Does Anyone Know How a HELOC Codes?

We have a 1st mortgage and a HELOC with Chase. They both report as mortgages...1st as installment and HELOC as revolving credit as it's a LOC

 

http://consumers.creditnet.com/straighttalk/board/showthread.php?s=&postid=384818#post384818

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I am SO glad I saw this on here...I wanted to post on a different forum about this but wasn't allowed.

The HELOC is SO dangerous nowadays and loan officers are hurting borrowers left and right without knowing it! First off it is so hard to know how the ending mortgage company.......the original one or one that ends up buying your loan will code this.

Lender A may code it a mortgage and Lender B that takes over the loan may call it a revolving account. Helocs are great if you have 100k in equity and you get a 100k line of credit and only pull out 50k or less of it.

When you are talking about a purchase....the heloc is maxed out.meaning you are pulling the final 20% of your equity out and thus are taking 100% of your line. The main problem with this is that 9 times out of ten it will be recorded as revolving (and for the sake of risk lets just assume that it will ALWAYS be recorded as this becaus eliek I said before you have no control over how a lender reports it) and the revolving will be a maxed out revolving account.

This tanks your score right away on its own but when you look at the "total revolving availale" and "total used" what this does because of the sheer size of a heloc type loan (compared to a maxed out 500 dollar cc) is show you at your limits across the board as far as your available credit.

This is the BIGGEST travesty in mortgage today. I am bombarded by wholesale lenders every day that are pushing the 20% heloc and even the 100% purchase HELOC! This is crazy and can turn a 720 credit score into a 620 in no time if the situation is right.

I have called several lenders about this and the basic feeling I get is "duh, if their scores tank then they cant refinance later on" they don't come out and say it but I know this is why they do it.

I am talking from experience here as well..have "lost" a few clients to other mortgage guys that will offer a 6% heloc for a purchase where I was offereing a 8 or 9% fixed second loan. (which at the loan amounts 20% are, the 2% dont make that much of a difference).

These people, even after I told them of the things that could happen, have come back to me and told me that their scores tanked and their revolving is so maxed out that they cant get a car loan.

The HELOCS are especially dangerous if you are looking to "just get in and refinance down the road".........when your scores tank.....you wont be able to do anything close to what you can now with your scores.

Well as you can tell I am passionate about the HELOCS and while they are good for some situations you really have to be careful and unfortunatley not all of the mortgage guys understand the impacts of the advice they are giving.

Good luck and glad I could answe you here!

 

This is a VERY important topic.

It would be great if creditnetters started posting what lenders their HELOCs are through, whether they report as real estate/mortgage, and whether they report as revolving.

Also, what impact (if any) they had on your scores when maxed.

I just got a stated income HELOC through quickenloans and am holding my breath waiting to see how it's going to report and what the score impact will be.

Will post when I know.

DemPooches

 

We have our HELOC thru Chase (our 1st mortgage lender too). It reports as a revolving credit line and didn't impact my score at all. It isn't maxed out though so that may matter.

 

as a mortgage lender myself, 98% of my second mortgages are HELOC (requested by the borrower, not solicited by me)...i won't do a 80/20 as the value of a house is based on an appraisal which is just an opinion...i haven't seen it impact any of my consumers scores...usually, if anything, six months later, if they decide to increase the line, they have better scores and get a better rate.

each situation is different, as each consumer is different. i would never give a consumer a heloc if i didn't think they would manage it wisely or if i felt it wasn't their best option. i also pay all my consumers closing costs associated with both a term or heloc loan.

if a mortgage lender is forcing you into something that worsens your situation (interest rates, payments) - some states have predatory lending laws (north carolina was the first) where this type of lending is against the law. they have to prove to you that it makes sense to give you a second mortgage.

just my opinion.

 

amen jenz.

i live by the same..

kev