Grow your home equity and HELOC business

Find the best technology solutions to maximize your success

With the home purchase market tightening, home equity loans and lines of credit (HELOCs) are a popular way for lenders to grow their business. In today’s rising interest rate environment, HELOCs let homeowners access equity without having to relinquish the record-low rates on their first-lien mortgages. As a result of continued demand for home equity products, many lenders are looking for ways to increase efficiency and reduce costs, while supporting regulatory compliance. The following frequently asked questions address how to streamline the servicing of home equity products and generate more home equity business.

What technology is available to help manage home equity loans and HELOCs?

Mortgage technology is available to help streamline the lending process for home equity loans and lines of credit (HELOCs). With an end-to-end digital loan origination system (LOS) like Encompass® by ICE Mortgage Technology®, lenders can originate home equity loans on the same platform as first lien mortgages, while following applicable regulations. This provides a complete picture of the borrower during loan origination and allows seamless and automatic loan boarding into the servicing system. A powerful servicing platform like the MSP® Mortgage Servicing System can streamline HELOCs and first mortgages on a single platform to help lenders reduce risks and enhance regulatory compliance. Powerful tools like automated valuation models (AVMs) and AI-driven lead generation tools can help lenders make smarter decisions and generate leads in the growing home equity market.

What are the challenges of servicing home equity loans and HELOCs?

Unlike traditional consumer loans, home equity loans and lines of credit are real estate-backed products. While some financial institutions use a consumer loan servicing system to manage home equity products, doing so can create many challenges. Like mortgage loans, real estate-backed products have stringent regulatory requirements that are not easily managed using a consumer loan servicing platform. Additionally, these consumer loan systems are not set up to readily update as regulations change. It is also difficult to get a complete view of the borrower when data is divided between different servicing systems for first lien mortgages and home equity products. The best solution is to find a mortgage technology solution that supports both first lien mortgages and home equity products on one integrated platform, like MSP.

How can regulatory compliance be improved for home equity loans and lines of credit (HELOCs)?

The mortgage lending market is heavily regulated and this includes home equity loans and lines of credit (HELOCs). The optimal mortgage servicing system – like MSP – is designed to support both first lien mortgages and home equity products on a single platform, helping lenders address evolving regulatory compliance obligations. The right system, coupled with the right technology provider, can help financial institutions address regulatory changes by the timely execution of necessary coding updates. These updates are pushed out to all the financial institutions using the platform to help keep lenders and servicers up to date on the latest government regulations.

Can home equity loans/HELOCs and mortgages be serviced on the same system?

Many organizations have taken steps to consolidate loan servicing technology and processes across first lien mortgages and home equity products. With today’s expense and margin pressures, on top of evolving regulatory requirements, lenders are looking for ways to streamline duplicative systems and processes.

Advanced mortgage servicing solutions, such as MSP, allow first lien mortgages and home equity products to be processed on a single, integrated technology platform. This provides an opportunity for lenders and servicers to drive down costs, enhance regulatory compliance and reduce IT complexity across their organizations.

How can mortgage lenders consolidate loan servicing technology to reduce their tech stack?

Real estate-backed loans, such as first lien mortgages and home equity loans, are often the starting point for technology consolidation projects in financial institutions. The technology consolidation process typically begins with an exploratory analysis that looks at simplifying the technology stack, reducing operational costs and mitigating risk.

Once a decision is made to proceed, financial institutions often work with an external technology solutions provider that understands the industry and applicable regulations so those requirements are considered during every step of the consolidation project. Selecting an integrated mortgage servicing platform that already supports both first lien mortgages and home equity products, such as MSP, simplifies the consolidation process, increases efficiency and reduces risk.

What are the benefits of consolidating home equity products and first lien mortgages on a single servicing platform?

Servicing home equity loans and lines of credit (HELOCs) on the same platform as first lien mortgages helps:

Unlike consumer loan servicing software, mortgage servicing systems include functionality to assist with regulatory compliance requirements for real estate-backed loans, which are generally more stringent than for consumer loan products. The technology vendor typically offers a service-based model where they make updates to the system to help servicers stay compliant with the latest government regulations. The lender can also reduce risk by gaining a complete view of the borrower on one integrated mortgage servicing system.

How can servicers reduce costs for home equity loans and lines of credit?

Reducing servicing costs for home equity loans and lines of credit can be accomplished by servicing home equity products on the same platform as first lien mortgages. By consolidating all residential real estate-secured products onto one system, lenders can:

Mortgage servicing solutions like MSP process both first lien mortgages and home equity products on a single platform to simplify servicing and better mitigate risk.

How can lenders and servicers generate more leads for home equity loans and lines of credit (HELOCs)?

Since most consumers start their search for home equity products online, a lender or servicer’s website is an optimal place to capture potential leads. Leveraging tools that keep homeowners engaged with monthly property updates is an effective way for organizations to stay top of mind. Proven, affordable technology is available today that delivers these types of automated lead generation and engagement capabilities.

Property data also provides a wealth of information about homeowners and their properties. Data providers offer various ways for lenders and servicers to easily match properties in their portfolio and identify potential prospects based on current equity and other loan-readiness indicators. Armed with this data, financial institutions can create more targeted lead lists, resulting in better marketing-campaign ROI as well as an increased consumer response.

How can financial institutions cross-sell to find customers for home equity loans?

Deepening financial relationships with current customers is an effective way to generate leads for home equity loans and lines of credit (HELOCs). With a match-and-append solution or an analytics platform, a financial institution can more quickly identify which of its customers are homeowners, then combine the information with property data and automated valuation models (AVMs) to determine if the customer has sufficient equity in their home. The organization could then reach out to those customers with a customized home equity offer.

Conclusion

Today’s homeowners are opting to stay in their homes longer to keep their historically low interest rate mortgages. This means more homeowners may turn to home equity loans and lines of credit, which provides an opportunity for financial institutions to grow their home equity business. Consolidating first-lien mortgages and home equity products onto a single, integrated mortgage servicing platform, like MSP, can help reduce IT complexity, increase efficiency and reduce costs. Lenders and servicers can also reap the benefits of having a single view of the borrower to mitigate risk, identify cross-selling opportunities and generate more home equity leads.