"Once you get over about 4% on a 30-year fixed mortgage the re-fi activity slows down quite a bit," Keith Pipes, EVP of lending and financial services at Wescom ($3.37 billion in assets, 190,126 members), said. "It opens up more opportunities for members to consider an equity line of credit for additional liquidity than refinancing at a little bit higher rates."

Wescom's field of membership spreads out over southern California, which had one of the nation's most dramatic falls in home prices in the wake of the 2008 recession. Now prices have recovered and grown past the pre-recession highs.

"In almost all the markets that we serve, real estate prices have been very strong over the past five or six years," Pipes said. "Particularly in Orange County and Los Angeles County, the appreciation has been above the national average."

Wescom has roughly $100 million in HELOCs on its books during the past two years, but that number is expected to rise in 2017.

"That's great considering it was almost nothing in 2011, and $12 million in 2012," Pipes said. "We've ramped it up quite a bit thanks in a large extent to the increase in equity in our marketplace, but also reaching out to our members and encouraging them to consider us for their home equity line of credit."

Yet many lenders are ignoring powerful tools to maximize returns on HELOCs, according to a survey last October by Nomis Solutions, a Silicon Valley research company. The survey covered members of the Consumer Bankers Association's home equity committee, whose 35 members represent about 80% of value of loans generated in home equity market. It found:

• Only 44% of lenders are using targeted offers to stimulate utilization of approved loans.

• Only 28% of lenders are using targeted promotions to secure new clients.

• Only 11% of lenders are exploring mobile strategies for HELOCs.

Raising Utilization Rates

Ten years ago, home equity loans were exploding, as consumers leveraged rocketing home prices to not only improve their homes but also to cover high discretionary expenses, like vacations. "Everyone was using their house like an ATM," said Rutger van Faassen, vice president of lending at Nomis Solutions. "A lot of banks did a lot of business in the run-up years to the crisis."

Of course, when the housing bubble burst, home prices crashed. Some home owners lost their homes to foreclosures, while many others were saddled with combinations of mortgages and HELOCs that exceeded what they could recover in a sale.

And, obviously, home equity originations dried up. Much of the debt remaining from the bubble years is now running off the balance sheets, just as a new HELOC market is beginning to emerge.

Consumers remain leery, van Faassen said. "The financial crisis in general has made people more aware of debt, and a lot of people have deleveraged."

However, van Faassen said consumers need to be reminded a home equity line of credit makes sense if it is replacing higher-cost consumer debt. Encouraging higher utilization is one of the first steps lenders can take to increase HELOC volume.

"We still see a lot of irrational consumer behavior," he said. "People run up credit card debt with 16% to 19% interest at the same time they have a home equity line of credit.

"We're advising banks that maybe they should help their consumer," he said. "It's better for the consumer to consolidate. If you have to run debt, why don't you run it at the lowest possible interest rate?"

Wescom, which has about a 50% utilization of outstanding credit available on HELOCs, is also encouraging members to use them more fully.

It offers members a 50% rebate on interest payments for a limited time. When those offers were made two years ago and again a year ago, utilization rates rose 6% to 10%.

Wescom also offers a six-month introductory rate of 1.99% for its home equity lines of credit. "That does attract some attention," Pipes said.

Targeting More Precisely

Van Faassen said lenders can maximize returns from new home equity lines of credit by targeting promotions. For example, they can offer lower rates to members with better credit scores. Most lenders have a blanket strategy, offering, say, a 1.99% interest rate for six months to all borrowers, instead of aligning the price to willingness to pay, van Faassen said.

"We're arguing they should look at the segment, and price at the segment," van Faassen said. "People who have a very good credit score are usually very price sensitive. If you have an 800-plus credit score, you're usually very savvy, you shop around."

That high credit score borrower might receive an offer for a 0.99% rate, while the offer might be 3% to 4% to a borrower with a 620 FICO score, "who doesn't have a lot of options and doesn't shop around as much."

Wescom employs this risk-based pricing model, with rates that vary based on credit scores and loan-to-value ratios. Members can also get a lower rate if they also have a checking account or other loans with Wescom.

"The business analytics group looks at our experience and the market overall, and that's how we determine what the differential is between different credit tiers and loan-to-value," Pipes said.

Expanding the Mobile Connection

Another change since the last rise of home equity loans is the central role that mobile phones play in consumers' lives. This means lenders have to provide intuitive applications to allow members to apply and tap their home equity lines. It also creates opportunities for lenders to reach consumers through texts, which people are more likely to respond to than phone calls, van Faassen said.

"The banking industry is always one of the more conservative ones and doesn't innovate as quickly as many other industries," he said. "As far as mobile technologies, they're not as far ahead as some other industries."

CEFCU has a mobile app that allows members to transfer money from their HELOC to their checking accounts, CEFCU Marketing Manager Jennifer Flexer said.

Marketing can also target members for text messages, for example about loan offers that are particularly relevant.

If members have allowed advertising on their mobile device, the credit union can send reminders of services and offers that are available based on the member's location. This "geo-fencing" feature is generally used when members are at a car dealership.

Wescom has developed its own mobile platform in-house. It allows members to check home equity lines of credit balances and transfer funds in or out with other Wescom accounts.

This year, Wescom plans to introduce the capability to enable members to apply for a home equity line of credit on the mobile device in addition to the online platform. In a few years, it also wants to extend mobile capability to mortgage applications, which it currently handles online using Accenture's Mortgage Cadence platform.

With first mortgages, he said, "there are more regulations involved, more steps involved. So that would be further out, but not that much further out."