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   ARTICLE   |   From Scotsman Guide Residential Edition   |   November 2018

Cash in on the Booming HELOC Market

Using the right technology reduces costs and improves approval-turnaround times

As most originators already know, homeowners are sitting on a record amount of equity as their property values continue to rise. That’s making home equity lines of credit (HELOCs) more attractive.

In fact, the number of American homeowners expected to take out HELOCs is projected to double to 10 million over the next five years, according to a recent study by TransUnion. Even though borrowers are feeling more confident about tapping into the equity in their homes, some mortgage originators are still missing out on keeping and acquiring new business.

This is largely a consequence of the fact that traditional HELOC processing has not yet fully modernized, and potential borrowers are seeking superior digital alternatives. The J.D. Power 2018 U.S. Home Equity Line of Credit Satisfaction Survey found that the digital experience is becoming increasingly critical to customer satisfaction.

It is imperative that originators take every action necessary to capitalize on the HELOC boom while satisfying new and returning borrowers at the same time. The best way to enhance the HELOC experience for the borrower is by employing innovative technology that decreases the time it takes to close a loan while also lowering overall costs.

Increased speed

Given there are enough lenders now offering HELOCs, the best way to distinguish yourself as an originator is by turning loans around in the shortest period of time. Of course, this cannot come at the expense of compliance. Still, it is no secret that borrowers want their money as soon as possible, and if they don’t get it from one originator, they will go to another.

On average, the HELOC turnaround time is approximately 40 days. This has become much too long in our current age of instant gratification. Decreasing this time appeals especially to the demands of younger borrowers, specifically millennials.

The longer an originator and the lender take to close on a HELOC, the higher the probability that the borrower will choose to go to another originator. Implementing a comprehensive, automated software system is the best way to cut closing times — largely due to the extensive databases that can be accessed electronically within seconds.

In the past, originators had to use multiple data outlets to gather information, such as tax status, current market value, photos of the property, a copy of the deed, transaction history and more. With innovative technology, originators have access to everything they need in one secure place. A comprehensive report solution like this can decrease the loan turnaround time from 40 days to just 15 days.

Desktop valuations, for example, are quickly replacing full appraisals as a top-valuation choice for originators. While desktop valuations are completed by a computer, like an automated valuation model (AVM), a real estate valuation specialist is employed to manually select and weigh the comparable sales.

This approach of computer and human working together was created to provide an evaluation that is more reliable than an AVM, but less expensive than a full in-person appraisal. And, desktop valuations can be turned around in as little as 48 hours, unlike a full appraisal that may take up to three weeks to complete.

In addition, delivering faster appraisals makes originators stand out from their competition, especially those working with a partner who has an in-house valuation department focused specifically on turning around evaluations in the quickest amount of time. An in-house department like this also can offer various types of valuations, depending on the borrower’s need.

There are, of course, situations in which AVMs and full appraisals are appropriate and even necessary, which is why it is important that originators are choosing the best options for themselves and their borrowers. By partnering with an appraisal provider that can match a lender’s specific underwriting guidelines and deliver a valuation that is the perfect fit in the shortest amount of time, originators can stay compliant and continue to grow their business.

Decrease cost

Finally, offering HELOC solutions at competitive prices puts originators in the forefront of borrower’s minds. According to the J.D. Power study, “55 percent of borrowers indicated they considered at least one other lender during their shopping process.” This phenomenon of comparison shopping “is most pronounced among millennials,” the study found.

If an originator is charging $400 for an appraisal, the borrower will have no problem going elsewhere to find someone charging under $200. If borrowers can save money with a certain originator, and the originator also delivers results in a third of the time expected by the borrower, the borrower is much more likely to use that originator repeatedly. And, if such originators have more and more borrowers seeking to do business with them, they are able to grow their business and quickly realize a profit.

Originators must implement technology that automates the HELOC-loan process while saving themselves and their borrowers valuable time and money. There are solutions that can decrease loan-turnaround time and deliver faster services all while lowering overall costs so that lenders can focus solely on originating loans. By utilizing one system with the capability to deliver in one report a range of HELOC-loan information — such as flood certification, current market value, interior and exterior property photos, a copy of the deed, liens, judgments, transaction history, property data and tax information — originators can comply with regulatory guidelines while simultaneously reducing costs and closing times.

•  •  • 

The HELOC boom is showing no signs of abating. Many people agree that the popularity of HELOCs will continue to increase over the next five years and possibly beyond. Now is the time for mortgage originators to capitalize on this trend and truly make a difference for their borrowers by ditching the status quo and making a commitment to enhancing the digital-loan experience for everyone involved.


 
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