"Wells Fargo Home Lending will temporarily stop accepting applications for all new home equity lines of credit (HELOCs) after April 30," the bank said in a statement to FOX Business. "The decision to temporarily suspend the origination of new HELOCs reflects careful consideration of current market conditions and the uncertainty around the timing and scope of the anticipated economic recovery."
Wells joins JP Morgan in the move, which is explained on the bank's website.
"Due to the economic uncertainty created by COVID-19, we’re temporarily not accepting applications for new home equity lines of credit (HELOC). This will protect both you and the bank" which also advises customers who may need cash to explore mortgage refinancing options.
HELOCs, which are backed by the equity in the homeowners' property, can be used for renovation projects or simply cold hard cash, similar to a traditional line of credit at a bank. However, HELOC loan rates may be lower than primary mortgage rates but they still need to be paid back just like any other loan.
As of Thursday, 30 million Americans filed for unemployment and it remains uncertain how quickly, if at all these jobs will come back, as states and cities reopen businesses.
The collapse of the housing market amid the 2008 financial crisis nearly caused a massive collapse of the U.S. banking system as millions of borrowers were unable to pay their mortgages, nor sell their homes.
This time around bank balance sheets are stronger and the institutions themselves are better capitalized to weather a crisis.
Thus far the U.S. housing market appears to be holding its own amid the coronavirus pandemic as mortgage rates remain historically low with a 30-Year Fixed Rate averaging 3.23 percent.