Default Risk Rises on 20% of Boom-Era Home-Equity Loans

As much as 20 percent of home equity lines of credit worth $79 billion are at increased risk of default as their payments jump a decade after the loans were made during the U.S. housing boom, according to TransUnion Corp.

Borrowers face rate shocks as payments on the credit lines, known as HELOCs, switch from interest-only to include principal, causing monthly bills to surge more than 50 percent, according to a report today by the Chicago-based credit information company. The 20 percent of borrowers most in danger of default are property owners with low credit scores, high debt-to-income ratios and limited home equity, said Ezra Becker, TransUnion?s vice president of research.

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