Home Equity Lines of Credit: Market Trends and Consumer ...
Home Equity Lines of Credit: Market Trends and Consumer Issues Public Research Report
June 2017 Cat. No.: FC5-52/2017E-PDF ISBN: 978-0-660-08671-2 ? Her Majesty the Queen in Right of Canada, as represented by the Financial Consumer Agency of Canada, 2017 Ce document est aussi disponible en fran?ais sous le titre Les marges de cr?dit hypoth?caires : tendances du march? et questions touchant les consommateurs.
Table of contents
1. Purpose ......................................................................................................................................................................................................... 1 2. Background ............................................................................................................................................................................................... 1
Figure 1: Examples of readvanceable mortgage products .................................................................................................................... 1 Rapid expansion: 2000?2010 ...................................................................................................................................................... 2
Figure 2: HELOC uses 1999-2010 .............................................................................................................................................................................. 2 Figure 3: HELOCs and household debt ................................................................................................................................................................. 3 Moderate growth: 2011?today .................................................................................................................................................. 3 Product evolution: the emergence of readvanceable mortgages ................................................................. 4
3. Product characteristics ................................................................................................................................................................... 5 3.1. Flexibility ........................................................................................................................................................................................ 5 3.2. Open terms .................................................................................................................................................................................... 5 3.3. Affordability ................................................................................................................................................................................. 5 3.4. Complexity .................................................................................................................................................................................... 6 Figure 4: How readvanceable mortgages work ............................................................................................................................................. 6
4. Consumer issues ................................................................................................................................................................................... 7 4.1. Over-borrowing ......................................................................................................................................................................... 7 4.2. Debt persistence ....................................................................................................................................................................... 7 4.3. Wealth erosion ........................................................................................................................................................................... 8 4.4. Uninformed decision-making ........................................................................................................................................ 8
5. Macroeconomic risks ........................................................................................................................................................................ 10 5.1. Increased vulnerability to an economic shock ................................................................................................. 10 5.2. Payment shock ........................................................................................................................................................................... 10 5.3. Housing market correction .............................................................................................................................................. 11 5.4. The role of HELOCs in the U.S. financial crisis .................................................................................................... 12
6. Improving consumer protection and education ...................................................................................................... 13 6.1. Education ........................................................................................................................................................................................ 13 6.2. Disclosure ....................................................................................................................................................................................... 13
7. Summary ..................................................................................................................................................................................................... 15
1. Purpose
The Financial Consumer Agency of Canada (FCAC) recently conducted research on home equity lines of credit (HELOCs) to better understand the consumer issues, potential macroeconomic risks, market trends and lenders' business practices. FCAC has a legislative mandate to conduct research on market trends and issues with the potential to impact financial consumers. This report focuses on the market conduct of federally regulated lenders and on the risks posed to consumers by HELOCs. It summarizes the Agency's research findings, and explains how FCAC plans to respond to the risks identified.
2. Background
HELOCs are revolving, and typically non-amortized, credit products secured by a lien on the borrower's residential property.1 The HELOC product first appeared in the late 1970s, but it was during the mid-1990s that lenders began tailoring HELOCs to appeal to a broader cross-section of consumers. Today, most HELOCs are sold as a component of readvanceable mortgages. Readvanceable mortgages combine HELOCs with amortized mortgages, and in some cases other credit products and banking services (e.g., personal loans, business loans, chequing accounts, overdraft protection and credit cards) under a global credit limit secured by a collateral charge against the borrower's property.
Figure 1: Examples of readvanceable mortgage products
Bank of Montreal
Homeowner ReadiLine
Bank of Nova Scotia Canadian Imperial Bank of Commerce
Scotia Total Equity Plan (STEP) CIBC Home Power Plan
Manulife Bank
Manulife One Mortgage
National Bank of Canada Royal Bank of Canada
All-in-One Account RBC Homeline Plan
Toronto-Dominion Bank
TD Home Equity FlexLine
1 The large majority of HELOCs in Canada have indefinite terms. For a more detailed discussion, see DBRS. (November 2014). Rating Canadian residential mortgages, home equity lines of credit and reverse mortgages. [Methodology Report]. Toronto. [Retrieved online]
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related download
- 7 6 what is a mortgage
- home equity lines of credit market trends and consumer
- housing affordability monitor national bank
- rbc housing affordability measures canada higher
- single family housing guaranteed loan program
- the valuation of hotels and motels for assessment purposes
- monthly budget worksheet freddie mac
- chapter 11 ratio analysis usda rural development
- e form 300073 06 2016 homeprotector page 1 of 6
- ratio analysis
Related searches
- lines of credit loans
- lines of credit in virginia
- home equity lines of credit rates
- personal lines of credit unsecured
- best lines of credit offers
- business lines of credit lenders
- guaranteed lines of credit for bad credit
- lines of credit for business
- home equity line of credit rates
- sba lines of credit loans
- home equity line of credit loan
- home equity line of credit payment calculator