According to the American Bankers Association’s Consumer Credit Delinquency Bulletin, while home equity loan delinquencies rose 9 basis points to 3.57 percent of all accounts, home equity line delinquencies continued their downward trend, falling another 10 basis points to 1.57 percent of all accounts in the first quarter.
“Home equity line delinquencies have fallen back to what they were five years ago,” said Chessen. “This is a positive trend in light of the number of home equity lines that will move into the fully amortizing period over the next several years, raising the monthly payment obligations for some borrowers.”
There are three important things to do as the health of home equity lending improves:
Review the cost assumptions underlying your current home equity line rates to determine if pricing is still optimal.
Check if your key competitors are adjusting their rates based on this reduction in loss rate and how this impacts your competitive position in the market.
Determine if this is the right time to reassess your underwriting criteria and determine if there is room to accept applications in the lower FICO range. If you do make this change, it is then important to determine how to price these customers based on their profitability and price sensitivity.
If you would like to discuss this further, feel free to drop me a note in the Comment section and I will get in touch.
Rutger's areas of expertise include cross-border project management, PMO development, M&A integration, business development (both B2C and B2B), product management, strategy development, international mortgage origination and securitization, planning, coordination and implementation.