Monday, December 18, 2017

Banks again pitching home equity loans

Banks eager to speed up their sluggish revenue growth are returning to a business that lost appeal during the housing downturn: home equity lending.

Consumers are hearing the pitches in direct mail, in their inboxes, and in their bank branches. Lenders say the competition to capture home equity business is heating up — and they're looking to sweeten the deals with flexible terms.

Banks see home equity as a growing market as home prices rise. Some borrowers who once owed more than their homes were worth now find they have equity for the first time in years.

"We have stepped up our outreach when the market started to improve," said Kelly Kockos, Wells Fargo's home equity head

In home equity lending, homeowners may borrow a fixed amount based on how much equity they have in their property. Borrowers may choose a home equity loan or line of credit. The funds are often used for home improvements, though borrowers may use them for other purposes.

Consumer advocates caution borrowers that failure to repay could result in the loss of their home, which is used as collateral. That's why it's important to make sure you have enough monthly income for the additional payments, they say.

Banks say they are being cautious about home equity lending and making sure customers can afford to borrow.

The push comes as banks feel pressure from investors to grow their revenues, which suffered from a decline in the mortgage refinance business and other factors. Last year's rise in interest rates dried up demand from borrowers to refinance their mortgages. That cost banks millions of dollars in mortgage income.

While banks are hungry to increase their home equity business, they are also cautioning borrowers that receiving approval is harder than it was during the boom times. Interested borrowers are facing more stringent requirements from lenders.

"We've ended up with a new world where home equity underwriting is significantly tougher than it was precrisis," said Guy Cecala, CEO of Inside Mortgage Finance, an industry publication.

Nationally, the median price for existing homes rose in 2013 by 11.5 percent, to $197,100, from $176,800 in 2012, according to the National Association of Realtors.

A recent report by real estate website Zillow predicts that U.S. home prices will rise by 4.3 percent on average this year.

Banks profited from home equity lending during the boom times as home prices skyrocketed. Critics said property owners were treating their homes like ATMs, spending the funds on vacations and other luxuries.

Consumer advocates say that in general, it's better not to borrow against a home's equity for luxury items that won't provide a return. Home repairs that could boost a property's value are a more prudent use, they say.

According to Inside Mortgage Finance, new home equity loans were a record $430 billion in 2006. In 2013, new loans most likely did not top $60 billion, Cecala said. Demand for the second mortgages fell in the downturn, as about 30 percent of the equity in U.S. homes was obliterated, he said.

Even with the recovery, Cecala said, "We've regained relatively little" of the lost equity. "The current pool of home equity borrowers is a fraction of what it was."

But banks want to position themselves for the growth they are seeing. Bank of America recorded $1.9 billion in home equity originations in the fourth quarter, up from $1 billion a year ago.

"Banks are looking for ways to lend money," Cecala said. "The housing market has gotten to the point where the stars are in alignment, so it's the first time since 2007 that the banking industry may be in a position to grow their home equity loan business."

Comments
Jim Leavitt isn’t coming back to Florida after all

Jim Leavitt isn’t coming back to Florida after all

Former USF coach Jim Leavitt isn't coming back to the state after all.Sports Illustrated reported late Sunday evening that Leavitt will remain at Oregon as its defensive coordinator – a position that will earn him a cool $1.7 million annually. ...
Updated: 5 hours ago
Rubio takes victory lap after child tax credit fight

Rubio takes victory lap after child tax credit fight

WASHINGTON – Sen. Marco Rubio didn't get all that he wanted but succeeded in making the child tax credit better for working families.Now he's taking a victory lap and enjoying positive news coverage."For two weeks, Republican Sen. Marco Rubio o...
Updated: 5 hours ago
All Eyes gallery: Jim Damaske’s favorite photos of 2017

All Eyes gallery: Jim Damaske’s favorite photos of 2017

Social media could be the buzz word for the year (I might be a tad late). It’s nifty to be able to share what you see practically immediately with our readers (you look at the Times’ website, twitter feed and Facebook don’t you?). I...
Updated: 4 hours ago
The future of Dirk Koetter

The future of Dirk Koetter

Three games. That's how many the Bucs have left. Can the same be said for Dirk Koetter's head coaching career?The answer to that question might be determined by what happens in those three games.If the Bucs lose the rest – and that is more like...
Updated: 4 hours ago
Florida Congressmen on front lines of battle over Mueller investigation

Florida Congressmen on front lines of battle over Mueller investigation

WASHINGTON – Two Florida Congressmen are figures in a growing battle over Robert Mueller's investigation into Russia, with conservative Matt Gaetz calling for an end to the probe and liberal Ted Deutch saying it needs to continue without interf...
Updated: 4 hours ago
Sun, sand, sustainability: Anna Maria Island excels at ecotourism

Sun, sand, sustainability: Anna Maria Island excels at ecotourism

Reach out and grab a leaf. Go on. Now pop it in your mouth. It's the moringa plant, ounce for ounce one of the most nutritious plants on earth, which tastes like a cross between a bean and a pea.Now look over there. It's a Seminole pumpkin. You can p...
Updated: 4 hours ago
Did President Trump break a promise to Florida’s Haitian population?

Did President Trump break a promise to Florida’s Haitian population?

With Election Day 2016 approaching, then-candidate Donald Trump traveled to Miami to earn the support of a group of Haitian-Americans."Whether you vote for me or you don't vote for me, I really want to be your greatest champion, and I will be your ch...
Updated: 4 hours ago
Bulls expected to sign at least 6 (and possibly more) this week

Bulls expected to sign at least 6 (and possibly more) this week

At least a half-dozen high school seniors — and possibly more — are expected to sign with USF when the NCAA's new 72-hour early signing period for football commences Wednesday.Homestead South Dade TE Chris Carter Jr., a three-star prospec...
Updated: 4 hours ago
HomeTeam 25: Girls basketball rankings for Tampa Bay

HomeTeam 25: Girls basketball rankings for Tampa Bay

1. Lakewood (10-0)This week: Friday at OsceolaThe buzz: The Spartans have been blowing teams out, but things will get harder over the winter break when they play in the Florida Prospects tournament in Orlando. Senior forward Toi Smith has missed a fe...
Updated: 3 hours ago
Bucs-Falcons: Predicting tonight’s Monday Night Football Game

Bucs-Falcons: Predicting tonight’s Monday Night Football Game

MONDAY NIGHT FRIGHTS Tom Jones, @tomwjones: The Falcons are playing for something. The Bucs are playing out the string. And, well, the Falcons are way better than Tampa Bay. On paper, this game won't be close. It won't be on the field either. If the ...
Updated: 3 hours ago