Home equity lenders – what their growth is based on
In announcing the hires, Schiano touted both the men’s digital expertise and their leadership skills that would be essential “…to deliver personalized solutions to all types of owners.”
Asked to explain, Schiano added: “We have a robust product line that serves clients who have a lot of equity and also serves some clients who have recently purchased their home who have little equity. So we have a higher LTV [loan to value] products available, and some traditional products. We have fixed rate home equity loans and we have a home equity HELOC which gives the customer more flexibility. The average FICO score of our borrowers is around 750; we go as low as 640 in some cases for customers. Our product range is very wide.
Yet corporate growth projections now depend largely on owners’ reluctance to refinance amid expected interest rate hikes. While the future is unknown, Schiano seems confident to hedge his bets: “We are in crazy times, and it’s hard to predict where things are going,” he said. “But what I can tell you is that if you look at where the prime mortgage rates are, economists predict that if rates go from where they started the year at 3-4%, that will halve the refinancing market. This means that customers still need to borrow, they will choose other means, be it home equity loans, personal loans or credit cards. But what they’re not going to do is refinance at 2.5% first to go to 4% first.
Although no one has the fabled crystal ball, the central bank’s telegraphy of higher interest rates amid inflationary pressure serves as fodder within the niche his company has carved out for itself.
“There is record home equity and there are different ways to leverage home equity,” he said. “And last year, consumers took advantage of that by refinancing their first mortgage. But with rising rates, some customers won’t want to refinance their first mortgage. They will want to withdraw money in other ways, and our product is a great product to help people pay down or consolidate debt, borrow money to improve their home. And, also, in some cases, our clients use a second mortgage, so instead of going to a giant first mortgage, they’ll go to a Fannie Mae first mortgage and use our layered second mortgage. And basically, it will get them a better first mortgage rate.