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Special Reports
In this section of BrokerUniverse we examine a subject of key importance
for mortgage originators every month, based on special reports that run in our sister publication, Origination News.
Home Equity Lending
A 'Magic' Source of Cash?
by Bonnie Sinnock
Home-equity loans, however one may define them, have played an important role
in the origination business. Loans with relatively higher yields, due to the borrower's atypical financial history
or the need by the borrower to tap the equity in his or her home, stay in demand even when rate-driven refinancing
burns out. And in a market environment such as has been seen recently, when home values are high and competing
sources of cash and investment may not look as relatively attractive as home equity does, the sector commands even
more interest.
How long will the home-equity loan sector's magic last? It remains to be seen.
In recent times it has been doing well, but there have been some rumblings of concern. Some question whether the
home values that support it will hold up while others have stated concerns about whether the lower downpayments
and higher leverage seen in many of these loans could lead to repayment problems.
That being said, there are those that counter these concerns by noting that history
appears to place a limit on the former risk and technological advances may limit the risk of the latter. Many believe
that the improvements in automation seen recently make the management of home-equity loan product risk - as well
as the management of the increasingly innovative loan products themselves - more viable and accurate than in the
past In addition, history indicates it is unlikely that home prices will depreciate nationally.
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