How to gain a competitive edge in today’s home equity lending market
Lenders today are still experiencing significant challenges in the purchase-mortgage market. Tight housing inventory, high prices, and low-interest-rate refinances have made consumers more apt to remain in their current residence than look for a new property. On the other hand, these dynamics have also played a role in creating a robust market for equity-driven transactions.
Black Knight reported in its October 2019 Mortgage Monitor that “tappable” equity – the amount of available equity before reaching an 80% combined loan to value ratio – is near an all-time high at $6.3 trillion. According to Black Knight, 45 million homeowners have an average of $119,000 in tappable equity available to borrow against.
As an added incentive for lenders to target this market, these candidates for equity-driven transactions comprise a relatively low-risk group. More than half of this population have credit scores of 760 or above; another 16% have scores between 720-759.
Such a large pool of low-risk equity candidates could very well help lenders increase origination volume. But, equity-driven transactions also present their share of difficulties, including small margins and lackluster conversion rates. For lenders to compete and succeed in this market, it’s important for them to address the factors contributing to these challenges.
Various dynamics are responsible for less-than-ideal conversion rates, but one likely reason is the complexity involved in applying for and getting a refinance or another home equity product. The process tends to be slower and more involved when compared to other products currently available to consumers, such as unsecured personal loans.
For lenders to successfully compete for this pool of candidates and improve pull-through rates, it’s critical that they provide consumers with a quick and convenient lending process. A digital point-of-sale solution integrated with a comprehensive loan origination system can certainly speed up equity-driven transactions. But to really deliver the sort of customer experience that helps increase conversion rates, it’s also essential for lenders to leverage a digital closing solution, and one that creates exceptional process efficiencies.
The best way to close a loan
Black Knight offers Expedite Close, a unique solution that uses intelligent technology and “lights out” processing to reduce the complexities inherent in mortgage and home equity lending. Expedite Close supports the eClosing process for all loan transaction types with comprehensive automation, workflow and decisioning – making closings faster, simpler and more seamless.
Expedite Close leverages embedded logic and client-defined rules to systematically select the best way to close each loan transaction – wet sign, digital, or a hybrid of both – without lender intervention.
Additionally, the solution accommodates most potential variations on the closing process. For example, if a borrower chooses to sign documents online but does not access them within the appropriate timeframe, Expedite Close will automatically change to a workflow that supports a wet-sign transaction. When a consumer does electronically sign his or her documents, the technology determines if other factors are in place for a complete digital transaction to occur, such as the state permitting eNotarizations and the county allowing eRecordings.
Expedite Close’s intelligent technology streamlines the origination process by systematizing and simplifying the decisioning complexities of closings. Lenders that use Expedite Close also do not have to change systems or processes midstream, so they can focus instead on improving the consumer experience.
A recent cost-benefit analysis on Expedite Close conducted by Black Knight demonstrates that this solution reduces costs from $40-$100 per transaction, depending on the degree of digitalization. Even in a completely wet-sign transaction, Expedite Close can help reduce costs by more than $30 per loan based solely on the increased operational efficiencies it delivers.
Increasing pull-through rates
Expedite Close also provides a secure, online portal that manages workflows and enables all participants to seamlessly interact with each other in the same “workspace.” Consumers can easily upload documents, view their loan status, look at the closing package in advance, e-sign documents at their convenience, and access documents from a mobile device or desktop. This helps to improve consumer engagement and reduce fall-out.
Speed to market
By taking complex decisioning and manual processing out of the equation, Expedite Close helps facilitate significant efficiencies, which in turn, reduces costs. Expedite Close also supports first mortgages, which means lenders can take advantage of its unique capabilities for their other real estate-backed loans, creating even greater efficiencies.
By delivering the speed and convenience today’s consumers expect, as well as more transparency into loan status, consumers can see the progress of their loan throughout the process. A faster, more visible equity-driven transaction is key to preventing consumers from looking at borrowing opportunities elsewhere.