Streamlining the Home Equity Lending Process With Technology
But don't be exclusively reliant on technology – also be open-minded to innovative ideas and inventive approaches.
No matter what the status of the market is, it is always a good time for credit unions to expand their offerings to include home equity loans to create a balanced portfolio of different types of loans. The lack of housing stock and high prices for the homes that are on the market have decreased home sales, and this makes home equity loans even more attractive to homeowners.
Credit unions can tap into that market of homeowners who are turning to option B to get the home they want – a home equity loan for renovations. The key for credit unions to make this a successful endeavor is using technology to streamline the process.
Many lenders that offer mortgages, including credit unions, have used the process for conforming and first loans on their non-conforming business, which includes home equity lending. They have used this method, which brings unnecessary steps to the process, because that is the only way they know how to process loans. Adding the home equity line of business does require a credit union to invest in a new loan origination system.
The reality is there is no solid reason a member should have to wait 45 days for a home equity line because of the time added for a full appraisal and a full title insurance policy. And for credit unions that offer home equity loans that take eight to 10 weeks to complete, they should consider how to provide members a loan in less than a week.
One way credit unions can save time is by using a platform that offers the essential services needed to complete a home equity loan with an automated valuation model instead of an appraisal, which the NCUA says can be used for loans up to $400,000.
Embracing technology, understanding what local lending requirements are and applying their individual risk tolerance is how any credit union can be successful in this profitable market. By leveraging available technology and services, credit unions can improve and update longstanding procedures and optimize operations.
A Better Process for Everyone
Stronger member engagement is on the minds of all executives and is a popular topic for every financial institution as of late – and rightfully so. When a credit union moves into the home equity lending space, it is important that it puts a system in place that ensures the member experience is a positive one. It is important to remember that on the other side of the borrower in the lending process is the loan officer, and the member will not have a positive experience if the loan officer does not have the right tools to help make the loan a reality. Basically, if the loan officer’s experience is garbage, then the member’s experience will be garbage.
There are systems and platforms that can make the process of getting a home equity or refinance loan as easy as originating a car or personal loan. Having the proper tools in place will help make loan officers feel empowered to do more home equity loans and further position the credit union for success.
Credit unions can improve the home equity lending process by understanding the related guidelines, regulations and requirements attached to the loans. Assigning a team to garner this knowledge and prevent any unforeseen issues is essential. Using that information to create an automated process around these guidelines that incorporates integrated solutions, requests for credit reports, employment verification, etc., is the next step. And the final step is to execute.
This is a market with growing competition, not only from other financial institutions but from fintechs that offer direct services to members. And while credit union members typically turn to their trusted credit union for better interest rates, they remain loyal because of a great experience such as having an on-time closing. This is unfortunately where these new fintechs are edging ahead of credit unions. They can quickly meet member demands.
Using automated and intelligent workflows can keep the process on track and reduce the time it takes credit unions to process home equity loans by 60%. This means leveraging available technology that significantly reduces manual data entry and errors, which in turn empowers loan officers to exceed member expectations by providing the personalized experience and speed they want.
Creating a better lending experience is not exclusively reliant on technology; it also depends on being open-minded to innovative ideas and inventive approaches. Remaining willing to consider fresh perspectives and new concepts benefits both lenders that are looking to add home equity to their product suite and those that currently offer it. When a lender adds home equity lending to its roster and uses technology to streamline back-office processes, the resulting benefits will only be overshadowed by a growing portfolio and improved borrower experience.
Allen Jingst Chief Revenue Officer LenderClose West Des Moines, Iowa