The 2022 housing market has been underscored by interest rate spikes and refi decline and lenders are working hard to adjust to new borrower trends. HousingWire recently spoke with Barry Coffin, managing director of home equity title/close at ServiceLink, about the ways lenders can capitalize on these trends by revving up their home equity solutions.
HousingWire: Between inflation and additional interest rate hikes coming down the line from the Fed, why is now a smart time for lenders to start prioritizing home equity products?
Barry Coffin: It’s a good time to prioritize home equity transactions for a couple of reasons. First, with the decline in refinance transactions caused by rising rates, origination volume is declining at a rapid rate. Secondly, home prices continue to surge, giving homeowners more tappable equity than they have had in several years. The combination of both allows lenders to seamlessly shift resources from refinance operations into home equity operations.
In addition, the combination of the loss of refinance cash out transactions and also government stimulus payments due to the pandemic will prompt homeowners to use the equity in their home when needing to access cash.
We are seeing many lenders take advantage of this opportunity by increasing their share of the fast-growing home equity market.
HW: As lenders adapt their strategies to better align with our rising rate environment, prioritizing home equity options could prove pivotal, especially for older Americans. What are some of the most valuable home equity solutions lenders can add to their arsenal of offerings?
BC: With the increase in home equity volume, lenders should be looking to add the same type of digital solutions they focused on adding to their refinance business, to their home equity offerings. Over the last few years, lenders have focused on digitizing their processes with the goal of reducing the cycle time from application to closing. These digital solutions, especially those offered by ServiceLink, work just as well in the home equity title/close process. They include automated title, digital signing solutions and eClosing offerings.
Technology equals efficiency. A lot of lenders haven’t spent much money on technology for home equity processes. They’re still using legacy in-house technology for their loan origination system and their processes simply aren’t efficient. When you think of efficiency as a way of managing the cost of the product, investing in technology makes sense. Home equity lenders are paying the fees, unlike a first mortgage transaction where fees are paid as part of closing costs, home equity lenders generally will pay the costs of the transaction for their borrowers.
ServiceLink provides the technology to keep the process efficient and keep in-house costs down while helping lenders reduce the time it takes to close a loan. During recent years, even though home equity volume was less when compared to refinance, our home equity groups still participated in the development of the technology and refinement of the services and the products that we offer.
HW: As life expectancies continue to rise and more older homeowners face the possibility of outliving their retirement savings, the demand for home equity services is likely to increase. What should lenders be doing now to upgrade their home equity options and educate their customers about the risks and benefits of these products?
BC: As previously mentioned, from a home equity perspective, it is important to focus on efficiencies to reduce the cycle time to close a loan. There are lenders out there that are still taking 35, 40, 45 days or longer to close a home equity loan.
A lot of our lender clients are working with us to reduce the cycle time by taking advantage of our products and seeing major improvements in compressing the closing cycle, reducing it by several days. We have lenders talking to us continually about their goal of closing a home equity loan in as few as three to five days with our technology being the key to bringing speed and accuracy to the process.
HW: In a housing market that is constantly shifting and evolving, how can ServiceLink help lenders better serve the changing needs of their home equity clients?
BC: A lot of what we’ve built in our Home Equity Operations is focused on customer service and on technology. From a customer service perspective, we focus on ensuring clients are getting the high end service they expect from a dedicated team of experienced, trained operators. From a technology perspective, our EXOS technology is specifically based on the changing needs of lenders and the demands of borrowers.
Our EXOS Title offering allows us to provide an automated title product and we’ve streamlined many other steps along the way. From the borrower side, either lenders or consumers can schedule their closing appointment for the exact date and time of their choice using EXOS Close based on real-time signing agent availability. That way, they can control their own closing timeline. We give them the technology to be able to schedule that appointment, and we send a mobile notary to their home. They get the loans signed much quicker by using our technology and our data shows that consumers often select the earliest date and time available to them.
We also offer a variety of eClosing solutions, for wherever lenders are on their digital journey. We’ve seen increased interest from lenders and borrowers alike in virtual closing for home equity loans. ServiceLink offers to help lenders with the transition to eClosing with our array of products, with hybrid products for lenders that are not ready to commit to a full eClosing. We have multiple options for both insured and uninsured title, and we can offer eClosings that still facilitate in-branch or face-to-face closings.