JANUARY 2016 n National Mortgage Professional Magazine n
Uncovering Home Equity Cross-Sell Opportunities By Corey Hulbert The U.S. housing market continues to improve, and with it, the plight of homeowners, many of whom have been underwater on their mortgages since the financial crisis began. According to CoreLogic, homeowners with negative equity fell to 8.7 percent in the second quarter of 2015, the lowest that number has been since the crash. The company put the total number at 4.4 million as of June 30, down from 5.1 million in Q1. Analysts said just more than $309 billion worth of U.S. real estate was still underwater, from a financing perspective. But it’s getting better. Zillow looked at the same numbers for the second quarter and they put the percentage of homes with negative equity at 14.4 percent, down from 15 percent. Still, that’s a 19.3 percent decrease from a year earlier. Even better, Zillow said that the bottom third of the 7.4 million homeowners who were still underwater saw faster rates of growth in the values of their homes. The best news is that this growth in home values is impacting up to 60 percent of the properties across the country, which led Black Knight Financial
Services to conclude that total home equity has increased by nearly $1 trillion over the past year ($825 billion in the first five months of this year!), reaching its highest level since 2007. The company put total available home equity at $7.6 trillion, with about $4.5 trillion of it available to borrowers now. That’s a lot of new business waiting for lenders to originate. The question is: How do lenders find it?
Uncovering home equity opportunities Prior to the crash when most lenders got their new business by picking up a ringing phone, few origination teams had formal strategies for cross-selling products. Today, many institutions have embraced more sophisticated marketing methods for uncovering new business. However, compliance concerns have driven many banks to keep much of their prospecting work internal to avoid third-party risk. This works fine for home equity cross selling as the prospects the bank will target are often already in their portfolio or CRM. The first step many lenders that service their own loans take is to determine where equity is still present within their customer base by ordering a bulk valua-
tion report on their portfolio. This is an excellent initial qualifier, but it is not as easily accomplished if the originator has sold the loans upstream. Fortunately, the information the originator needs is still available from sources outside of the company. Having good access to third-party data can make the lender’s work significantly easier. In this, our industry isn’t unique. The legal profession has special libraries and databases available for attorneys just as the healthcare industry has medical journals and databases that practitioners use to make better diagnoses. What our industry has that sets us apart from all others is the public record archive managed independently by County Recorders in the 3,143 U.S. counties. While the exact documentation that must be recorded publicly varies by state, our industry has arguably the best archive of pertinent information about the primary asset we’re concerned with than any other industry anywhere. Of course, that may change if Google reaches its healthcare information goals. If that happens, there may be as many documents associated with your body as there are with your home, but that hasn’t happened yet. What this means for lenders is that
property reports can reveal the information they need to effectively target prospects for home equity loan or line solicitations. The best companies that provide these reports typically employ a national network of abstractors that dig into the local records and uncover the information lenders need to qualify crosssell prospects. For instance, a property report designed to determine the open liens on a piece of real estate will reveal whether a homeowner has one loan (typically just the purchase note) or two (the second being a home equity loan). When combined with a low-cost valuation report or AVM, lenders can quickly create viable marketing lists for cross-sell purposes. Black Knight says the average American homeowner with a mortgage has about $19,000 more equity in his or her home today than a year ago. Lenders who will be able to find these borrowers will be able to tap into this equity and earn more business in the future. Corey Hulbert is associate vice president and head of sales for SmartProp at ATPR Inc., a provider of technology-based solutions for the real estate lending and settlement services industries. He may be reached by e-mail at Corey.Hulbert@ATPRInc.com.