[8] In 2008 major home equity lenders including Bank of America, Countrywide Financial, Citigroup, JP Morgan Chase, National City Mortgage, Washington Mutual and Wells Fargo began informing borrowers that their home equity lines of credit had been frozen, reduced, suspended, rescinded or restricted in some other manner.
[9] Falling housing prices have led to borrowers possessing reduced equity, which was perceived as an increased risk of foreclosure in the eyes of lenders.
After Tax Cuts and Jobs Act of 2017, interest on a HELOC is no longer deductible unless the loan is used for substantial home improvement.
[13] Both conditions were favourable to customers, as the growing equity in their properties represented an excellent opportunity to secure larger and longer loans.
Some of these measures may have impacted the growth of the HELOC market, limiting the demand on the customer side and making lending criteria tighter.
This insurance was used by lenders to “securitize pooled mortgages through the National Housing Act Mortgage-Backed Securities (NHA MBS) program”.
[15] Another measure was the Office of the Superintendent of Financial Institutions (OSFI) decision to cap the maximum LTV ratio for HELOCs at 65%, thus limiting the amounts homeowners could leverage from their property.
This is significant as the UK market has historically replicated innovative financial products developed in the US, such as credit cards or online payments.
[18] This can be partly attributed to the fact that the UK banking system is highly consolidated with little product innovation among the major lenders.
In 2022, almost 80% of Brazilian families ended the year in debt (generally with very expensive rates), a record since the CNC - National Confederation of Commerce - began researching the subject in 2011.
It can enhance financial flexibility, reduce borrowing costs, and provide homeowners with a valuable tool to manage their finances more effectively.
This empowerment can lead to better financial decision-making, reduced reliance on high-cost consumer debt, and ultimately a higher quality of life for many individuals.