{"id":471284,"date":"2026-02-13T00:41:23","date_gmt":"2026-02-13T00:41:23","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/471284\/"},"modified":"2026-02-13T00:41:23","modified_gmt":"2026-02-13T00:41:23","slug":"here-come-the-helocs-mortgages-housing-debt-to-income-ratio-serious-delinquencies-and-foreclosures-in-q4-2025","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/471284\/","title":{"rendered":"Here Come the HELOCs: Mortgages, Housing-Debt-to-Income-Ratio, Serious Delinquencies, and Foreclosures in Q4 2025"},"content":{"rendered":"

\t\t One of the most fundamental changes resulting from the Financial Crisis was the transfer of mortgage risk from banks to taxpayers.
\nBy\u00a0Wolf Richter<\/a>\u00a0for\u00a0WOLF STREET<\/a>.<\/p>\n

Mortgage balances rose by $98 billion (+0.7%) in Q4 from Q3, to $13.2 trillion, according to the Household Debt and Credit Report from the New York Fed, which obtained this data via its partnership with Equifax.<\/p>\n

Year-over-year, mortgage balances rose by $564 billion (+4.5%). Since the beginning of 2020, mortgage balances have surged by 38%, while home prices have surged by 53% over the same period<\/a>.<\/p>\n

\"\"<\/p>\n

Overall mortgage balances grow as a result of several factors: When a buyer finances the purchase of a newly constructed home (growth of the housing stock); when the seller of an existing home has a small or no mortgage (40% of the homes are owned without mortgage), and the buyer takes on a new big mortgage; and when a homeowner does a cash-out refinance of an existing mortgage, thereby ending up with a bigger mortgage on the same home.<\/p>\n

Mortgage balances are reduced by the principal portion of mortgage payments and other mortgage paydowns and mortgage payoffs; and by foreclosures that cause the remaining mortgage balance to be written off after the sale of the home \u2013 there was a lot of that during the Mortgage Crisis.<\/p>\n

Here come the HELOCs: +36% since Q1 2021.<\/p>\n

Balances of Home Equity Lines of Credit jumped by 1.9% in Q4 from Q3, and by 8.6% year-over-year, to $430 billion. Since Q1 of 2021, the low point, HELOC balances have surged by 36%.<\/p>\n

HELOCs are lines of credit, and many of them are unused, just sitting there as a standby source of funding. But these balances here are actual balances drawn on HELOCs and accruing interest.<\/p>\n

A HELOC is a second-lien loan on the home that, if defaulted on, can lead to foreclosure, even if the first-lien mortgage is current. HELOCs are full recourse loans even in the\u00a012 states, including California, where nonrecourse mortgages\u00a0are standard, and where lenders, after a foreclosure sale, cannot pursue former homeowners with deficiency judgements on the first-lien mortgage. But they can pursue former homeowners for the balance of the HELOC. HELOCs did some damage during the Housing Bust, and lessons were learned about their risks.<\/p>\n

But what caused their disfavor in the years before 2021, and caused their balances to plunge for 13 years, was the ultra-low-rate mortgage. Instead of borrowing on a HELOC, homeowners cashout-refinanced their home. And that trend has now flipped.<\/p>\n

\"\"<\/p>\n

The burden of housing debt.<\/p>\n

The debt-to-income ratio is one of the classic ways of evaluating the burden of a debt. With households, we can use the debt-to-disposable-income ratio.<\/p>\n

Disposable income, released by the Bureau of Economic Analysis, is the monthly after-tax income consumers have available to spend for their daily costs of living, to service their debts, and to save and invest the remainder. So after-tax wages, plus income from interest, dividends, rentals, farms, small businesses, transfer payments from the government such as Social Security, etc.<\/p>\n

But it excludes income from capital gains, which is where the super-wealthy make most of their money. And this upper crust of income is excluded here and doesn\u2019t skew the data.<\/p>\n

The housing debt for this ratio combines mortgage debt and HELOC debt.<\/p>\n

The housing-debt-to-disposable income ratio in Q4 was unchanged at 58.8%, just a hair higher than a year ago, which had been the lowest on record, except for the freak quarters during the pandemic when stimulus funds distorted disposable income.<\/p>\n

The chart below shows why the mortgage crisis happened: Consumers were way overleveraged with a housing-debt-to-disposable-income ratio of over 90%. When home prices sank and people started to lose their jobs, the debt imploded and was a big factor in the Financial Crisis.<\/p>\n

\"\"<\/p>\n

Delinquencies and foreclosures are very low.<\/p>\n

Serious delinquency rates\u00a0\u2013 90 days or more delinquent \u2013 in Q4 edged up to 0.92% for mortgages (red in the chart below) and to 0.82% for HELOCs (blue).<\/p>\n

These are low delinquency rates. They have returned to normal from the pandemic free-money lows in 2021-2023.<\/p>\n

\"\"<\/p>\n

Foreclosures are still historically low.\u00a0The number of consumers with foreclosures on their credit reports in Q4 edged up a hair to 58,140 consumers, well below the 65,000-to-90,000 range of the Good Times in 2018-2019, and far below those in prior years.<\/p>\n

The increase over the past few years comes off the artificially low near-zero level during the era of mortgage-forbearance, when foreclosures were essentially impossible. The current levels aren\u2019t even back to the Good Times normal yet, though they will eventually get there.<\/p>\n

There will always be foreclosures, but a massive wave of foreclosures won\u2019t happen unless there is a confluence of two factors: Widespread and sharp declines of home prices that make it impossible for a struggling homeowner to pay off the mortgage with the proceeds from the sale of the home; and a high unemployment rate, where lots of people suddenly lost their jobs and cannot make the mortgage payments.<\/p>\n

\"\"<\/p>\n

But this time, the banks are off the hook.<\/p>\n

Among the most fundamental changes resulting from the Financial Crisis was the transfer of mortgage risk from banks to taxpayers. Now, 65% (or $9.4 trillion) of all mortgages outstanding are guaranteed or insured by the Government Sponsored Enterprises, such as Fannie Mae and Freddie Mac, or by government agencies, such as Ginnie Mae; the FHA insures subprime mortgages with low down payments, the VA insures mortgages of veterans, etc.<\/p>\n

The huge system of 4,000 banks and over 4,000 credit unions hold only about $2.7 trillion in mortgages, HELOCs, and second-lien mortgages, according to Federal Reserve data on bank balance sheets, less than 20% of the total. So there won\u2019t be another mortgage crisis for banks. They\u2019re largely off the hook.<\/p>\n

The remainder of the mortgages that didn\u2019t qualify for government backing, such as jumbo mortgages, and that banks didn\u2019t want to keep on their balance sheets, about $1.7 trillion in total, were securitized into \u201cprivate-label\u201d mortgage-backed securities (MBS) and sold to institutional investors around the world, such as bond funds and pension funds, and they\u2019re on the hook for those.<\/p>\n

And in case you missed it: Household Debts, Debt-to-Income Ratio, Delinquencies, Collections, Foreclosures, and Bankruptcies in Q4 2025<\/a><\/p>\n

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the mug to find out how:<\/p>\n

\n\"\"<\/a>\n<\/p>\n

\"\"<\/p>\n

WOLF STREET FEATURE: Daily Market Insights by Chris Vermeulen, Chief Investment Officer, TheTechnicalTraders.com<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"One of the most fundamental changes resulting from the Financial Crisis was the transfer of mortgage risk from…\n","protected":false},"author":2,"featured_media":471285,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,46],"class_list":["post-471284","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-ca","tag-canada","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/471284","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=471284"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/471284\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/471285"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=471284"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=471284"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=471284"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}