As most originators already know, home- owners are sitting on a record amount of equity as their property values continue to rise. That’s making home equity lines
of credit (HELOCs) more attractive.
In fact, the number of American homeowners expected to take out HELOCs is projected to double
to 10 million over the next five years, according to a
recent study by TransUnion. Even though borrowers
are feeling more confident about tapping into the
equity in their homes, some mortgage originators are
still missing out on keeping and acquiring new business.
This is largely a consequence of the fact that traditional HELOC processing has not yet fully modernized, and
potential borrowers are seeking superior digital alternatives. The J.D. Power 2018 U. S. Home Equity Line of Credit
Satisfaction Survey found that the digital experience is
becoming increasingly critical to customer satisfaction.
It is imperative that originators take every action
necessary to capitalize on the HELOC boom while satisfying new and returning borrowers at the same time.
The best way to enhance the HELOC experience for the
borrower is by employing innovative technology that
decreases the time it takes to close a loan while also
lowering overall costs.
Given there are enough lenders now offering HELOCs,
the best way to distinguish yourself as an originator is
by turning loans around in the shortest period of time.
Of course, this cannot come at the expense of compliance. Still, it is no secret that borrowers want their
money as soon as possible, and if they don’t get it from
one originator, they will go to another.
On average, the HELOC turnaround time is approximately 40 days. This has become much too long in
our current age of instant gratification. Decreasing this
time appeals especially to the demands of younger
borrowers, specifically millennials.
The longer an originator and the lender take to
close on a HELOC, the higher the probability that the
borrower will choose to go to another originator. Implementing a comprehensive, automated software
system is the best way to cut closing times — largely
due to the extensive databases that can be accessed
electronically within seconds.
In the past, originators had to use multiple data outlets to gather information, such as tax status, current
market value, photos of the property, a copy of the
deed, transaction history and more. With innovative
technology, originators have access to everything they
need in one secure place. A comprehensive report
solution like this can decrease the loan turnaround
time from 40 days to just 15 days.
Desktop valuations, for example, are quickly replacing
full appraisals as a top-valuation choice for originators.
While desktop valuations are completed by a computer,
like an automated valuation model (AVM), a real estate
valuation specialist is employed to manually select and
weigh the comparable sales.
This approach of computer and human working
together was created to provide an evaluation that
is more reliable than an AVM, but less expensive than
a full in-person appraisal. And, desktop valuations
can be turned around in as little as 48 hours, unlike
a full appraisal that may take up to three weeks to
In addition, delivering faster appraisals makes originators stand out from their competition, especially
those working with a partner who has an in-house
valuation department focused specifically on turning
around evaluations in the quickest amount of time.
An in-house department like this also can offer various
types of valuations, depending on the borrower’s need.
There are, of course, situations in which AVMs and full
appraisals are appropriate and even necessary, which
is why it is important that originators are choosing
the best options for themselves and their borrowers.
By partnering with an appraisal provider that can match
a lender’s specific underwriting guidelines and deliver
a valuation that is the perfect fit in the shortest amount
of time, originators can stay compliant and continue to
grow their business.
Finally, offering HELOC solutions at competitive prices
puts originators in the forefront of borrower’s minds.
According to the J.D. Power study, “ 55 percent of
borrowers indicated they considered at least one
other lender during their shopping process.” This
phenomenon of comparison shopping “is most pronounced among millennials,” the study found.
If an originator is charging $400 for an appraisal, the
borrower will have no problem going elsewhere to
find someone charging under $200. If borrowers can
save money with a certain originator, and the originator also delivers results in a third of the time expected
by the borrower, the borrower is much more likely to
use that originator repeatedly. And, if such originators
have more and more borrowers seeking to do business
with them, they are able to grow their business and
quickly realize a profit.
Originators must implement technology that automates the HELOC-loan process while saving themselves and their borrowers valuable time and money.
There are solutions that can decrease loan-turnaround
time and deliver faster services all while lowering overall costs so that lenders can focus solely on originating loans. By utilizing one system with the capability
to deliver in one report a range of HELOC-loan information — such as flood certification, current market
value, interior and exterior property photos, a copy of
the deed, liens, judgments, transaction history, property data and tax information — originators can comply with regulatory guidelines while simultaneously
reducing costs and closing times.
n n n
The HELOC boom is showing no signs of abating. Many
people agree that the popularity of HELOCs will continue to increase over the next five years and possibly
beyond. Now is the time for mortgage originators to
capitalize on this trend and truly make a difference for
their borrowers by ditching the status quo and making
a commitment to enhancing the digital-loan experience for everyone involved. n
Cash in on the Booming HELOC Market
Using the right technology reduces costs and improves approval-turnaround times
By Tim Smith
Tim Smith is co-founder and president of Austin, Texas-based FirstClose, provider of end-to-end technology
solutions to mortgage lenders nationwide. The FirstClose
reporting suite is a comprehensive solution with capabilities to deliver title, flood, valuation and other important
data elements in one report. For more information, visit
www.firstclose.com. Reach Smith at firstname.lastname@example.org.
Improving the HELOC experience
n The number of HELOCs is expected to double
in the next five years.
n The turnaround time for HELOC approvals
n The average HELOC-turnaround time is 40 days.
n Automated software can speed up HELOC-approval turnaround.
n Automated software with human expertise
is the best solution.