If there is any lesson lenders should take away from 2019, it’s how quickly the mortgage market can shift. Instead of the low volume and compressed margins predicted for this year, lenders have scrambled to keep up with a refi boom sparked by low interest rates. The lenders taking the greatest advantage of that shift are the ones who invested in the right technology solutions before it was obvious they were needed, and made sure their staff were prepared to handle new opportunities. When the market changed, these lenders were ready with efficient processes that let them grow their business while delivering an optimal borrower experience.
Looking ahead to 2020, lenders should evaluate their readiness to handle another critical swing in the market — this time toward home equity.
With strong home-price appreciation across most of the country, borrowers are now sitting on record amounts of home equity, gaining almost $5,000 on average in just the second quarter of 2019 alone. At the same time, consumers are taking on more debt in the form of auto loans, credit card balances and student loans, presenting a unique opportunity for lenders who can provide access to credit at a lower cost.
Despite this intersection of consumers’ need with a lenders’ ability to meet this need, there has been a disconnect between the amount of equity available and the amount of people tapping into it. While there are a handful of reasons for why borrowers remain hesitant, experts point to one thing that lenders could start doing to gain more home equity business – educate consumers.
Home equity solutions have changed since a lot of borrowers last purchased a home, leaving them to make false assumptions about the risks and realities of it. To shift consumer perspective on home equity, lenders need to reassess their internal processes and take the time to train staff on how to sell home equity, educating borrowers on the benefits of using it compared to credit cards and personal loans. Lenders also need to develop an agile process that can grow with increased market demand.
Then, as awareness around the benefits of home equity grows, lenders need to make sure they’re using the appropriate technology to implement an intuitive, user-friendly application process that mirrors the same transparent experience happening on purchase loans. Tapping into home equity looks a lot more appealing for consumers when they’re properly educated and the application experience doesn’t interrupt their day. Blend’s Digital Lending Platform, for example, enables consumers to apply for a home equity loan in as few as eight minutes, and get to closing — and their money — in half the time that it typically takes.
With a forward-looking strategy, lenders have the opportunity to deliver a much-needed solution to growing consumer demand for financing options. With consumers staying in their homes longer, tapping into home equity can help them update their homes or consolidate their credit card and personal loan debt.
The dynamic housing market changes constantly, and without innovative technology to do the heavy lifting, lenders risk alienating consumers who expect a high level of service and convenience in all their transactions. One of the most practical ways to stay ahead of the game is for lenders to invest in tech solutions that can handle mortgage, home equity and other products in one, unified solution that helps them deliver an exceptional customer experience.
A strategy that combines this kind of home equity-capable technology with borrower education on the benefits of home equity products will enable lenders to position themselves as the first choice for customers in 2020.
For more information on Blend’s Digital Lending Platform, visit https://blend.com/platform/. Information on Blend’s home equity applications can be found here: https://blend.com/products/consumer-banking/home-equity/.
