The refi boom is in our rearview mirrors and the road ahead looks promising for home equity volume. Who knows how high that volume could go, considering tappable equity is at a historic high of $11 trillion and total home equity at a record $27.8 trillion.
Black Knight’s report of a $1.2 trillion spike in tappable home equity in the first quarter of 2022 was a stunner, especially as it topped off a 12-month period that saw a 34% collective gain among mortgage holders. The math works out to about $207,000 per borrower and represents a sizable opportunity for lenders.
Of course, a lot of lenders pulled back on home equity products and services when refinancing activity surged and moved the bulk of resources to the more profitable first mortgage space. As these lenders and others now look to re-energize their home equity efforts, and new players make their foray into home equity, reliable title and settlement service partners with deep home equity experience are in demand.
Lenders need support in streamlining their processes and creating an exceptional borrower experience while keeping costs as low as possible.
How do you identify the right home equity partner?
First, think about your organization’s priorities and what kind of support you need. Are you just getting into home equity or are you looking to scale? Are you closing as quickly as you’d like? Are you meeting or exceeding customer expectations for speed, transparency and ease? Is your home equity business as profitable as it could be? Once you’ve answered those questions, consider the following factors and how your home equity service partner should deliver on each one.
Excellent turn times
The title and settlement processes should never hold you back from meeting your home equity application-to-close goals. Your service partner should provide the support that helps you shrink transaction turn times, whether you are working toward bringing your average close from 35 days down to 10, or from 10 days down to three or even five.
They can do this by applying advanced technology — digital title solutions, automated inspection and appraisal tools, consumer-facing scheduling apps and eClosing solutions — and working with you to optimize your internal workflows and processes.
Leading-edge technology products/solutions
Technology solutions can vary widely from one provider to another. Learn what products each provider offers before committing to a partnership. Their title and closing products should help you simplify your processes and reduce your application-to-close time frames. They should also focus on understanding your risk guidelines so they can recommend only the most appropriate technology solutions.
Technology can support the following areas with greater efficiency, transparency, accuracy and speed and elevate the customer experience:
- Digital scheduling — Allowing borrowers to schedule their appraisals and closings on their own mobile devices doesn’t just eliminate the back-and-forth calls that have traditionally slowed scheduling down, it makes them feel engaged and empowered. In a recent survey, 83% of consumers said they would be at least somewhat likely to self-schedule their closing appointment, given that option. That’s not surprising, considering they can receive confirmation of their appointment in minutes rather than days.
- eClosings — When the COVID-19 pandemic hit, interest in virtual closings soared. Technology took a giant step forward as emerging solutions became more mainstream. Today, lenders have choices ranging from in-person electronic notarization (IPEN), remote online notarization (RON) and remote ink-signed notarization (RIN) to hybrid signing and notarization.
- Title solutions — Clear-to-close solutions are now infused with technology from giving title data at the point of sale to property reports, ALTA products and more. Technology has made title a whole new game.
- Automated inspections and valuations— Technology is improving valuation methods and workflows to make appraisals faster. In addition to traditional in-house inspections, your service partner may offer automated valuation models (AVMs), desktop appraisals, hybrid valuations and self-inspection tools.
A steadfast commitment to security
Before entrusting any partner with your sensitive customer and company data, thoroughly research the safeguards they have in place to protect that data from cyber threats, transfer errors, human error and other risks. Bank-level security should be standard across every facet of the technology that is used to exchange, process and store data.
You might think that in an industry like ours, where customer data is ubiquitous, every service provider would offer the highest level of security. Not so. While all companies are required to put certain measures into place to remain compliant, many smaller companies simply can’t afford to make the necessary additional investments to bring their security up to bank-grade. This isn’t an area for compromise. The stakes are much too high.
A dedicated, experienced team
Skill and experience are required across every process your service partner provides, from title to valuations to closing. You should be assigned a dedicated service team whose members know the ropes and understand your specific expectations and workflows for home equity transactions. They will keep things moving forward smoothly, competently managing any issues that arise along the way.
For example, what happens if there’s a glitch with the title? Perhaps a lien on the property needs to be cleared before the title can be issued.
Your team should include curative specialists who can clear that file quickly and accurately, to keep the process moving and get the loan closed as soon as possible. You also need to have a great customer service team, since you will be relying on them to contact customers as needed and keep you in the loop with matters that require your awareness or attention.
Agility
Assess agility in a couple of places. If you plan to scale your home equity services with growing market demand, your service provider should be agile enough to not only equip you with the right technology for expanding quickly and smoothly, but also be ready to scale their team right along with you.
Staying on top of the growing volume of orders may require more staff members dedicated to your business, so ask about capacity early in the game. Whether this means moving people within their organization — a larger service provider will have more in-house talent available — or hiring additional team members, your partners should enable you to continue closing more loans, faster.
Second, your partner should be agile in their response to evolving regulations and market needs. The pandemic put this need for agility into sharp focus, as lenders who were able to adapt their technologies and processes quickly to overcome the various challenges presented by health protocols continued to thrive.
A broad footprint
Whether you are operating regionally or nationally, your title and settlement service partner should be able to cover your needs wherever you do business. A 50-state footprint is ideal since it affords you the freedom to expand without having to worry about getting additional service providers up to speed on your processes and workflows. A partner with knowledgeable people who stay up to date with every state’s regulations and nuances is worth its weight in gold, especially as those rules keep changing.
Stability, longevity and a sterling track record
Look for a service partner that offers a unique combination of cutting-edge technology and industry tenure. Companies that have been around for decades have a deep understanding of market shifts, as well as consumer and lender needs. Their staff is likely to have more experience, from the line level through upper management. Take a look at their track record of supporting lenders through cycle after cycle after cycle. Ask for references.
Doing business successfully in the home equity space requires a strong partnership. As the home equity boom continues to gain steam, home equity service providers who can deliver in each of these areas will help lenders thrive.
Barry Coffin is the managing director of originations title and close at ServiceLink.
This column, which originally appeared in HousingWire Magazine, does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To read the full December/January issue of HousingWire Magazine, click here.
To contact the editor responsible for this story:
Sarah Wheeler at sarah@hwmedia.com
