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Times are tough for mortgage lenders, home loan apps are down, refinances are stagnant, and the inventory of homes for sale is a little light. So, where might one find new business? How about HELOCs?
Many traditional mortgage lenders got involved in HELOC lending in connection with their first mortgage loans. These became known as piggyback loans. In most cases, they were used to avoid paying MI on high LTV loans.
With home values and prices rising and large down payments for buyers harder to produce, it may be time to take a look at HELOC’s once again. Additionally, increasing home values mean that many current homeowners now have increased equity in their home and may wish to use it!
This increased equity may be used by homeowners to consolidate other high-interest rate debt, like student loans, or to avoid incurring additional debt by using the equity to cover their children’s, or their, education expenses. This makes, even more, sense if they like where they live and have no intentions of moving.
Credit Unions are already taking advantage of these opportunities. Maybe, because they concentrate on providing needed services to their members and this is something their members need.
Credit Unions share of this market is up over 40% in just the last two years. A nice little bump for them and their members.
Banks are once again offering these lines now that Basel decided the required reserves are based only on the outstanding line as opposed to the full amount available.
However, that took enough time to put them a little behind the Credit Unions. CU’s don’t have such regulatory restrictions.
The challenge comes with home values remaining at levels that support the increased equity. If values begin the fall again, will there still be sufficient collateral to support the first mortgage and the outstanding HELOC? Only time will tell. CUs are betting they won’t fall and there will be sufficient collateral.
It turns out that there may be some opportunity for mortgage lenders in the field of HELOC lending. It’s a matter of finding the product and the consumers who need it.
