The originator business segment making a comeback

by Justin da Rosa23 Feb 2016
They may have been a dying breed in post-recession America but HELOCs are seeing a resurgence, according to one financial analytics firm.

“During the first three quarters of 2015, lenders originated nearly 976,000 new home equity lines of credit (HELOCs) with combined limits in excess of $115.8 billion,” CoreLogic said in its Home Equity Lending Landscape, which was obtained by Mortgage Professional America. “Both of these figures were the highest for the January-through-September period since 2008 and represented year-over-year gains of 21% and 31%, respectively.”

The industry saw five years of consecutive drops in approved HELOCs from 2005-2010 before giving way to five years of consecutive increases.

HELOCs are still well below peak levels, however.

“Despite the pick-up, the HELOC market is still below its peak in 2005, when originations totaled nearly $364 billion,” CoreLogic said. “But there are clear signs that a continually improving real estate market, a strengthening economy and better loan performance are converging to increase the lending community’s comfort level with home equity products.”

According to the CoreLogic, HELOCs are being underwritten much more conservatively than they were prior to the housing market collapse.

Many lenders issued 100% combined loan-to-values (CLTVs) pre-crisis, but those days are now over, according to CoreLogic. Its analysis found that HELOCs originated in 2015 had an average CLTV of about 61%.

Further, the average credit score for HELOC borrowers was 774 – up more than 30 points from the average of HELOCs originated 10 years ago.

“Not surprisingly, the performance of recently originated home equity is exceptionally good,” CoreLogic said. “Since 2009, the typical 60+ day delinquency rate at 36 months after origination was apparently 25 basis points, about half of the rate in the very early 2000s.”