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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 46 August 2024 F E A T U R E S T O R Y DRIVING GROWTH: LEVERAGING HOME EQUITY TO EXPAND LOAN OFFICER OPPORTUNITIES In a tight market, LOs seeking to diversify their offerings are turning to home equity products to expand their role and become a financial guide for life. B y DA N C A T I N E L L A A t their best, Loan Officers (LOs) should act as financial guides to their customers, helping them see and help surface opportunities that they did not know existed. To serve this role, LOs need to have a deep understanding of various products in the market, as well as the state of market conditions them- selves. Essentially, the idea is to proac- tively connect the customer to the right opportunity at the right time on their financial journey. The year 2021 brought historic lows to mortgage rates, with the average 30-year, fixed-rate mortgage (FRM) bot- toming out in January at an all-time low of 2.65%, before bumping back up to the high single digits just a few years later. The upshot was that many cus- tomers who thought they were buying starter homes are now realizing that the rates they locked in will never be seen again. With 80% of mortgage-holding Americans locked in at a rate of under 5%, homeowners are often finding themselves in golden handcuffs: in a home they are not quite happy with, but unwilling to leave. This is a good time for LOs to key in on how their customers can leverage home equity to make the improvements they want to their home—or reach any other financial goal they want. There is a measurable appetite for these loans as well as online searches for home equity lines of credit (HELOCs) went up by 305% in 2023, according to BankRate. Some customers (and by extension LOs) can be a bit skittish about tapping into their homeownership stake to achieve other goals. Again, the best ap- proach here for LOs is to make sure they really have a handle on what home equi- ty can do in general, and more impor- tantly, what it can offer your customers. So, consider this your primer on home equity use cases: covering five of the most likely ways customers may want to use their equity: Reverse mortgage, cash-out refinancing, mortgage insurance remov- al, annual home equity check-up, and home equity products like HELOCs, and home equity loans. The Power of Reverse Mortgages for Seniors R everse mortgages can be a great way to help seniors improve the quality of life in their sunset years. With a reverse mortgage, which a customer typically will not qualify for until they are older than 62, a lending institution gives a set monthly amount to their customer that they can live on. Once the customer moves, or passes on, the house gets sold and the monthly amount gets repaid from the proceeds of the sale. This injects a sometimes-much-needed boost of cash to help with anything from medical expenses to unchecked items on the bucket list. Although a reverse mortgage can nar- row the inheritance left behind to children and other loved ones, they can ultimately help seniors live a more flexible lifestyle— especially amid the rising concerns related to the high costs of inflation. Exploring these options can open pathways to access cash, supplement retirement income, and flexibility in fund usage. Consolidating High-Interest Debt With Cash-Out Refinancing C ash-out refinance is pretty much what it sounds like. It allows home- owners to access the equity they have built up in their homes by refinancing their mortgage for more than they owe and pocketing the difference. D A N C A T I N E L L A is the Chief Lending Officer at Total Expert. With more than 20 years of experience in mortgage technology, Catinella is a seasoned technology executive focused on driving digital transformation through all channels of lending. In an ever-changing digital landscape, he keeps a constant pulse on the next innovation that could change the way business is conducted. As Chief Lending Officer, Dan identifies and develops high-impact innovation strategies that align with the company's business goals and growth priorities.