As our industry closes the books on the first half of 2023, a growing number of title companies are concentrating their activities and placing their attention for the second half of the year on home equity originations. The reasons are simple:
On a unit basis, it’s where the growth is.
Home equity lines and loans are expected to grow from 2.7 million units last year to more than 3.7 million in 2023, nearly a 25% gain this year, as reported by Transunion. And, as you know, first mortgage production is expected to decline in the same period, according to the Mortgage Bankers Association. (In 2021, first mortgage production exceeded 11 million units.)
Home equity is the right product for the times.
More than 90% of all homeowners with a mortgage have first mortgage rates below 6% and 62% below 4%. So home equity lines of credit (HELOCs) and home equity loans allow them to tap equity—more than $18 trillion in aggregate—without giving up their coveted first mortgage rates. If, as some observers have noted, these low first mortgage rates are “golden handcuffs,” then home equity is the key that unlocks them.
An Opportunity to Demonstrate Value
The numbers don’t lie – home equity is an opportunity for title companies to generate needed revenue and at the same time demonstrate value to help build relationships with lender clients and prospects, but the competition is fierce. While depository institutions account for the bulk of home equity originations, more than 97% of new entrants to mortgage origination—both fintech’s and traditional mortgage banks—are also coming into the home equity market. Often these new entrants are emphasizing speed and a superior customer experience as their key differentiators, so title companies must be prepared to compete.
However, unlike a more standardized first mortgage transaction, the home equity lending process varies significantly. This increases the importance in identifying partners that have broad industry visibility and can offer a full spectrum of data and services to meet unique customer requirements for home equity lending.
"Understanding risk tolerance and go-to-market strategies – to be able to suggest prudent, non-traditional solutions that can take time and cost out of the process – is a great way for title companies to differentiate themselves," said Robert Karraa, president of DataTrace®.
In other words, the right data partner can make all the difference. DataTrace doesn’t provide title companies a “single, one-size-fits-all solution” for home equity lending. Karraa continued, “For example, on certain transactions, some lenders may only require a Legal & Vesting report, rather than a full owner search. This type of information can often be delivered in minutes, as opposed to days, helping the title company support a lender’s marketing claim about a faster, more modern HELOC experience. Where it fits, DataTrace can provide a lower cost option, given that many home equity settlement service costs are absorbed by the lender. We empower our customers to support all scenarios.”
Title companies can also leverage our title and property data solutions to help clients identify prospects and add “lift” to their marketing campaigns. For example, companies can use our data to identify homeowners within a certain market area that meet a lender’s criteria based on equity, mortgage type, length of ownership, or other attributes through either our TitleFlex® platform or by leveraging our Advanced Data Solutions to identify targeted lists culled from a lender’s portfolio. And, through our DataTrace TaxSource™ solution, we can deliver accurate up-to-date tax status information – again, often in minutes.
To fully capitalize on the revenue and relationship opportunities that exist in home equity, work with a partner that provides the right tools paired with the most accurate, reliable data. For more than 40 years, that’s exactly what DataTrace has delivered and will continue to deliver.
Increase your home equity competitive edge with DataTrace. Learn more.
About DataTrace:
DataTrace Information Services, LLC provides advanced real estate title search technology, automation and examination solutions that enable settlement services companies to quickly access and search hundreds of regional title databases through a secure standardized interface. Our system is the largest and most innovative of its kind, delivering title history information, property tax assessment and payment data, document images and property profiles in 47 states across the U.S. Every day, thousands of title insurance underwriters nationwide rely on our real estate title insurance solutions to help them open and close more business and improve customer service.