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Home Equity Loans - Home Equity Credit Update 2007: Both Sides of Declining Home Equity Loan Applications Will the home equity lending market see a decline in 2nd mortgage origination for 2007? According to affiliates of Home Equity Wire the industry believe the recent decline of home equity loan applications is more of a credit issue than consumer demand result. John Allen, a spokesman for Smart Home Equity commented, “The banks recently tightened their guidelines for second mortgages in the sub-prime market.” Allen continued, “We have noticed that application volumes have increased. But just as the lending approvals have decreased, so to have the lending turn-down notifications for applicants because their credit scores mainly in the sub-prime sector. In a recent survey by Home Equity Wire second mortgage originators surveyed in 2006 are expected to produce nearly $375 billion in home equity loans in 2007, which will be a 15% decline from the approximately $439.6 billion in seconds they originated in 2006. Home Equity Wire has previously noted a decline in second mortgage volume throughout 2006 following a robust increase in volume for the first half pertaining to the year, with flat 2nd quarter 2006 results. Yet they reported a decline in third quarter of 2006 including fourth quarter 2006 data from the prior year’s periods. Many mortgage lenders originators have tightened their lending guidelines significantly for both closed-end equity loans including revolving home equity lines of credit. As the lenders attempt to reduce non-performing loans by increase the minimum credit score requirements for 2nd mortgages. Unfortunately the eliminates many potential borrowers who are seeking a home equity loan to consolidate their debts including save money. Ken Carter, executive vice president of National City Home Equity, does not necessarily believe the home equity market is declining. “The market continues to be alive including well. the past year has been a particular interesting year for the mortgage industry including the MBA continues to talk regarding normalization,” he said. National City does consider that the could have a particular impact on the second mortgage market. “A lot of borrowers are taking out closed-end seconds that don’t require mortgage insurance, so I don’t know if a change in the is going to make a particular impact,” said Mr. Bailey. “Borrowers might build equity much faster with a home equity loan than they will with mortgage insurance. PMI being tax deductible has some benefits, but monthly payments are less with 80-20 piggy-back than with PMI. Additionally, the tax-deductible only goes up to household incomes of $110,000 or less. It’s more beneficial for our customers to do piggyback than PMI. We see the as having minimal impact on our mortgage business,” said Mr. Carter. 2007 could be a particular interesting year that could help insiders obtain closer to offering more accurate forecasts for home sale recovery. Who knows...? the could be the year that the interest rates for home equity loans spur home construction including help continue to our economy's steady growth.
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