Scott Roller: Must-See Home Equity Vendor Solutions

Scott Roller founded 3W Partners LLC and is Co-Founder of Vendor Surf LLC (www.VendorSurf.com), each dedicated to revolutionizing sourcing of vendors in the mortgage and credit union ecosystems. The companies monitor and report on the service provider market to provide participants what they need to excel in today’s market. He is a frequent contributor to MBA NewsLink.

Ah, the U.S mortgage industry, where there is always a hitch… and ebb and flow, a good news, bad news story. 

Historic low rates enabled the biggest volume boom ever. But that severely cripples future refinances for some time. Today’s higher rates may crush originators, but mortgage servicers often enjoy reduced churn with better efficiency and price appreciation.  Property value gains produce trillions in more tappable home equity. But rising interest rates make equity utilization more expensive for consumers.

A Bright Spot Emerges

Home equity is where it’s at. According to Black Knight data, nearly 60% of home equity was accessed via cash-out refinances in 2021, but as of October 2022, cash-outs were down 83.6% year over year. Worse yet, rate-and-term refis were down an astonishing 92.6% in that same timeframe.

The reasons… Very few Americans are going to walk away from their crazy-low primary mortgage rates to access equity, prompting lenders everywhere to showcase home equity products, filling the volume gap with this most viable offering.

Roughly half of U.S. mortgaged homes have an equity position greater than 50% of the property’s value, per the Federal Reserve. With the dramatic rise in interest rates, consumers in need of cash will look toward home equity loans and HELOCs. There is so much tappable equity out there, even moderate home value declines should not produce much adversity. While there are sizable drops in home values and equity lately, Black Knight last month reported that home prices remained up 45% from pre-pandemic levels. That still provides a $5 trillion boost in household equity.

“You can’t stop the waves, but you can learn to surf.”

― Jon Kabat-Zinn

In their cyclical fashion, most lenders are dusting off some antiquated home equity programs, most having spent no energy to prepare for this market opportunity. Given the past few years of overflowing refi pipelines, that is not surprising. Why plant corn if the market price for soybeans is breaking records? Conversely, multiple vendors have set themselves up to help lenders and credit unions successfully market, process, service and trade home equity loans and HELOCs.

Below is a summary of three separate digital vendor solutions whereby I saw excellent demos and believe the lenders should too. 

FirstClose™ Equity

Probably the best piece of advice I ever received was, ‘When everyone else zigs, you should zag.’ (Set yourself apart. BTW, thanks mom). Team FirstClose has obviously been busy zigging, zagging, bobbing and weaving… and every other ‘ing.’  While enjoying the refi ‘feeding frenzy’ and delivering results for clients, they also launched their second-generation HEL and HELOC platform—FirstClose™ Equity. They already have 400 banks and credit unions on their first-generation platform.

The new platform is an impressive, one-of-a-kind equity solution that reduces operational touchpoints in HEL as well as HELOC origination and improves the overall customer experience for borrowers. The end-to-end platform boasts:

• A borrower-facing POS solution that gives consumers instant online feedback on their home valuation, available home equity and loan options.
• A decisioning engine that delivers credit decisions within 5-to-7 minutes.
• Automated workflows, including the ordering of settlement services, that enable lenders to complete the application through closing process in 5-to-10 days, versus the industry average of 45-to-60.
• Deployed clients have experienced a 35% increase in online applications, a 25% increase in pull through and a 77% reduction in time from application to funding.
• A white-label version of FirstClose™ Equity is powering the new digital HELOC offering that loanDepot’s mello unit has begun marketing nationally.

Notables from the FirstClose™ Equity Demo:

1. Immense opportunity to auto-configure workflow scenarios for speed, efficiency, compliance and quality. Examples: Lending footprint, Credit score, CLTV, Property type, Lien position, DTI, AVM vs. appraisal, Trusts and more. Endless opportunity to automate rules.
2. Auto consents for pulling credit and eSigning. Borrower self-serve to upload front and back of ID, proof of insurance, voided check on where to send funds, etc.
3. No data is stored, as everything is procured from the LOS. Each call to action initiates a data map to the LOS.
4. Business Intelligence, tracks everything: Where and why fallouts occur, appraisal taking too long, maybe an AVM would have sufficed, etc.
5. Everything is so crisp, clean and intuitive. This includes the borrower portal as well as the lender dashboards. Task lists and status indicators keep both sides engaged on ‘the needful.’
6. Lastly, my being a huge ‘vendor geek,’ I love the KPIs on vendor services… who’s performing best/worst, an audit trail as to why each vendor was selected for the transaction.

Even more zigging and zagging… In mid-November, FirstClose announced their enhanced integration with MeridanLink, making this technology available to the LOS’ 1,900+ lender and credit union users via the MeridanLink partner marketplace. Earlier, FirstClose announced a new collaboration with Evolve Mortgage Services’ SigniaDocument engine and its full eSign and eNotary (RON) capabilities. The company is also in the final stages of another major LOS integration, which will soon be available for pilot with three mid-tier lenders and available to the general market in February 2023.

I have seen the FirstClose™ Equity and am not surprised industry partners are lining up to capitalize on the opportunity.

First American’s FraudGuard® Home Equity

Once you have the home equity application in house, First American now let’s you re-imagine and simplify engaging third-party vendors.

FraudGuard® Home Equity is a streamlined version of First American Data & Analytics’ FraudGuard fraud analytics suite. It consolidates all the different tools that a lender normally would run separately to safely originate a home equity product, including AVMs. This single-source solution is essential in reducing vendor costs and improving efficiency.  While always wise to do, this is critical in home equity lending given that the cost of originating is usually absorbed by the lender.

FraudGuard is integrated with all leading loan origination systems and covers 100% of residential properties in the U.S. Lenders using the original FraudGuard suite for their first mortgage originations can easily “turn on” the home equity solution since they share common APIs. FraudGuard Home Equity:

• Identifies undisclosed liabilities
• Validates identity
• Detects occupancy discrepancies
• Checks all applicable loan participants (including borrowers and employers) against industry exclusionary lists
• Instantly provides a comprehensive property valuation report complete with property type, listing status and homeowner and condo association data

While all issues and findings are rated against a complex scoring model, there is absolutely nothing complex regarding navigation and the user experience. Lenders can use policies and procedures to customize workflows to meet regulatory and compliance needs, including setting up scenarios where approved staff can override policy on a transaction level. Lenders can continually fine tune all rules and alerts as they go.

Notables from the FraudGuard Home Equity Demo:

1. Simple, intuitive and a nice workflow.
2. Great flexibility to customize scenarios based on attributes, conditions, policy and more, while still having the ability to update with ad-hoc (1-off) services, such as debt monitoring, VOE, 4506T, occupancy, watch list, etc.
3. The final product is a full PDF report with all underlying debt, vendor services and alerts―a complete audit trail of the key components―uploaded to the LOS / storage.
4. Lenders get a base product out of the box and pricing is then commensurate with however extensive customization becomes. Like a tollway, the more you use it, the fee adjusts accordingly.
5. Centralization, using one digital tool to pull in requisite services―eliminating multiple pulls, fees, data reads and the dreaded ‘stare and compare.’ 
6. Just a single integration and lenders can deploy the platform across all lending channels… retail, home equity, correspondent, etc.

FraudGuard Home Equity allows lenders to close quickly and efficiently without exposing themselves to risk or sacrificing agility, while helping to control the cost to the originations. Building such a digital solution to leverage your massive data capabilities is just smart business. First American Data & Analytics’ solutions are used in more than one third of all U.S. mortgage transactions, providing astounding coverage of U.S. real estate data; 100% of property ownership data; 99% of deeds, mortgages and foreclosures; 96% of assignments and lien releases; 99% of homeowner association information; and 99% of map and parcel boundaries.

Wolters Kluwer OmniVault for Real Estate Finance

Wolters Kluwer continues to significantly expand the brand to grow far beyond their flagship compliance and GRC expertise.

In May 2022, they announced their OmniVault platform, an eVault solution that enables clients to manage digital HELOCs and eMortgages on a single platform and provides clients with the same user experience and visibility across all enterprise asset classes (i.e. mortgage, auto, home equity, unsecured, etc.).

The OmniVault uses the company’s industry-leading, multi-award winning eVault technology to support digital home equity lending, both HELOCs and home equity loans, in addition to already supported conventional, U.S. government and jumbo first mortgages. This enables banks and credit unions to originate digital HELOCs as a Digital Original® to be managed as an authoritative copy, rather than just a PDF or a paper document. A Digital Original® ensures verifiable ownership and control of these digital assets, and enables the sale, transferability, pledging, syndication and securitization. The offering includes a digitally sealed audit trail providing an irrefutable chain of custody and evidence for the digital assets. Wolters Kluwer’s proprietary technology has more than 20 years of proven success and supports both MERS® and non-MERS® eRegistry transactions.

Being able to offer digital HELOCs will help lenders differentiate their customer experience, while the OmniVault will give institutions simple, consistent ways to originate and manage digital real estate assets across their organizations. Many of the largest financial institutions are already Wolters Kluwer eOriginal clients, so leveraging OmniVault by adding digital HELOCs can easily be done under their current MSAs.

Today, most HELOCs are held on balance sheets, but there are early signs that a secondary market is developing for these products. If this comes to fruition, the ability to quickly move digital assets to investors or into securities will take on greater importance.

OmniVault offers vast flexibility and efficiency for small and large clients. Each legal entity generally has its own eVault (or partition). Most eVaults on the market require separate logins per entity/eVault, but not with OmniVault. Clients can simply toggle parameters to see every asset type across the enterprise in a comprehensive view or scale down to isolate specific asset types in the eVault. This is unprecedented. No more Excel spreadsheets to maintain for tracking which assets are in specific eVaults, along with respective login credentials. Single login. Enterprise-wide visibility.

Notables from the OmniVault Demo:

1. A simple and user-friendly command center that allows you to be ‘Master and Commander’ of all data, pools/vehicles, assets—creating countless custom views.
2. A well thought-out deployment process, able to create from ‘day-1’ or migrate existing contracts/data.
3. With Wolters Kluwer’s Rapid Deployment Solution (RDS), lenders can be using its platform for HELOCs within just two weeks.
4. When securitizing a pool of loans, the transfer of ownership to a trust vehicle is fairly instant, one of the greatest value props of digital.
5. If you are already Wolters Kluwer eVault (eOriginal) customer, there is no additional cost to set up OmniVault. It is part of the package.

Wolters Kluwer’s technology has already been used in more than 456 ABS securitizations valued at more than $164 billion and is firmly embedded in the ABS and RMBS ecosystems.

In Closing

So few lenders or vendors spend time and money investing in robust home equity lending platforms. Most never contemplate it when the industry is feasting off the most historic refi boom ever. FirstClose, First American Data and Analytics and Wolter Kluwer are supreme exceptions, with the confidence and foresight to innovate in every market condition—unmistakable signs of strong and mature leadership.

If you are a credit union or lender ramping up your home equity program, you would be wise to take a closer look at these impressive solutions.

Thanks for reading.

(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.)