Home Equity Issues Threaten Regional Banks

Columbus, Ohio–Home equity loan defaults are increasing–highlighting how the financial crisis is transforming from large bank writedowns to lending issues at smaller banks like Huntington Bancshares in Columbus, Ohio, according to the Financial Times.Home equity loan defaults mean potential big problems for regional banks; if one folds, it may set off a series of mergers, the Times said.In the last six months, home equity loan-related losses have more than tripled to 1.54 percent of unresolved loan volumes.As home prices continue to decline in California and other states where some of the biggest home equity loan portfolios are located, defaults could increase.In addition, the institutions with the biggest amount of home equity loans in their lending portfolio are almost all regional–including Huntington, National City and SunTrust Banks, according to Fitch Ratings.