Homeowners need HELOCs during the pandemic

As the mortgage market continues to navigate these unprecedented times a troubling trend is emerging. Mortgage lenders are forcing the hand of their homeowners into cash-out refis and the reasons are numerous. However, during these unprecedented times, it’s important to be reminded of the roles HELOCs play in helping households finances.

There is no single solution to providing homeowner relief. For example, a line of credit is tappable as the homeowner needs it; It doesn’t require a wholesale change to the mortgage product and gives homeowners a lifeline with considerably less risk and also offers something they can return over a shorter time frame.

According to figures from Black Knight, a total of $61 billion in equity was withdrawn in Q4 2018, representing just one percent of available equity. This data proves that the market is there. HELOCs may offer a more measured approach to many homeowners, when compared to a cash out refi. HELOCs are often less than $100k, and represent lower equity draws on average. More importantly, HELOCs are arguably quicker to validate. During the time of social distancing, AVMs are commonly the most popular form of valuation. At Veros we use three sources of independent AVM testing (AVMetrics, Platinum Data, Solidifi) to ensure incredibly accurate AVMs. In the context of third-party testing firms, lenders can feel confident in AVMs to accurately value their products, whichever one is best for their customers.