Tapping Equity

Lenders Look to HELOCs for Growth

With Rates Climbing, Firms Search for Profits

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Statewide, lenders have issued 8,184 HELOCs this year through the end of September.

Lenders across the Granite State are issuing significantly more home equity lines of credit than they have in years past, as high mortgage rates hammer the purchase and refinance mortgage markets. 

And while banks and credit unions have long dominated the market for home equity lines of credit, New Hampshire has seen other lenders – both familiar and new – make headway in the second-mortgage market.  

The issuance of HELOCs has jumped year-over-year by 40 percent through Sept 30, while cash-out refinances have dropped by 55 percent, according to The Warren Group, publisher The Registry Review. 

The state’s current leaders in the HELOC space by number of loans issued through Sept. 30 is Rhode Island-based Citizens, which holds 13.46 percent of the market and has been a local leader in the space since 2015, Warren Group data shows. The runners-up, TD Bank and Triangle Credit Union, hold a combined 5.26 percent of the market. 

Refis No Longer Attractive 

With rising interest rates likely keeping borrowers from refinancing out of their first mortgages, homeowners could find a competitive landscape as lenders and other companies look to find ways to help them access record high levels of home equity. 

“Most mortgage lenders out there are exploring or have actually launched a home equity product just because they’ve got a lot of excess capacity within their system,” said Jackie Frommer, Figure’s chief operating officer of lending. “They’ve got a lot of customer relationships, and they’re looking to leverage that, and they know the right thing for their customer is not to do a cash-out [refinance], which was the historical answer when there was home price appreciation.” 

Historically low interest rates in 2020 and 2021 have left 73 percent of homeowners nationwide with a mortgage rate below 4 percent, according to John Burns Real Estate Consulting. The consulting firm has also found that homeowners have on average $229,000 in tappable home equity. 

Eric Finnigan, vice president of research and demographics at John Burns Real Estate Consulting, said the amount of tappable equity available to homeowners has provided an opportunity for lenders, fintechs and other companies to find innovative ways to help borrowers access this equity in the coming years. 

“There’s a huge opportunity for homeowners to tap their equity,” Finnigan said. “That just opens up a huge opportunity for innovation, and I think we’ll probably see a lot more of that definitely in the next 12 months if rates stay high.” 

Guaranteed Rate Leverages White-Label Product 

Some newer entrants in home equity lending have taken different approaches to their products and processes. A longtime presence in Southeast New Hampshire’s purchase mortgage market, Guaranteed Rate launched a fixed-rate HELOC a few months ago and has already seen uptake for the product.  

Partnering with Guaranteed Rate is financial technology firm Figure, which also provides HELOCs directly to consumers through a five-minute digital application process. In the first half of 2022,  

Unlike a traditional HELOC, Guaranteed Rate offers a fixed-rate HELOC. 

“By providing our customers a fixed-rate HELOC option along with an ability to draw, as and when needed, from the comfort of their homes digitally, Guaranteed Rate is fulfilling some key customer needs,” Arun Tripathi, Guaranteed Rate’s head of new secured lending, said in a statement in July announcing the fixed-rate product. 

While Guaranteed Rate offers and closes the loan, the company uses Figure’s product and technology on a white-label basis. 

San Francisco-based Figure, which uses blockchain technology for a variety of financial services, created a HELOC product in 2018. 

“We were getting a fair amount of traction over the last couple of years that we had it and then recently, given where mortgage rates are and given where home price appreciation is, the product has just taken off,” said Jackie Frommer Figure’s chief lending officer. “Home equity is sort of the product du jour right now because of where rates are and home prices are.”