The surging levels of home equity in the United States have prompted mortgage lenders to enhance accessibility to home equity lending for a wider range of borrowers.
In a recent report by Keynova Group, it was revealed that the majority of companies offering home equity lending now have a digital application process. Surprisingly, almost half of these lenders also conduct a soft credit check before fully underwriting the loans, showcasing a shift towards efficiency and convenience in the lending process.
Keynova’s comprehensive review focused on the digital capabilities and user experiences of 12 top bank and nonbank lenders in the country. Among the depository lenders examined were major institutions like Bank of America, Chase, Citi, Citizens, PNC, Truist, U.S. Bank, and Wells Fargo. Non-depository lenders included companies such as Freedom Mortgage, loanDepot, Rate, and Rocket Mortgage.
Key Findings from the Report:
- Accelerated Closing Options:
- One-fourth of the lenders studied offered expedited closing options, with two lenders boasting home equity funding in as little as one week.
- Rate Lock Features:
- More than half of the lenders allowed customers to lock in a rate online, especially during times of rising interest rates.
- One-third promoted the flexibility to digitally lock or unlock a fixed-rate loan, allowing borrowers to switch to an adjustable rate if interest rates decrease.
- Interest-only Payment Options:
- Approximately 20% of lenders provided the option of interest-only payments for qualified customers during the draw period of a home equity line of credit (HELOC).
The utilization of HELOCs has surged among U.S. homeowners as home prices continue to soar post the COVID-19 pandemic. Data from To us revealed a significant increase of 26.5% in HELOC originations during the second quarter of 2024 compared to the previous quarter.
In response to affordability challenges, lenders have expanded digital access to information on down payment assistance programs for homebuyers and loan modifications for current homeowners. Notably, 83% of lenders offered online guidance on starting the process for loan modifications or alternative financial assistance.
Key Trends in Home Equity Lending:
- Down Payment Assistance (DPA) Programs:
- Half of the lenders reviewed for the report offered customized low down payment products, while 42% provided information on grants and resources for affordable homeownership.
- The number of DPA programs for homebuyers reached a record high in Q2 2024, offering more options for both first-time and repeat buyers.
In conclusion, the current economic landscape characterized by rising home prices, increased interest rates, and inflation has put pressure on consumer finances. Lenders are adapting by leveraging digital resources to make it simpler for homeowners to access their home equity or explore affordable lending alternatives. This proactive response is essential in ensuring that borrowers can navigate the evolving market conditions with ease and confidence.
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