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Home equity line defaults are likely to rise

Home equity line defaults are likely to rise

A wave of potential defaults on home equity lines of credit could start arriving in the next few years as Americans face a day of reckoning on their boom-era borrowing.

Many homeowners who took out home equity lines, essentially second mortgages, during the housing bubble have been paying only interest.

Now, as they are nearing their end-of-draw terms, shutting down further borrowing, they have to start paying back principal along with interest. That, credit rating firm TransUnion said Thursday, could lead to payment shock — and possible defaults.

Economists said that the threat is particularly pronounced in California, especially more affordable inland areas,...