Hello, LOs!
Last week, nonbank heavyweight loanDepot and the real estate investment trust New Residential Investment Corp. announced they are offering a home equity line of credit (HELOC) product.
Is it a mere coincidence? Of course not. Lenders are seeking to expand their product portfolios to help compensate for the lost volume of refinances due to fast-rising mortgage rates.
Surging house prices have made home equity products an obvious choice, given the value of homes used as collateral for such loans is rising. Black Knight reported that tappable equity available to homeowners reached $446 billion in the U.S. in Q4 2021.
"Home equity isn't going to be the answer to the volume drop, but it's a way to at least replace some of the lost value for mortgage companies," said Saket Nigam, senior vice president of capital markets at SpringEQ, a home equity lender.
In a traditional home equity product, the lender disburses a lump sum upfront to the borrower, who then pays the loan back in fixed-rate installments. A HELOC, by contrast, is a revolving line of credit that allows borrowing as needed, with a variable interest rate.
LoanDepot said its product will be digital: consumers will apply and get approved online in a matter of minutes and gain access to funds in as little as seven days. However, prospective borrowers can talk to a licensed loan officer if they prefer during the approval process.
How comfortable are you with selling new home equity products to your customers? What are the challenges and opportunities regarding these offerings? Please share your thoughts with me at flavia@hwmedia.com.
P.S. Don't miss our HW+ Housing Economic Update tomorrow! We've got Matt Graham, CEO of MBSLIve.net; Odeta Kushi, deputy chief economist at First American; Mike Simonsen, CEO of Altos Research; and our lead analyst Logan Mohtashami providing insight on what's next. Register here.
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