Any decline in home equity balances could be offset by higher demand for other types of consumer loans. The worry is that only borrowers with blemished credit will take out home equity loans, increasing banks’ risk.
With tax reform close to the finish line, bankers are still clear winners from the compromise worked out between House and Senate negotiators. But the bill includes some caveats that might give institutions pause.
The lower mortgage interest deduction cap in House Republicans' tax bill would create a disincentive for existing homeowners to sell and add to already tight housing inventory concerns, according to Black Knight.