Jerry Schiano of Spring EQ: The Outlook for Home Equity Lending
Jerry Schiano is CEO of Spring EQ, a nationwide refinance, home equity and HELOC lender. Headquartered in Philadelphia, Spring EQ is among the fastest-growing and most awarded lenders since its founding in 2016. Schiano has more than 30 years of entrepreneurial experience in the mortgage industry and has founded and successfully led multiple lending organizations, including New Penn Financial (now NewRez) and Wilmington Finance Inc.
MBA NEWSLINK: What is Spring EQ’s role in the market?
JERRY SCHIANO: Spring EQ is a first and second mortgage lender that specializes in providing refinance, home-equity loan and home-equity line-of-credit products directly to consumers and through mortgage brokers. We place a significant focus on meeting the unique needs of every borrower—and approaching every homeowner’s situation as a personal one—with personalized solutions we’re able to offer because of our wide and deep array of products. We also invest a lot of attention and effort in technology, balancing human interaction and expertise with technical efficiencies to deliver a user-friendly digital loan process to our borrowers. Our team aspires to become the largest non-bank home-equity lender in the country.
NEWSLINK: Banks have typically dominated the HEL market. How does Spring EQ compete?
SCHIANO: Firstly, our product line is deep. We offer up to 97.5% loan-to-value ratios and wider FICO bands on our products. In contrast, banks typically target prospective borrowers who have high credit scores, low LTV ratios and straightforward income. Truth is, there is a large segment of homeowners who are excellent credit risks but still don’t qualify for bank products. At Spring EQ, we’re able to provide excellent home-equity financing options for all borrowers.
Another way we compete is by offering every Spring EQ borrower access to intuitive, streamlined digital processes and a team of loan experts who are available at any time to help guide them through every step. In addition, we provide what we call a “1st Things 1st Mortgage Review,” a program that helps homeowners understand the different options for accessing their home equity so they can determine which option is best for them.
NEWSLINK: With interest rates so low, why shouldn’t consumers just get a cash-out first mortgage?
SCHIANO: Every borrower is different—and while we can certainly help those who would benefit from a cash-out refinance, many homeowners are seeing more upside with home-equity loan products. Here’s why: even though interest rates are low from a historical perspective, they have been consistently rising since January and are likely to keep climbing.
The Mortgage Bankers Association is predicting 30-year fixed rates will rise to about 3.4 percent by the end of the year, which we haven’t seen since the start of the pandemic. Many homeowners who were able to refinance to a lower rate have already done so. By getting a cash-out refinance on their first mortgage now, they’ll lose that low rate. Getting a second HEL just for the cash out portion, on the other hand, gives these borrowers the opportunity to keep their low first mortgage rate intact. Depending on how long they plan to stay in their home, this strategy can save borrowers thousands of dollars over the life of a loan.
NEWSLINK: What can proceeds from a HEL be used for?
SCHIANO: Borrowers can use funds from their HEL for any purpose they choose. We see a lot using their funds for home improvements—especially in a housing market like this where demand outweighs supply. They can also use the funds for investments, vacations and college tuition. Many of our borrowers use their proceeds to pay down high interest rate debt like credit cards. We’ve found these borrowers have been able save an average of $530 a month. Borrowers use the money in multiple ways, too. For example, we have one client who used a HEL to pay off their car loan and refinish their basement, and they still saved more than $100 a month on their monthly payments.
NEWSLINK: How long does it take to close a HEL?
SCHIANO: It takes us as little as 11 days to close a HEL once we receive the requested documents from a customer, because we specialize in HELs and have invested heavily into streamlining our process. In comparison, banks typically take much longer—often as long as four weeks. In most cases, our borrowers only have to provide identification, proof of income and home insurance and their first mortgage statement. For smaller loans, no interior appraisal is required, either, which speeds up the process even more.
NEWSLINK: How much equity can a borrower pull out with a HEL?
SCHIANO: This varies, too, but most banks allow up to 80 percent of a home’s value to be accessed through a HEL. At Spring EQ, we allow up to a 97.5% percent LTV ratio for owner-occupied borrowers with higher credit scores with our our fixed-rate HEL products—and up to 90% on our HELOC products.
NEWSLINK: What is the outlook for the HEL market?
SCHIANO: The market is strong and growing stronger. A recent report from CoreLogic found that nationwide, the amount of equity homeowners have in their homes increased $1.5 trillion over the past year while the average homeowner gained $26,300 in equity. Given the ongoing shortage of available homes for sale and the impact this has on home values, we see this trend continuing.
Declining refinance activity is another factor. As rates continue to increase, originators will be looking to replace their lost refi business, and HELs are a viable alternative. I expect that the volume of HEL production will move substantially higher over the coming year, and we’ll have the opportunity to help even more borrowers reach their financial goals.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)
