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BMO Harris Bank to shut off interest-only home equity loans

A "for sale" sign is seen outside a home in New York June 19, 2012. REUTERS/Shannon Stapleton
A "for sale" sign is seen outside a home in New York June 19, 2012. REUTERS/Shannon Stapleton

UNDATED (WSAU-Wheeler News)  B-M-O Harris Bank is among those cutting off home equity lines of credit in which borrowers only have to pay interest each month.

The Milwaukee Journal Sentinel says federal regulators are discouraging those types of arrangements, because it could put a severe strain on banks should another severe recession occur. The interest-only credit lines are backed by the equity in the borrowers' homes. They were fairly common during the housing boom which preceded the Great Recession in 2008.

B-M-O Harris spokesman Jim Kappel tells the paper that his bank has a new group helping customers whose credit lines are ending. In many cases, borrowers can moved into other types of home equity financing in which they'd have to start paying down the principal on their loans, as well as the interest. Kappel did not say how many customers were affected. For those with distressed financial hardships, he said the bank would do what it could to help them make it through.

Kappel stressed that B-M-O Harris would continue issuing home equity loans, and they're an important part of its business in Wisconsin.

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