By SAM GARCIA
While home-equity originations lost some steam recently, Williston Financial Group Chairman and Founder Patrick F. Stone sees a good rest of the year for home-equity lending. He thinks second mortgages have a shot at going fully digital sooner than first liens. Stone is far more optimistic about the U.S. economy than what he reads in the media.
Month-to-date home-equity volume at WFG when Stone spoke by video conference last month was 7,377 units, slightly better than the previous month’s 7,216 at the same point.
“Home equity loans started off pretty strong this year, but they’ve leveled off,” he said.
Stone notes that lending standards have tightened up across the board. This despite that there has been no meaningful change in banks’ ability to fund loans. “But they are more conservative now.”
Lenders are nervous even though American consumers, businesses and investors are healthy and economic conditions are fairly good, he explained. Disposable income for consumers is up $800 billion from before the pandemic, while businesses and investors have around $5 trillion more.
“The underlying numbers and underlying health of the economy is far better than the perception we have because of the media and the politicians,” Stone, who talked with HELN before the debt ceiling had been resolved, stated, later adding, “the bank failure issue was way overblown by the media.”
Stone suspects that muted investor demand will continue to negatively impact the non-agency MBS market the rest of this year. He expects the share of non-agency securitizations to go from 25 percent of agency volume to 20 percent this year.
In a recent webinar that Stone hosted with economist Bill Conerly, Ph.D., 2023 2nd Quarter Economic Outlook, Conerly said he sees remodeling as the brightest spot in construction this year. He expects home improvement to remain strong because property owners are anchored to their houses due to low interest rates. Previously, they might have purchased another property to address their need for more square footage, upgraded kitchens or bathrooms, or a home office. But given current rates, a home renovation makes more sense for many.
In the interview, Stone noted that even though full digitization of the mortgage process remains elusive, second mortgages could be the first product to succeed.
He commented in a written statement that many of their clients are re-launching digital mortgage projects and assessing their technological capabilities. They are also considering opportunities and building a digital roadmap.
Stone wrote that second mortgages could eventually become instant, where a borrower can apply online, receive immediate approval, and close online during the same user session.
“The home-equity loan, specifically, is a place where you’ll see digitization happen first,” he said during the interview. “It is getting better already. It’s gotten very quick already.”
Stone expects home-equity products to remain attractive even with the recent tightening in credit standards.
The American consumer is in good shape, he explained. They have tremendous equity in their homes, and unemployment is low.
“The home-equity loan business will be good for the rest of the year,” Stone predicted. “Basically, if I’m a lender and I’m looking at somebody that has 50 plus percent equity in their home, they have a good job, they’re making good money, they don’t have a lot of debt. Will I make them a loan? Yes.”