Allen Jingst: Housing Equity Loans an Opportunity for Community Lenders

PERSON OF THE WEEK: With home prices hitting record highs in the first quarter of 2022, homeowners in the US have realized significant gains in home equities. Now, community lenders need to be ready to help homeowners leverage this capital to help them meet their future needs.

But how big is the opportunity for community lenders offering home equity loans? To learn, MortgageOrb recently interviewed Allen Jingst, Head of Revenue for LenderClose.

Q: You predict that 2022 will be an unprecedented year for home equity lending. Because this?

Language: The first months of 2022 are a bit of a crossroads for lenders, as they see the historic explosion of low interest rates more visible in the mirror than on the horizon. In the not-too-distant future, they will be faced with some strong headwinds: rising rates, housing shortages, car shortages and a record number of homeowners recently refinancing or buying a home.

While the challenges may be growing, at the same time, Black Knight recently reported that home equity use hit a record high of $ 9.4 trillion in the third quarter of 2021. As interest rates rise, so will credit card interest rates. and other debt, offering homeowners a way to capitalize on equity for debt restructuring or a lower interest rate option to convert equity into income needed in 2022.

Q: How can Community lenders expand their lending options to meet the needs of the current market?

Language: Because Community lenders had a physical presence, they had previously had an advantage over competing fintech. However, this is no longer enough. There are fintechs that compete with financial institutions using technology to meet borrowers not only where they live but also where they spend their time: online.

To check this, look for “home equity loan in [your city]”And see which company appears at the top of the list. he is probably not a Community lender. In addition, fintechs also use platforms such as Instagram, TikTok and Pinterest to reach homeowners who have gone beyond making financial decisions based on which bank has a branch away from them.

Some community lender leaders are reluctant to advertise because they have limited staff and are not sure they can handle the extra volume of applications while offering the right borrower experience. This is where finding the fintech that can help and utilizing them is vital to escalating in the digital world. There are many credit union service providers (CUSOs) and technology companies that focus on credit unions and community banks to equip them with the tools and technology they need to build their community presence and meet the needs of the entire current market. , not just people who want to go to a branch.

Q: What do you think were some of the reasons financial institutions chose not to offer home loans until now?

Language: Many financial institutions have made infrastructure changes in the last 18 to 24 months that have put home equity lending into their mortgages to redeploy their staff to focus on the growing number of refinancing requests. As a result, mortgage-backed loans took longer than in previous years to complete because they were processed in the same way as a refinancing. This has led to a lower volume of mortgage loans and a reduction in borrower satisfaction.

As market conditions change, so do FI views on equity. They split equity lending into an independent division, focusing on technology and service upgrades to equip staff with better resources to speed up the process and provide a better borrower experience. Financial institutions are also under increasing pressure from competing fintech that is not bound by industries and geographical borders. In the coming years, they will have to focus on finding existing and potential borrowers with new and innovative first-rate digital technology.

Q: What must happen for financial institutions to adopt housing equity lending?

Language: It starts from the top. If the leadership team challenges the rest of the organization to consider options such as mortgages to help borrowers, set clear goals for the team, and teach front-line staff to be able to ask a question, they will be surprised to see what can happen. . For Community lenders, only 4% of customers on average own a real estate loan from this financial institution. This is a problem, and until leaders see it as a problem and take the necessary steps to change it in their organization, borrowers will continue to seek help elsewhere.

Q: What should leaders do if they want to extend their mortgage offerings to their FI?

Language: The first step is to know what it means to extend lending to a home equity. When we talk to lenders, many are surprised to see where they rank compared to their peers in terms of total home equity portfolio strength, loan conversion ratio, average closing time and borrower satisfaction. Gaining a new perspective on what is possible may reveal opportunities that may not have been obvious.

Once management understands the current position of the FI, there are many ways to help implement new technologies, products, processes and ways of thinking that can help them attract new borrowers, close more loans and increase their portfolio unnecessarily. add staff or cause subversive changes. It is really a continuous cycle of knowledge and then development. Having the right partner to help you see what is possible is crucial to continually improving your home equity lending process and offerings.

Q: How do you think the industry as a whole will approach home equity lending going forward?

Language: During a recent NFL football match, there was an ad from a major online lender that had mostly focused on buying a home and refi at home. However, this commercial focused entirely on lending home equity.

I believe that the big banks will start offering and promoting HE loans again as interest rates and equity continue to rise. I also believe that competing fintechs will continue to expand into areas that were previously owned by Community lenders and will not build branches. They will focus on meeting borrowers where they spend time and focus on providing a better experience that meets the evolving expectations of the most demanding and smart borrowers.

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