increase in foreclosures as the Grace Period ends on HELOCs, and people are not prepared to pay them off or refinance them. Especially given that for most people, their home values have not yet recovered back to “pre-crash” levels.

Moreover, this is just another reminder that the reckless handling of the mortgage market and industry prior to 2008 continues to leave lingering collateral damage on people all across the country. At Real Estate Investments Northwest, we are here to help people who find themselves in this position with no other options. A difficult time for many people with HELOCs is approaching, and everyone should be prepared.