Curinos hosted a Home Equity Summit in Fort Worth, Tex., bringing together more than 30 attendees across banks, credit unions and fintech lenders to converse in roundtable discussions on the opportunities and challenges in the home equity market today. Here a few of the many key takeaways that emerged from the summit.
1. Traditional home equity lenders (banks and credit unions) are becoming increasingly motivated to find ways to increase the utilization of their HELOC products.
HELOC utilization is a key performance indicator for banks, and sales practices need to be addressed to reduce the amount of unused line commitments, while increasing the average drawn balance at the time of origination. Curinos’ Home Equity Portfolio data show that over 50% of newly originated HELOCs carry a utilization rate of less than 30% of their issued line commitment, causing strain on their portfolio utilization rate and burdensome capital expenses on unused line commitments.
Non-traditional counterparts (fintechs) have tackled the utilization challenges through minimum draw requirements at the time of origination, debt-consolidation focused marketing and digital application processes. Currently, traditional lenders are trying to increase utilization through relationship-based means, such as helping educate borrowers on HELOC features, benefits and accessibility to funds, while also reeducating the front-line sales staff on ways to identify debt consolidation opportunities through needs-based assessments.
2. In anticipation of further rate cuts by the Fed in 2025, home equity lenders are looking for insights into how mortgage cash–out refinance transactions could potentially impact HELOC and HELoan product demand.
Curinos’ 2025 National Home Equity forecast anticipates up to 16% annualized origination growth in home equity originations in 2025, fueled mostly by improving consumer confidence, rising tappable equity and the staggering increases in the average household consumer debt levels. Despite their reservations on potential first mortgage cashout demand in 2025, over 60% of Summit attendees agree that home equity originations are still likely to meet or exceed Curinos’ 16% growth forecast.
Forecast of Home Equity Originations At-a-Glance
Source: Curinos Model Science
3. There’s a strong correlation between cycle time and intent.
Curinos’ Home Equity Origination Benchmarking data confirm that the lower cycle times that non-traditional lenders achieve lead directly to stronger levels of line-usage. Non-traditional lenders have demonstrated that minimizing friction and shortening the time from approval to booking results in a more motivated borrower, helping prompt more robust average balances at the time of origination, exceeding traditional lenders by as much as 30%. As a result, traditional lenders are adopting operational processes in an attempt to condense cycle time, but the wait between approval and funding remains frustratingly long. This invites a larger representation of borrowers less motivated to take any balance draw at the loan closing.
Source: Curinos LendersBenchmark Home Equity Originations
