Standing Out In A Crowded Home Equity Market

Faster and more accurate valuations among needed changes

BY JEREMY MCCARTY, SPECIAL TO NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

With rising mortgage rates, homeowners in need of cash for remodeling, debt consolidation, or just a rainy-day fund, have increasingly turned to a home equity loan. And, thanks to rising home values over the last decade, homeowners are sitting on more equity than ever. Many homeowners are opting to remodel or add on rather than move, but don’t want to touch their low-interest first mortgage when tapping into their home equity. A home equity loan is now one of the most viable options to convert equity into cash. Home equity loans are a great option to consolidate debt or used as a cushion to weather the challenging economy.

With this surge in home equity demand, lenders need to re-focus on this market and establish a way to differentiate themselves from the competition.

Faster Valuations

Home equity loans are often categorized as consumer loans with the credit and title underwriting completed very quickly. Similarly, the property valuation component needs to be expedient for a successful program and to meet homeowner expectations. The ability to provide an equity loan commitment within a few hours is a game changer for the lender’s competitive abilities and for the borrowers to potentially get faster access to their funds.

Accurate Valuations

Often, equity lending valuations are completed through the use of Automated Valuation Models (AVMs) or other valuation tools that utilize only a drive-by inspection of the property. While these tools serve a purpose, they may not show the maximum home value, especially if interior remodeling and amenities are not considered. Furthermore, homeowners are disappointed when the lender’s valuation does not reflect the true value of their home because the chosen tool did not provide a complete view of the property.

Technology

By leveraging new technology to show all the interior and exterior amenities, rather than the antiquated valuation processes focusing only on the home exterior, lenders can be operationally more efficient, and provide the true home value to their borrowers. All of this results in a positive borrower experience.

Additionally, with the right technology, lenders do not have to sacrifice the quality of their valuation. With the proper tools in place, a decision made with the help of technology can be just as thorough and accurate as a full appraisal, at a fraction of the cost.

Virtual Inspections

A key technology to streamline home equity valuations is the “virtual inspection.” Rather than waiting for someone to drive by the property to do just a front exterior inspection, virtual inspections can be completed within minutes — and the process is much simpler than you would think.

With a virtual inspection, the homeowner connects to the virtual inspector through a streaming video call to conduct a brief, but thorough inspection of the home’s interior and exterior. The inspection usually takes just 15-20 minutes, and homeowners often enjoy the experience. They appreciate being able to show off their home, being part of the process and knowing that the the necessary elements for a sound and accurate valuation. The valuation analyst can then provide a strongly supported valuation report within a couple hours after inspection. Technology like virtual inspection helps set lenders apart where the time for loan approval can be measured in hours, unique qualities of their home have been considered in the valuation.

Within minutes of the lender ordering the evaluation, the homeowner is contacted, and if available, the inspection is conducted on the spot. Alternatively, the homeowner can schedule a time that is convenient for them through an online calendar.

Collecting the property data virtually is a much faster, lower cost, thorough and consistent manner to provide not weeks. This sets a new standard in home equity lending. Additionally, homeowner involvement in the inspection solidifies their commitment to the loan and vastly improves the borrower experience — reflecting very positively on the lender in the highlycompetitive equity lending landscape. n