Over the past several years, we’ve seen significant changes in the mortgage landscape. In the early 2020s, many homeowners secured ultra-low interest rates. Fast forward to today, we're now experiencing a never before seen convergence of multiple factors. New purchase interest rates are reaching record highs, home prices are remaining strong, inventory continues to lag far behind demand and with the recent boom in refinances, many homeowners aren't inclined to sell. So, where does the market go from here? Well, oddly enough, the U.S. housing market has the highest home equity levels on record and consumer demand to tap into that equity has never been higher. According to recent borrower data, one in three current homeowners plan to take out a home equity loan in the next year.
What does this mean for mortgage lenders?
The rising borrower demand for home equity presents a significant opportunity for lenders who are prepared to offer home equity lending products. The question is, do you have the right tools and people in place to support this shifting market? Here are the top seven ways your business can leverage home equity lending:
1. Meet customers where they are
Homeowners have more accessible equity than ever, and there is something to be said about meeting consumers when and where they need you the most. Whether they are looking to pay down high-interest debt, or finish home improvement projects, offering a quick and efficient home equity lending experience will allow you to support each borrowers’ unique needs.
2. Remember those 2020 and 2021 refinance customers
In addition to marketing to new borrowers, now is an ideal time to connect with your refinance customers from 2020 and 2021. The data shows that over two thirds of today’s mortgages have rates of four percent or less, and the average homeowner has about $65,000 of tappable equity. Now is a great time to reach out to those customers about tapping into their liquidity, while keeping their low rate first mortgage in place. This is also a great way to help deepen customer relationships, so that your business is top of mind when they are ready to buy a new home.
3. Reach out to current home equity line of credit (HELOC) customers
You may already have a book of home equity borrowers. Knowing how much of their revolving credit is being used and how much more equity they can tap into is important, as this can help to expand usage and open up more borrowing potential. Marketing to these customers should be part of your strategy, not only to cultivate home equity opportunities, but also to support overall retention.
4. Adopt the right tools to market and manufacture home equity loans
Having the tools to promote and manufacture home equity products at scale is incredibly important. Starting with sales and marketing tools, your lending platform should provide fully integrated lead management and CRM solutions as part of your single system of record. Encompass CRM™ and Surefire CRM for example, for example, provides industry-leading sales automation and CRM support, delivering streamlined lead management that seamlessly integrates with your loan origination system (LOS). When it comes to your LOS, ensure your system has built-in home equity technology to help you originate, process, and close more home equity loans in less time.
5. Leverage your retail sales force to sell home equity products
In today’s market, having dedicated teams for manufacturing different lending product types can seem like a luxury. Many lenders are realizing that in order to remain competitive and offer alternative lending products at scale, they need to pull in their retail sales force to sell and originate home equity products. This means ensuring that your business strategy includes properly incentivizing these teams to sell home equity products.
6. Compliance is key
So, you’re all in on offering home equity products and you have the team in place to sell. Have you thought about the compliance risks of your team operating out of two systems of record? With today’s reporting regulations, more and more lenders are making the shift toward moving their home equity business out of a consumer lending platform and into a single system of record. By ensuring that you are using a compliance-driven LOS, you have the benefit of built-in support and reporting for all loan categories, including HMDA for home equity.
7. Remain relevant in a changing market
The mortgage industry is cyclical, and it's important to stay ahead of market changes and anticipate consumer needs. Offering and promoting different types of lending products is essential to remaining competitive in any market.
Now more than ever, lenders require a platform that can evolve with their business.
Encompass® is the industry's most widely used and proven solution for managing all loan types with speed and agility. Click here to learn why top lenders trust the Encompass platform to deliver a fast, efficient, and compliant home equity lending experience.