An executive at the $4.8 billion ESL Federal Credit Union said a stable local real estate market helps his credit union manage the risk associated with keeping roughly 45% of its loan portfolio in HELOCs.
Credit data firm TransUnion reported that some financial institutions face risks from borrowers who made advances on HELOCs during the housing boom. Borrowers are generally able to draw against the lines of credit for 10 years, followed by a pay down period. TransUnion theorized some borrowers would be unable to make the higher payments of the pay down and lack the equity to refinance the debt.
The Rochester, N.Y.-based ESL has roughly $1.1 billion of its loan portfolio in home equity loans with about $900 million in HELOC's. The credit lines have a 10-year draw and are paid down over 20 years. Their average balance is $35,000, the credit union said.
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