Even though bank may still have limitations on physical operations due to the Covid-19 pandemic, they can still leverage technology to prepare for what a potential boom in home equity line of credit (HELOC) lending.
Inflation will happen and rates will once again rise, making the market ripe for HELOCs. Community and regional banks need to be savvy enough to compete against larger banks and rising fintech nonbank lenders for this growing market share, and they can do this by using technology to properly harness the data. Data is new currency.
According to a J.D. Power study on HELOC satisfaction, 88% of consumers say they started the HELOC process without being prompted by a bank employee. That percentage is even greater for millennials: 94%. This a trend that is likely to continue.
Fast-paced technology allows consumers online options to do their banking from their smartphone, and many don’t want to speak to a banker unless they cannot get the answer online. They are signing up for loans, transferring funds to another account or opening new accounts — all transactional services that can be done with a few keystrokes and mouse clicks, without having to visit a local branch.
This same technology can be applied to the HELOC application process, which banks can use to greatly improve interactions with consumers. So why aren’t more banks embracing this technology? Why do we keep seeing phone numbers or “email us” prompts under the HELOC section of a bank website? It seems home equity lending is stuck in the 1990s.
This has to change to capture customers’ attention. The rise in home prices means millennials have more equity in their homes, and 59% gather their information online — 50% through smartphones only, according to the J.D. Power study. Banks have not been actively marketing to this group, making it a crucial area for improvement with the use of technology.
For any technology to be successful, banks need to change their approach or mindset regarding their HELOC application process. There are many options that can be used on the front-end of the HELOC experience as more banks streamline their digital processes. Others are using their loan origination system as a robust starting point in this process; one that should be easy, fast and intuitive.
Technology can automatically order the necessary data, like credit, income, flood and instant title reports. If the title data is not readily available, it can use intelligence logic to select the best data property report provider, based on turn time and price. That information is then delivered in one report that is custom-tailored to each lender’s unique loan fulfillment requirements.
Other technology can help with the front end, digital marketing and other aspects of the business, from the top of the funnel to eClosing. The constant change means that systems put in place three years ago were probably more expensive than some banks were willing to invest. Those systems might not have featured all the functionality a bank needed; now, they are outdated. Even if banks previously considered and decided against possible systems for whatever reason, it is paramount that they take another careful look today.
Some banks may be content with their current level of home equity loans; however, as the market starts to ramp up, they risk leaving significant business on the table or losing a customer to a non-bank fintech. Recent advancements mean there are innovative and inexpensive systems available that do not require a total retooling of a bank’s existing technology stack. What is the price on shaving 25 days off the process? What price can your bank can put on saving 25 days in the process? With the right approach, these new tools can help banks be cost neutral, or even save money.