Upgrading the Consumer Experience in Home Equity Lending (Part 1)
By Craig Austin
Executive Vice President, FirstClose
Everything old is new again, right? Case in point: home equity lines of credit (HELOCs). These products have been around for decades, but in recent years have taken a back seat to cash-out refinances. Now this is changing as borrowers with historically low first mortgage rates, and generationally high levels of tappable equity rediscover HELOCs as smart way for borrowers to pay down high interest credits or to pay for big ticket items, like tuition, weddings, etc.
What consumers are also discovering is that HELOCs are still being originated the same way they were a decade ago, and the process can stretch from weeks to months, depending on the lender.
For more than 20 years, our firm has believed that there is a better way to originate these products and invested in technology to significantly change both the borrower’s and the lender’s experience with HELOCs.
Let’s begin with the borrower. At the end of the day, what they want is their money… as quickly as possible and without having to jump through too many hoops to get it.
We designed FirstClose™ Equity, our end-to-end HELOC platform, to enable banks, credit unions and mortgage companies to dramatically elevate the experience that they deliver to customers and members.
Our platform can complete a HELOC from initial inquiry to closing in as few as 5 days versus the industry average of 45 to 60 days. Depending on the client’s business rules, the entire process can be conducted online, including a RON closing.
From Hello to Here’s Your Money
Here’s how it works. The borrower’s journey begins with a white labeled point of sale (POS) solution that explains the lender’s product offerings, and asks the borrower a few basic, validating questions: Name, address of the property, date of purchase, and citizenship. They are also asked to consent to a soft credit pull.
With this information, our platform is able to show the consumer the amount of their tappable home equity in less than 10 seconds. If the customer likes the answer, the system prompts them to take the next step and apply.
Just as importantly, if there is an issue—say the initial credit pull comes back too low or there is an issue, or maybe the lender doesn’t lend to non-citizens, or the property is outside the lender’s footprints—the system politely tells the borrower that the loan can’t proceed. And does it before consumer has gone through the hassle of entering lots of data or the lender has expended time or ordered services.
The application process itself is extremely streamlined. With the consumer’s consent, our system can collect and verify bank, asset and employment information. Even the few pieces of information that the borrower has to provide—their drivers license and photo, for example—can up uploaded through the platform.
Our decisioning engine is able to give the consumer a firm decision on CLTV and pricing in approximately 5 to 7 minutes. Again, depending on the lender’s business rules, our system can generate closing documents and give a clear to close on many HELOCs at that time.
The borrower can then schedule a closing at their convenience. This can take place at the lender or the credit union’s branch or, depending on the location, be done entirely remotely from the borrowers’ home or office.
Finally, the system allows borrowers to select their initial draw and provide account information for where it should be sent.
There’s no question that home equity lending is in the spotlight again, and that by all indications, it will be the go-to-product for personal liquidity for the foreseeable future. The only question is who is going to capture the business? Lenders using manual paper-based processes that have been around since the last time home equity was “in” or banks and credit unions offering a significantly better customer experience?
[Part 2 of this discussion will focus on how technology is enhancing HELOC lending from the lender’s perspective]