Study: Lenders Need to Capitalize on Potential Home Equity Boom

Article by: Mike Sorohan msorohan@mba.org

April 06, 2018

With the number of American consumers expected to take out a home equity line of credit projected to double to 10 million over the next five years, lenders need to improve digital offerings if they want to capitalize on the trend, said J.D. Power, Costa Mesa, Calif.

The company’s 2018 U.S. Home Equity Line of Credit Satisfaction Study said the digital experience is becoming increasingly critical to customer satisfaction. The study evaluated customer perceptions of the HELOC process and explored key variables that influence customer choice, satisfaction and loyalty based on six factors: offerings and terms; application/approval process; closing; interaction with the lender; billing and payment; and post-closing and usage.

The study ranked SunTrust Banks as highest in HELOC customer satisfaction, with a score of 869 on a 1,000-point scale, followed by BB&T (860) and Huntington National Bank (851). The industry average score was 837.

“Lenders need to recognize that the HELOC customer experience is a journey that begins with initial consideration and evaluation and extends through to usage, with each part of the journey affecting overall perceptions,” said Craig Martin, Senior Director of Financial Services with J.D. Power. “Increasingly, many steps in that process are occurring in digital and mobile channels, which are areas that the industry has been slow to leverage and refine. As Millennial homeownership rates increase and home values continue to rise, lenders need to be able to meet these customers where they want to be, not try to force them into the lender’s entrenched methods.”

Key findings of the study:

–Digital channels become critical for younger borrowers: Established relationships with lenders still play a key role in the HELOC customer journey, with 66% of all borrowers gathering information about a HELOC in person. However, digital is becoming a bigger factor among younger borrowers, with 59% of Millennials gathering information online via desktop computers and 50% of Millennials gathering information online via smartphones or tablets.

–Few HELOC borrowers say they are actively solicited: The majority (88%) of HELOC borrowers say they began the HELOC search without prompting from a lender, demonstrating that marketing efforts are not having much effect on customers. The group in the study least likely to hear from lenders are Millennials, 94% of whom initiated a HELOC product search themselves.

–Comparison shopping is the norm: More than half (55%) of customers indicate they considered at least one other lender during their shopping process. The comparison-shopping phenomenon is most pronounced amongst Millennials, of which 80% of HELOC borrowers considered at least one other lender.

–Concern is the rule, not the exception: Nearly two-thirds (64%) of all borrowers express some type of concern about obtaining a HELOC product, with Millennial customers showing the highest levels of concern. Only 13% say they had no concerns. Key concerns include the variable nature of the loan and overextending themselves.

The study is based on responses from more than 4,008 HELOC borrowers. (http://www.jdpower.com/resource/us-home-equity-line-credit-study.)

Original article here

The Appraisal Institute

The Appraisal Institute has published guidance to help appraisers learn what evaluations are, when they are used and who can prepare them. The Appraisal Institute’s “Guide Note 13: Performing Evaluations of Real Property Collateral for Lenders” addresses how appraisers should prepare an evaluation for a lender and comply with the Uniform Standards of Professional Appraisal Practice (USPAP).crea, complete rea, completerea, stamford ct

The Guide Note states, “Federally insured lending institutions in the United States are subject to regulations regarding real estate appraisals. For lending transactions involving real estate, a lender must obtain an appraisal from a state licensed or certified appraiser. There are 12 exemptions from this requirement. For three of these exemptions, in lieu of an appraisal by a licensed or certified appraiser the lender may obtain an evaluation.”

Evaluations, per the Interagency Appraisal and Evaluation Guidelines, are market value opinions that may be provided by individuals who are not state licensed or certified appraisers. However, state licensed and certified appraisers may provide them, according to the Appraisal Institute’s Guide Note. The interagency guidelines also state that an evaluation must be based on a valuation method that is appropriate for a transaction rather than the method that renders the highest value, lowest cost or fastest turnaround time.

The Appraisal Institute’s Guide Note states that USPAP allows an appraiser to adjust the scope of work for a valuation assignment as long as the resultant value opinion is credible, given the intended use. When preparing an evaluation, the appraiser may consider narrowing the scope of work as appropriate.

According to the interagency guidelines, a lender may obtain an evaluation in lieu of an appraisal when the loan transaction: Has a transaction value equal to or less than $250,000; is a business loan with a transaction value equal to or less than the business loan threshold of $1 million, and is not dependent on the sale of, or rental income derived from, real estate and the primary source of repayment; or involves an existing extension of credit at the lending institution, provided that there has been no obvious and material change in market conditions or physical aspects of the property that threaten the adequacy of the institution’s real estate collateral protection after the transaction, even with the advancement of new monies; or there is no advancement of new monies other than funds necessary to cover reasonable closing costs.

Phone: +1 203 858 6727

Office: +1 203 212 3788

Complete Real Estate Answers, Inc.
27 Fifth Street, 2nd Floor, Stamford CT 06903

Nana G. Smith, Proprietor

Web & Blog: CompleteREA.com (you are here)
Facebook
Twitter
Google+

C.R.E.A. – comment using this form to be in touch :