The Strategic Rise of Second Liens
How changing borrower behavior is creating new opportunities for delegated correspondents
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Published July 1, 2026
A Changing Borrower Mindset
For much of the past two years, the mortgage industry has been defined by higher rates, reduced refinance opportunity and changing borrower behavior. While lenders across the market have adjusted to those realities in different ways, one trend is becoming increasingly clear within the delegated correspondent channel: second lien lending is evolving from a complementary product offering into a more meaningful long term business strategy.
That shift is being driven by a combination of market conditions and borrower demand. Homeowners today continue to hold substantial levels of equity, but many remain locked into historically low first mortgage rates they are unwilling to refinance away from. As a result, more borrowers are exploring ways to access liquidity while preserving the financing already in place on their primary mortgage.
Industry data shows second lien volume reached its highest annual level since 2007 in 2025, reinforcing the growing role these products are playing across the market.
For delegated correspondents, the opportunity extends beyond simply adding another product to the menu. More lenders are viewing second liens as a way to diversify production, strengthen customer retention and create additional origination opportunities in a market where traditional refinance activity remains constrained.
“More correspondents are viewing second liens as a long term growth opportunity, not simply a reaction to current market conditions”
John Gibson
Chief Production Officer
From Product Expansion to Business Strategy
In many ways, second liens have become a natural extension of the broader evolution taking place across mortgage lending. Borrowers are increasingly payment conscious. They are evaluating financing decisions differently than they did several years ago. Preserving a low first mortgage rate has become a priority for many homeowners, even when they need access to capital for debt consolidation, renovations, investment opportunities or other financial needs.
That behavior is changing the conversation across the lending landscape.
Historically, second liens were often viewed as cyclical products that gained traction only during certain market environments. Today, the category appears to be establishing a more permanent role within the industry. Correspondents are increasingly building strategies around HELOCs and Closed End Seconds not only because of current market conditions, but because they recognize the long term value of offering more flexible financing solutions to their customers.
The delegated correspondent channel is particularly well positioned for this growth because of its operational flexibility and ability to support a wide range of lending strategies across both retail and third party originations. As more correspondents expand into second liens, however, execution and operational support are becoming just as important as product availability itself.
That is especially true as the market continues demanding consistency, speed and broader borrower eligibility. Correspondents entering or expanding within second liens are increasingly focused on working with lending partners that understand how to support these programs operationally while maintaining a strong customer experience from submission through closing.
Execution Becomes the Differentiator
At Arc Home, we have seen growing interest from correspondents looking to build out second lien capabilities in a more meaningful way, not simply as a short term response to market conditions, but as part of a broader long term lending strategy. That includes both HELOC and Closed End Second opportunities designed to complement traditional first mortgage production while helping correspondents adapt to evolving borrower demand.
In many cases, correspondents are not looking to replace their existing business model. They are looking to expand it. Second liens are increasingly being viewed as another avenue to support customer relationships, generate additional production and create more balanced lending channels moving forward.
Operational scalability is also becoming a larger part of the conversation. As more lenders enter the second lien space, correspondents are paying closer attention to execution, turn times, consistency and overall support structure. Those factors will likely play a major role in determining which lenders are best positioned for long term success within the category.
The opportunity itself also extends well beyond today’s market cycle. While elevated rates and reduced refinance volume accelerated growth in second liens, the broader drivers behind the category remain strong. Homeowners continue prioritizing payment preservation on low first mortgage rates, while lenders continue looking for ways to diversify production and better align with changing borrower expectations.
For many delegated correspondents, second liens are no longer viewed as a standalone niche product. They are becoming part of a more complete lending strategy that helps support growth across changing market conditions while creating additional flexibility for both lenders and borrowers alike.
As the market continues evolving, correspondents that position themselves with a broader range of solutions, strong operational execution and the ability to adapt to changing borrower behavior will likely be best positioned moving forward. Second liens are increasingly becoming part of that conversation.
"As more lenders enter the second lien space, correspondents are paying closer attention to execution, turn times, consistency and overall support structure."
John Gibson
Chief Production Officer, Arc Home
Arc Home is a Top 10 Non-QM lender providing wholesale mortgage brokers and correspondent lenders with a broad range of Agency, Non-QM, Non-Agency and second lien solutions. Known for competitive pricing, operational excellence and a commitment to innovation, Arc Home continues to expand its product offerings to meet evolving market demands. Backed by TPG Angelo Gordon, ArcHome delivers the expertise, support and execution partners need to grow their business.
