How to Win in Today’s HELOC Marketplace

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Third-Party Data and Advanced Analytics Give Lenders a Competitive Edge

What percentage of your mortgage borrowers are sitting on a hefty pile of equity in their homes? Among those customers, which ones have a credit rating of 700 or better? And which homes in your portfolio are likely to continue increasing in value?

Finally: How much would all of that information be worth to your home equity line of credit (HELOC) business?

All of that insight—and more—is readily available. The challenge is pulling mission-critical data from multiple sources and turning it into actionable growth strategies. That’s where analytics come in. The right tools can reveal unprecedented insight into both your existing customers and your best prospects, driving more profitable growth and building stickier relationships with your borrowers.

Getting the Data Right
Love it or hate it, Zillow’s Zestimate tools launched a new industry for automated valuation models, or AVMs. Manual property valuations can take days or weeks to complete. AVMs compile massive amounts of transaction information, tax records, recent home sales and other sources of market insight to generate real-time valuation estimates for nearly every property in the country.

By setting up automatic AVM portfolio reviews, you can scan your entire portfolio against your own data on payoff amounts. That analysis will find existing borrowers who are carrying a healthy equity balance. You can then run those names through employment, income and credit screens to see which ones could be potential candidates.

When it comes to identifying high-value prospects, though, credit scores are just the beginning. Alternative datasets can provide leads that may not necessarily show up in a traditional credit report, such as younger, first-time home buyers who might not have enough of a track record yet to qualify for a credit score.

Insight into a customer’s payment history, such as utilities and rent, as well as banking activity, such as bounced checks or multiple accounts, can help lenders better understand potential borrowers’ financial behaviors. With that information, lenders can make better decisions around extending an offer to someone with a limited credit history.

The right analytics can turn these myriad of datasets into highly accurate “propensity scores,” helping lenders identify their best prospects.

Improving the Customer Experience
Like most consumers today, home equity borrowers expect the “Amazon experience” from their lenders. They want to fill out an application on their smartphone in less than five minutes. They want fast approvals and immediate access to their funds.

That need for speed is fueling stiff competition from alternative lending products, such as unsecured personal loans (UPLs). Even though interest rates tend to be higher with UPLs versus a HELOC, two-thirds of new HELOC customers who obtained their line of credit within the past two years considered alternative products when shopping for their HELOC, according to a 2019 report from J.D. Power. That’s up from 41% just a few years ago, according to J.D. Power.

Automating the loan origination process can help shave days off of the HELOC loan process, making it as attractive, from the borrower’s perspective, as a UPL. And offering direct deposit can get the money into borrowers’ hands faster.

Deepening the Customer Relationship
Once the loan has closed, data can help lenders stay engaged with their borrowers and create cross-selling opportunities. Consider this 2019 report from the Mortgage Bankers Association (MBA): While HELOC loans are still being taken out at a healthy clip, HELOC utilization rates have been declining in recent years.

You can boost usage by running automated database reviews to identify any HELOC customers with little to no balance on their accounts. Proactively reaching out to these customers with reminders that they can use their HELOC to buy their next car or pay the next college tuition bill could spur borrowing.

Also, a fast, frictionless HELOC process could encourage satisfied customers to use other services, such as opening a checking account.

Better, Faster Decision-Making
Leveraging the right digital tools not only makes the HELOC process faster, it can give your loan officers a competitive advantage in prospecting and closing more loans. On the approval side, data visualization tools let lenders combine their own data with third-party information on a single dashboard to make more informed decisions more quickly.

A 2018 study from the Federal Reserve Bank of New York found that mortgage companies that leveraged advanced technology in the approval process had a 25% lower default rate than mortgage companies that used traditional manual processes.

The faster loans close, the more business a lender can pull through the pipeline. And the better the insight you have into your borrowers, the stronger your portfolio will be, boosting its investment value.

Rising home values, strong employment and a favorable interest rate environment are expected to continue driving new home equity loans into the next decade. The right data, combined with powerful analytics, can help ensure you capture a healthy share of this growing market.

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