Home Equity Lending on the Rise

Home equity borrowing has hit its highest level in three years, signaling growing confidence in the housing market, the credit scoring firm Equifax has reported.

New home equity revolving lines of credit issued so far this year reached a total of $44 billion through July, a three-year high. A total of 495,000 new lines of credit were issued during that period, also a three-year high, according to the Equifax October National Consumer Trends Report.

Gains in home equity lending are considered a good sign for the housing market overall, because they indicate that lenders are less concerned about falling home values, which could wipe out the equity backing those loans.

Consistent growth seen

"Increasing new home equity revolving credit indicates homeowner confidence and momentum towards an improved market," said Craig Crabtree, general manager of Equifax Mortgage Services. "While the levels are significantly lower when compared to pre-recession peaks, the recent stability has given way to consistent growth.”

Write-offs of delinquent home equity lines of credit also fell in September to their lowest level since April 2009, according to the report.

The total credit available through revolving home equity lines totaled $537 billion in July, according to Equifax, down 20 percent from its peak of $680 billion in May 2009. The number of new home equity lines established so far this year is less than a quarter of the 2 million created through July 2006, a pre-crash high.

Primary mortgages still shrinking

Meanwhile, outstanding balances on primary mortgages have been shrinking. First mortgage balances totaled $7.85 trillion in September, down 3.4 percent from their September 2011 level as tight credit has limited the initiation of new loans, borrowers paid down debt and foreclosures took some loans off the books.

Balances on seriously delinquent mortgages are down by 41 percent from their peak of $710 billion in March 2010, totaling $419 billion in September of this year. Over two-thirds of seriously delinquent first mortgages were originated from 2005-07, as were three-quarters of delinquent balances involving home equity lines.

This article was first published on MortgageLoan.com at: http://www.mortgageloan.com/home-equity-lending-rise-9269