In a recent episode of Stewart in the Studio, we explored proven strategies for reducing costs and improving speed to close in the home equity lending space. The conversation focused on the current market landscape and what lenders can do to stay competitive. Following is a summary of the discussion – to listen to the full episode, please click here.
Home Equity Lending in Today’s Market
Despite predictions earlier this year for falling interest rates, the reality has been quite different. With rates remaining elevated, fewer homeowners are interested in refinancing, making home equity loans and lines of credit an attractive alternative. Lenders—including consumer banks, credit unions and independent mortgage bankers—are seizing the opportunity to meet growing consumer demand.
However, with profitability top of mind, lenders are asking: How can we use different strategies in processing and underwriting to improve speed-to-close while reducing costs?
Balancing Cost and Risk
A major focus for home equity lenders is managing the delicate balance between cost and risk. Risk tolerance plays a key role in determining product selection, particularly when selecting the right valuation method. Options range from simple Automated Valuation Models (AVMs) to full appraisals, depending on the lender’s credit risk policy. A smart “cascade” approach—starting with lower-cost valuation tools for low-risk loans and escalating only when needed—helps control costs while maintaining appropriate risk management.
Smarter Title and Closing Solutions
On the title side, there are similar considerations, and many lenders are finding ways to avoid unnecessary costs without compromising loan quality. Rather than requiring full title policies for every transaction, many are leveraging database-driven searches, current owner reports (owner and encumbrance searches), sometimes supplementing with Errors and Omissions (E&O) coverage for additional protection.
Flexibility in settlement and closing is also crucial. Whether borrowers prefer to close at a branch, at home, through hybrid options, or fully online with remote notarization, offering choices enhances the overall experience while keeping operations efficient.
Why Customer Experience Matters More Than Ever
While rates and fees are important, a smooth and simple customer experience has become the ultimate competitive advantage. Lenders are placing greater emphasis on consumer-centric processes, especially as venture-backed fintechs continue to raise the bar.
Partnering with single-source providers for title, valuation and closing services can help streamline the borrower journey and deliver the seamless experience today’s consumers expect.
New Opportunities Ahead: Freddie Mac’s Proposal
The discussion also highlighted a new proposal from the FHFA that could allow Freddie Mac to purchase home equity loans. Although still in early stages, this move could further drive the need for a Home Equity origination strategy, bringing much-needed liquidity to the market and expand lending opportunities—giving consumers more options and creating new opportunities for lenders.
Ready to streamline your home equity lending operations?
Contact us today to learn how we can help you reduce costs, manage risk, and deliver a better borrower experience.
