Home Equity Lending Trends and Growth Opportunities
Home Equity Lending Trends and Growth Opportunities
As we come out of a complicated time in history, there are many advantages to the increasing optimism of consumers. “That optimism, combined with low-interest rates, has fueled home buying and the market for real estate first mortgage loans—but what impact is current consumer behavior having on home equity lending?” stated Info-Pro.
Miniter Group’s partner, Info-Pro Lender Services, recently hosted the webinar, “Home Equity Lending Trends & Loan Growth Opportunities.” The webinar focuses on current HELOC buyer behavior trends, optimizing HELOC product offerings to satisfy borrower needs, and creating revenue and positive loan growth.
Keith Marvel, Vice President of Sales at Miniter Group, led the webinar, which is available as a recorded video on Miniter’s YouTube Channel. Click Here to watch the webinar.
Obtaining New HELOC Business
“The housing market is tight right now. People know that,” said Marvel. “A lot of homeowners, instead of shopping for a new home, are instead improving what they have. Home equity products are in greater demand.”
Due to this, lenders have heightened competition to place these first-time HELOC borrowers into their pool of new-found customers. This idea introduces the critical question of how a lender can obtain HELOC business from more than its existing first mortgage base.
Using data from the analytics firm Nomis, Marvel could generate intuitive findings of the mindset of a home equity borrower. The research from the recent studies presents many different yet insightful results that lenders should be aware of for future home equity lending.
Incumbency and Local Presence Matter
One of the findings was that it is that incumbency matters. it is more difficult for a non-incumbent financial institution—an organization that does not hold the potential borrower’s first mortgage—to woo over and win a new home equity customer.
For instance, “The Nomis study shows only 32% of respondents looked at getting a home equity loan from a bank where they did not have their first mortgage.” Marvel stated. The remaining sixty percent went to their primary financial institution.
Marvel also indicated from the survey that 50% of consumers in the study did not price shop for their HELOC and instead applied to just one lender. This statistic suggests that incumbency played a significant role in how many lenders a consumer applied to for a home equity loan.
Attitudinal Price Sensitivity
The Nomis report also looked at attitudinal price sensitivity by asking, “If another bank had offered you a better rate on your HELOC, would you have accepted it?”
- Just 42% responded with an unqualified ‘yes.’ Of the remaining, 20% said yes, but only if it’s 0.25% better.
- Another 29% said the rate needs be at least one-half to a whole percentage point better.
- A limited-time appeals promotional rate would have lured a small group (4%).
Marvel said the challenge is simple but not easy. Non-incumbent lenders will need to try harder than incumbent banks to win new HELOC business. He also suggested that an incumbent may need to bundle in other services or benefits to keep that borrower—especially with offers from low-price leaders.
The Nomis survey findings make clear that a credit union needs to know their local home equity market well and exactly what their competitors are doing.
Shopping Online or In-Person?
How do consumers shop for a home equity loan—for example, online or in-person? The data show it varies by age. Overall, the Nomis results show even distribution, from “no research” (13%) to 25% looking at three or more lending sources and 20% conducting diligent research on a comparison website.
The under-35 age group performed some form of research, with a slight tendency to research three or more lending sources. The report says that under 35s are more likely to visit a lender in person – 60% saw at least two lenders in person.
Another way to expand the home equity portfolio, emphasized Marvel, is to expand the range of borrowers for which the credit union will write HELOCs. “There’s plenty of capital; now it’s just a matter of the lenders getting comfortable getting their toes back in the water and going after this business,” said Marvel.
He noted that many lenders, because of the pandemic-induced economic crisis, either retreated from the market, raised qualifications to borrow, or moved off home equity products.
This guide provides the lender with a detailed overview of Force-Placed Insurance. Discussions include features & benefits, history of force-placed insurance, the lender-placed insurance policy, issues with the current force-placed insurance business model and the new Borrower-Centric insurance tracking module along with compliance and vendor management. This is a must-read for any lender using force-placed insurance.
Equity Protection Program
Miniter Group’s Equity Protection Program is a fully insured loan program designed to assist lenders in generating more Home Equity loans. It will also allow lenders to grow their combined loan to value from the first and second mortgages, which will expand lending opportunities to strengthen your portfolio.
The product is a single interest credit default product, and it is meant to safeguard the institution against default from the borrower. Most banks drop out at 80 to 85 CLTV, and they may require a 720 FICO score to get the higher CLTV. Credit unions are embracing the product more than the banks. The credit union can pick the certain FICO score and CLTV buckets they want to insure against credit default. If the loan goes bad, they file a claim, and they are out of the deal, and no foreclosure.
At the Miniter group, we specialize in turning these challenges into lending opportunities. Miniter’s credit default program can assist lenders in generating new interest revenue while simultaneously building a HELOC and home improvement portfolio.
To learn more about insuring your HELOC and 2nd’s portfolios, read:
Recorded Tuesday, June 8th, 2021
How is consumer behavior impacting Home Equity lending? Are lenders doing enough to compete with marketplace competitors that are disrupting the lending industry by making the process easier, faster and more borrower-centric?
Watch this webinar to learn:
- Current HELOC Buyer behavior trends
- Optimizing HELOC product offerings to satisfy borrower needs
- Creating revenue and positive loan growth