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Banks Could Face U.S. Home-Equity ‘Payment Shock,’ Moody’s Says

Home-equity lenders could see delinquencies rise in the next two years as borrowers face a “payment shock,” Moody’s Investors Service said.

The majority of home-equity loans were issued during the housing bubble before the 2008 financial crisis when underwriting standards were “dismal,” Moody’s said today in a report. Those loans will reach the 10-year mark between 2015 and 2017, when borrowers who are paying only interest must start repaying principal, and some won’t be able to keep up, Moody’s said.