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Even in this beaten-down housing market some homeowners actually have equity, meaning home equity loans-a lending category that largely was forgotten in the aftermath of the housing crisis-are coming back.
Along with some new issues.
First is awareness. In many cases homeowners are so used to bad news they do not realize the value of their house now exceeds their mortgage balance. CUs have to scour their rolls to discover these opportunities to make new loans.
Second is valuations. Anecdotal evidence suggests appraisers are being extremely conservative in this brave new real estate world of increased regulatory scrutiny, leading many homeowners to complain their values are being understated.
That leaves many credit unions stuck in the middle, say industry insiders and analysts, wanting to make their members happy while being financially prudent.
Steve VanSickler, chief credit officer for Silver State Schools Credit Union, and president/CEO of Silver State Schools Mortgage Co., said he has seen a recent uptick in home equity loan applications, even though the $637-million-asset CU has not initiated any specific marketing campaigns to promote them.
"What we do see and track for allowance for loan loss purposes is fewer and fewer of our residential real estate loans, both senior and junior liens, are underwater," VanSickler said. "Another factor is home values have returned such that some families do have lendable equity."
Judy Dodier, SVP home financing for $544 million Align Credit Union in Lowell, Mass., said because having equity is "really new" in a number of markets, credit unions should examine their home equity products carefully.
"We try to piggyback on the first mortgages we hold," Dodier said. "If there is equity there, we want to reach out. We cover the cost of an appraisal for a home equity line. It is worth it because the AVMs [automated valuation models] that come up through public records are not strong. An appraisal will weed out bad data. Zillow is only OK, so we have an AVM service we belong to through the Massachusetts Credit Union League that is a little more in depth."
Curtis Cole, home loans manager for $307 million Southwest Airlines Federal Credit Union, noted his institution is based in Dallas, but has members across the nation.
That gives the...