HELOC, Home Equity Loan Originations Were Basically Flat in 2023 

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HELOC and home equity loan origination volume increased 1.5% in 2023 compared with 2022, while debt outstanding increased 8.3%, according to the Mortgage Bankers Association’s (MBA) 2024 Home Equity Lending Study.

Total originations of HELOCs and closed-end home equity loans increased to $2.13 billion per company in 2023, from $2.1 billion in 2022, according to the report.

“Home equity originations were relatively flat in 2023 compared to 2022,” says Marina Walsh, CMB, vice president of industry analysis for the MBA, in a statement. “Even with evidence of easing credit availability, with originations activity moving to lower FICO credit scores and higher combined loan-to-value ratios, the closings to applications pull-through rate dropped, indicating that home equity lenders were doing more work for fewer loans.”

“Despite the tepid volume growth in 2023, our study shows an uptick in home equity debt outstanding,” Walsh adds. “The elevated mortgage rate environment slowed servicing runoff, and utilization rates also increased. Given the substantial amount of accumulated equity in real estate, there is still untapped potential for home equity lending for lenders and borrowers.”

In terms of usage, 56% of borrowers used their home equity loan for home renovations, down from 65% in 2022, while 33% used the loan for debt consolidation, up from 25% the previous year.

In 2023, more than 75% of total originations were subject to an automated valuation model (AVM) or desktop valuation (DV), with most of both categories entailing an exterior/drive-by inspection or no inspection at all.

Conversely, 22% of originations required a full appraisal with the majority entailing both an interior and exterior inspection.

In the study, lenders say they expect HELOC debt outstanding to increase 2.3% in 2024 and 4.8% in 2025, while home equity loan debt outstanding is expected to increase 11.1% in 2024 and 7.2% in 2025.

Photo: Tierra Mallorca

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