Home equity lenders – what their growth hinges on

In announcing the hirings, Schiano touted both men’s digital expertise and leadership skills that would be critical “…in delivering personalized solutions for all kinds of homeowners.”

Asked to expound, Schiano added: “We have a robust product line that serves customers who have a lot of equity and also serves some customers who recently purchased their home who have a little bit of equity. So, we have some higher LTV [loan to value] products available, and some traditional products. We have fixed-rate home equity loans, and we have home equity HELOC that gives more flexibility to the customer. The average FICO score of our borrowers is about 750; we go as low as 640 in some instances for customers. Our product line is very wide.”

Yet company growth projections are now largely contingent on homeowner reluctance to refinance amid predicted interest rate increases. While the future is unknown, Schiano seems confident in hedging his bets: “We’re in a crazy time, and it’s hard to predict where things are going,” he said. “But what I can tell you is that if you take a look at where the first mortgage rates are, economists predict if the rates go from where they started off the year at 3-4%, that will cut in half the refinance market. What that means is customers still need to borrow, they’ll choose other means whether they be home equity loans, or personal loans or credit cards. But what they’re not going to do is refinancing at 2.5% first to go into a 4% first.”

While nobody possesses the fabled crystal ball, the central bank’s telegraphing of higher interest rates amid inflationary pressure serves as fodder amid the niche his company has carved out. 

“There’s record home equity, and there’s different ways to tap home equity,” he said. “And last year, consumers tapped that through refinancing their first mortgage. But with rising rates, some customers won’t want to refinance their first mortgage. They’ll want to cash out through other means, and our product is a really good product to help people pay off or consolidate debt, to borrow money to improve their homes. And, also, in some instances our customers use a second mortgage so instead of going to a jumbo first mortgage they’ll go to a Fannie Mae first mortgage and use our second mortgage piggyback. And basically, that’ll enable them to get a better first mortgage rate.