Securitization picks up pace while lenders target growing demand for non-refinance equity access
The home equity lending sector is experiencing notable shifts as originations rise and non-bank competitors chip away at traditional institutions' dominance, according to Home Equity Lending News’ (HELN) new study.
While traditional banks historically held a firm grip on the home equity line of credit (HELOC) market, that grip is loosening. HELN director Vikram Gupta said the presence of non-bank lenders is reshaping the landscape.
“Although the HELOC market has historically been bank-dominated and relatively insulated from competition, a growing list of non-bank HELOC lenders has clearly changed this paradigm over the last few years,” Gupta noted. “Banks must proactively adapt if they intend to maintain competitive credibility within this increasingly dynamic segment.”
As credit union yields drop, HELOC and closed-end second mortgage (CES) rates and weighted average coupons have declined.
“Three years ago, I saw price compression at 100.50 to 101.50,” HELN Director Ralph Armenta said in the report. “Today, there is such a voracious appetite that I am seeing trades at the 105–106 handle, a 6-year life for both CES and HELOC, which are driving yield to around 8%.
“Time, patience, and investor demand have been kind to this asset."
RMBS issuance is also accelerating. HELN CEO Sam Garcia reported that “so far in 2025, securitization volume has almost doubled compared to the same stretch last year,” forecasting that volume could reach 100 deals totaling $35 billion by year-end. Deregulatory trends and growing investor demand are key drivers.
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California’s home equity loan demand
California's high home prices and limited inventory have also fueled interest in second-lien products.
With mortgage rates holding around 6.76% and refinance rates at 7.15%, many homeowners are locked into low-rate first mortgages and are hesitant to refinance.
“Many borrowers worked hard to secure those low rates,” said Tim Kyle of Independent Home Finance Inc. “There’s no need to give that up. Instead, clients can access equity through second-lien solutions that match today’s market conditions.”
These are some of the equity options commonly available in California:
- Fixed-rate second mortgage (HELoan): A lump-sum option with predictable terms, requiring a minimum 640 credit score, 20–30% equity, and a DTI under 43%.
- Reverse second mortgage: Designed for homeowners aged 62+, allowing them to access equity without monthly payments.
- Home equity agreement: Tailored for credit-challenged borrowers, this short-term option accepts scores as low as 500 and provides time to rebuild credit.
- HELOC: Offers flexible access to funds with variable rates.
“Unless a borrower has a very short-term use case, HELOCs present too much uncertainty. A fixed-rate second mortgage is often a safer, smarter approach,” Kyle said.
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