Are Home Equity Loans Staged for a Comeback?

Posted on November 15, 2017 by Laura Lam

HELOCS not usedThere has been a hint of optimism for home equity lending among bankers this earnings season, but attitudes remain mixed a decade after the housing market crash began.  While home equity lines of credit provided a lift to some bank consumer portfolios, a number of other banks said their home equity businesses had fallen and added little about their future.

Industry observers say bankers should take the long view. Home equity lines of credit especially are poised to grow now that home values have been rising for a number of years during the economic recovery.  “If you think about the consumer credit portfolio, it’s for so many years been sitting idle,” said Christine Pratt, a senior analyst with Aite Group. “You have a consumer sentiment that is very positive about spending and borrowing right now, and you have housing prices rising.”

Last week the credit bureau TransUnion said it anticipates 11.4 million Americans will take out home equity lines of credit between 2017 and 2022, more than double the 5.4 million Americans who took out home equity lines between 2011 and 2016.  TransUnion currently projects 1.4 million for 2017, representing a well of untapped opportunity.

“Since 2009, there’s really been a supply shortage. A lot of lenders got out of the HELOC business or curtailed that activity there,” said TransUnion’s Joe Mellman.  “We’re already starting to see more and more lenders are coming back into the market or scaling up their operations.”

While an overall HELOC bump is likely still a few years away, lenders will need to speed up the origination process to compete in this space. Mellman predicted that traditional lenders would look to innovations in the fintech space to expedite HELOC originations.

However, Pratt issued a note of caution to lenders working to speed up the HELOC origination process. As the speed to closing increases, so does the risk of fraud – particularly fraud perpetrated by family members who have the same name as the homeowner.

Source:  National Mortgage News