Bank home equity balances fell by 5.3% last year, leaving lenders to pick up the banks' slack
Home equity lines of credit (HELOCs) from banks have seen slight but steady declines over the past few years, with figures from the National Association of Federal Credit Unions (NAFCU) stating that they fell by 5.3% in 2015, after a 3.2% drop a year prior.
This development has left other lenders to take the banks’ place in the home equity loan sector (HE balances at these organizations actually grew by 6.1% last year). Indeed, a total of 1.17 million new HELOCs have been originated between January and October 2015, representing the best 10-month period since the financial crisis.
Additional data from Equifax corroborated these numbers, also stating a 19.7% increase in the total credit limit of new home equity lines in 2015. This rise amounts to a value of $121.6 billion, especially notable in a time when the economy is still considered in its recovery phase.
Credit unions, in particular, have begun diversifying into open-end HELOCs and other products to further deepen their customer relationships, amid a climate of uncertainty over the banks’ ability to deliver.
“We're seeing credit unions gain market share, not just in HELOCs, but in business lending [and] auto lending, so it's pretty much across the board,” NAFCU chief economist Curt Long told National Mortgage News.
Lenders said that the heightened interest in HELOCs stems from its value as an alternative to personal loans among many consumers.
“When we started to really look into the personal-loan business, we noticed that a lot of the people that were taking out personal loans were also homeowners, so we sat around saying why would somebody take out a cost-to-capital that is higher than taking out a home equity loan,” IoanDepot chief financial officer Bryan Sullivan said, whose company primarily caters its services to those with credit scores ranging from 700 to 760.
This development has left other lenders to take the banks’ place in the home equity loan sector (HE balances at these organizations actually grew by 6.1% last year). Indeed, a total of 1.17 million new HELOCs have been originated between January and October 2015, representing the best 10-month period since the financial crisis.
Additional data from Equifax corroborated these numbers, also stating a 19.7% increase in the total credit limit of new home equity lines in 2015. This rise amounts to a value of $121.6 billion, especially notable in a time when the economy is still considered in its recovery phase.
Credit unions, in particular, have begun diversifying into open-end HELOCs and other products to further deepen their customer relationships, amid a climate of uncertainty over the banks’ ability to deliver.
“We're seeing credit unions gain market share, not just in HELOCs, but in business lending [and] auto lending, so it's pretty much across the board,” NAFCU chief economist Curt Long told National Mortgage News.
Lenders said that the heightened interest in HELOCs stems from its value as an alternative to personal loans among many consumers.
“When we started to really look into the personal-loan business, we noticed that a lot of the people that were taking out personal loans were also homeowners, so we sat around saying why would somebody take out a cost-to-capital that is higher than taking out a home equity loan,” IoanDepot chief financial officer Bryan Sullivan said, whose company primarily caters its services to those with credit scores ranging from 700 to 760.
