Most banks and credit unions are struggling to maintain their mortgage origination numbers. If you find your organization in this situation, we suggest you consider adding home equity lines of credit (HELOCs) to your portfolio of loan offerings. LoanCare has the compliance tools, training, and servicing chops to help you safely and profitably originate and service home equity loans. As your specialized loan servicing partner, we can reduce cost and risk and increase your profits.
In July, the Federal Reserve raised interest rates for the third time in 2022, and the consensus is that they are not yet finished. On top of that, Freddie Mac recently reported that the housing supply in the U.S. is nearly 3.8 million units short of the rate of homeowner demand. These factors, coupled with growing economic uncertainty in the U.S., have driven mortgage applications to their lowest level of activity since February of 2000 (according to the MBA’s most recent numbers).
It’s no wonder that mortgage origination numbers are down in 2022. With fewer houses available, fewer borrowers are seeking a closed-in first mortgage. Likewise, higher interest rates are driving down the demand for refinancing. In this market condition, homeowners struggle to access their home equity. Enter the Home Equity Line of Credit (HELOC). When you offer your bank or savings and loan customers a HELOC, you are extending them a flexible and potentially tax-advantaged loan product. In addition, those who qualify are often the most stable customers as they have built meaningful equity in their homes.
According to the Federal Reserve, Americans have amassed a whopping $27.8 trillion in home equity (the highest level on record). HELOCs have become a popular borrowing option for homeowners looking to tap into their property’s equity without refinancing or selling. Whether borrowers are funding home improvement projects or accessing funds for significant purchases/ expenditures, many are turning to HELOCs to turn home equity into cash. To supply this demand, more financial institutions are making home equity lines of credit a central product in their suite of credit and loan options.
A golden opportunity, but don’t go it alone!
But the fact is that many banks and credit unions find servicing these products far trickier than traditional closed-in first mortgages. For starters, HELOCs are a form of revolving credit with a draw period and a repayment period. During the draw period, the borrower may withdraw funds at their discretion – all at once, at regular intervals, or as needed. This variability makes automated servicing of HELOCs very difficult. HELOCs are also subject to variable interest rates and stringent state and federal regulatory and reporting requirements. As a result, without a significant investment, financial institutions may find servicing these credit products more pain than they’re worth.
That’s where we come in. LoanCare has more than 30 years of subservicing experience and has been continuously subservicing HELOCs since 2017, becoming well-versed in their regulatory and reporting requirements. As a matter of fact, while many of our competitors stopped subservicing HELOCs during recent years of lower interest rates, LoanCare has continued to invest in the technology and training that have made us HELOC subservicing experts.
When seeking a HELOC servicer, ensure that potential partner have mastered the policies and procedures, regulations and reporting demands associated with these assets. Our experience enables us to handle HELOCs at a large volume and maintain exceptional customer service throughout the life of the loan.
LoanCare’s HELOC subservicing service brings several benefits to your organization.
- Reduces your costs and staffing: By partnering with LoanCare you can rely on us for required compliance and reporting services, in addition to the base loan servicing.
- Protect the value of your MSR: Your MSR values provide an ongoing revenue stream.
- Protect your investment: We help you manage defaults and give you the flexibility you need to react to changing interest and marketing conditions.
- Give your customers the best loan servicing experience: LoanCare has best of class tools to support your homeowner clients.
As financial institutions turn to home equity lines of credit to revive their revenue stream, this once niche asset will become a more central feature on the balance sheet. Rather than reconfigure policies, invest in new technology and retrain personnel, bottom-line-conscious banks and credit unions will look for subservicing partners for their HELOC assets.
Well-vetted firms offering specialized loan services like LoanCare have the experience, personnel, and technology to deliver top-quality customer service and mitigate the risk associated with these lines of credit. HELOC partners must also maintain the highest levels of security and fully comply with all state and federal regulations governing the asset. Few others in the loan subservicing market can achieve this. We can.
Contact us today to learn more.