Home Equity Loans, Time to Test the Water

By. John Blom, Pinpoint Direct Marketing

The marketable mass available for refinancing won’t last forever. Banks are becoming more competitive and aggressive. Credit Union marketers are under more and more pressure to grow loan portfolios. Help may be around the corner.

One bright spot on the lending horizon may be Home Equity Loans. Home prices have begun to stabilize and even increase in most markets. Fundamentally this means two things. First members have more equity from which to borrow. Second as prices stabilize and begin to trend upward the risk to the lender decreases.

Are you monitoring home values in your service area? Historically Home Equity lending mirrors the trend in home values. U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 7.3% gain in the fourth quarter of 2012 over the fourth quarter of 2011. According to Equifax’s National Credit Trends Report the number home equity loans originated increased by 19% with HELOC originations increasing by 13% in year over year fourth quarter comparisons.

Time to dip your toe or dive in?

The time to aggressively pursue home equity loans may be now, or sometime in the near future. How will you know when the time is right? Watch your housing market. The news is packed with local data concerning home sales, prices, inventory, new housing, etc. Consumer confidence will often drive you crazy from month to month, but over time can you tell if it is trending up or down in your market.

Until Home Equity loan demand gets hot, use a targeted approach to your marketing. Build a model of attributes for those members and prospects who you believe will have not only the highest propensity to respond to your offer, but will also clear your internal underwriting. Broadly targeted campaigns are great when the market is hot, but refining your target audience allows you to focus your efforts on prospects in a position to respond. Pick your shots as the market for Home Equity loans picks up. Targeting can help you keep your acquisition cost down, deliver results, and make your campaign profitable.

In a recent successful prospecting campaign, we incorporated our model to target the offer and improve results. Geographic criteria defined our overall market. By incorporating LTV, length of homeownership, minimum income, age, and credit score range, a select group of prospects was identified.

Keep tabs on your local market and start thinking about your approach. Home Equity loans are coming back.