An executive at the $4.8 billion ESL Federal Credit Union said a stable local real estate markethelps his credit union manage the risk associated with keepingroughly 45% of its loan portfolio in HELOCs.

Credit data firm TransUnion reported that some financial institutions face risks fromborrowers who made advances on HELOCs during the housing boom.Borrowers are generally able to draw against the lines of creditfor 10 years, followed by a pay down period. TransUnion theorizedsome borrowers would be unable to make the higher payments of thepay down and lack the equity to refinance the debt.

The Rochester, N.Y.-based ESL has roughly $1.1 billion of itsloan portfolio in home equity loans with about $900 million inHELOC's. The credit lines have a 10-year draw and are paid downover 20 years. Their average balance is $35,000, the credit unionsaid.

ESL President/COO Faheem Masood explained that Rochester's longhistory of stable real estate prices means very few borrowers willbe underwater on their homes or would face any sort of paymentshock when the pay down period begins.

“We have seen very little speculation in real estate in theRochester market,” Masood said, adding housing prices had risenabout 3% during the 2005-2008 run up to the housing crisis and thenincreased about 1% more from 2008-2010 years. Since then, homeprices have remained more or less the same, with small fluctuationseither way, he said.

“This is a very traditional housing market,” Masood added. “Theoverwhelming majority of real estate owners live in their propertyand we build equity in our homes by paying down our mortgages.”

That means that if a HELOC borrower faced could not affordrepayment, he or she would be able to refinance the loan witheither the credit union or another lender, he said.

In addition, ESL borrowers pay back some of the HELCO principaleven during the draw period, Masood said. Each month,borrowers pay the greater of either $100 or 17 basis points of theprincipal along with an interest payment.

As a result, the monthly payment on ESL's best HELCO rate withthe credit union's average balance of $35,000 is roughly $156, hesaid. That figure will climb to a little more than $200 during thepay down period.