Lender offering comes amid a tough market for brokers
Pennymac TPO has joined the growing list of lenders introducing home equity products to give its brokers new offerings for consumers in a tightened mortgage market.
The company this week launched its Fixed Rate Home Equity Seconds product, providing mortgage brokers with more options to stay competitive in today’s market, Kim Nichols (pictured), chief TPO production officer, told Mortgage Professional America during a telephone interview.
As a result, Pennymac TPO’s broker partners now can offer clients a home equity loan as a second lien solution to access more cash while preserving the low interest rate of their first mortgage, Nichols added.
“We always want to give them products they can use to grow their business, grow their customer base,” she said of the company’s broker partners – numbering some 3,539 per the company’s third quarter earnings report ended Sept. 30.
Product launched amid record home equity levels
The product emerges at a time of record-setting tappable home equity levels, upwards of $19 trillion, Nichols noted. It also comes amid something of a purchase market standstill with an untold number of homeowners unwilling to sell their properties secured at historically low mortgage rates that emerged during the COVID-19 pandemic coupled with an erosion in home affordability for others.
“The environment was really right for a home equity product,” she said. “If you look at the landscape with home price appreciation having increased so much, tappable home equity sits at $19 trillion. That’s a lot of home equity to tap into - and then you have consumers sitting on their 3% to 4% interest rates on their first mortgage.”
By some estimates, the level of equity wealth is even higher than the $19 trillion estimate by Pennymac. Motley Fool reports that US homeowners are now sitting on a collective total of nearly $30 trillion in home equity, citing statistics from the St. Louis Federal Reserve. That amounts to roughly $200,000 per homeowner in tappable equity, “meaning the amount of equity you can borrow against in order to still maintain 20% equity in your home,” according to the private financial and investing advice company.
For brokers, the struggle is real
Given the current environment, Nichols suggested the struggle for brokers is real: “We all know part of the struggle we’ve had with purchases – nobody wants to give those rates up. They’re staying in their homes, but now they have an opportunity to tap that equity without giving up that low interest rate on their first mortgage. The environment is really prime for a home equity solution.”
But she noted the distinctions between Pennymac’s product and a HELOC.
“This is a fixed rate home equity loan,” she said. “It’s not a HELOC. People hear the term home equity and automatically think HELOC, which is typically a bank product. This is a fixed rate, closed-in-second, so the borrower has the certainty of what that rate’s going to be. It fully funds at closing.”
For consumers, she noted, tapped equity can cover a variety of needs. “Many homeowners may want to access their home equity to pay for expenses such as home improvements or college tuition, and now our broker partners can best serve this segment,” she said.
Nichols said the launch represents the first time the company has rolled out a second lien product in the broker channel. She said the offering would be made in 11 states initially before a complete, nationwide rollout. Already, it’s generating great interest, she noted. The states in which the product is now available are: Arizona; California; Colorado; Florida; Georgia; Minneapolis; Oregon; Pennsylvania; Utah; Virginia; and Washington.
“We launched it officially Monday, and we’ve had good interest. We just started marketing today,” she said on Wednesday, “so today and tomorrow are big marketing pushes. We have a lot of loans in the works and lots of inquiries to our account executives.”
Broker guidance on selling the product is offered
Some of that marketing, in essence, will be to brokers themselves – particularly to those unaccustomed to offering those products to consumers. To that end, Pennymac invites interested brokers to register for the Power Your Business Webinar, “Home Equity Seconds Product Overview,” on Dec. 14 at 10 a.m. PT/1 p.m. ET. Moreover, the company sent out a simultaneous invitation to those interested in becoming an approved Pennymac broker partner.
Among the product’s guidelines:
- Eligible loans do not require a full appraisal with an accepted Pennymac AVM. Must meet program requirements.
- Only eligible for primary residences
- Fixed-rate term structures of 10, 15, 20, or 30 years
- Up to 85% loan-to-value (LTV).
- Up to $500,000 loan amount (minimum $50,000).
Want to make your inbox flourish with mortgage-focused news content? Get exclusive interviews, breaking news, industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.