The Impact of Automation: Redefining Possibilities in Home Equity Lending

Since the beginning days of Coviance, I’ve had the privilege of working closely with credit unions and banks nationwide. These partnerships have given me a front-row seat to the challenges and opportunities shaping our industry. Lately, one question has kept surfacing: “Why home equity and HELOC lending?”

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My answer is simple: Why not?

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With home values rising and Americans sitting on record-high levels of tappable equity—$20.3 trillion earlier this year, to be exact—home equity lending is an untapped opportunity.

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Why Home Equity?

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It’s a strategy that fosters both growth and deeper borrower engagement. If your institution hasn’t made home equity a priority, here are three reasons to reconsider:

• Diversification of loan portfolios. A secured asset that’s arguably the “new auto loan” gives lenders greater financial stability with diversified economic cycles, such as variable interest rates and the gain of increasing property values.
• Boost yield with higher-value assets. Home equity loans often yield higher returns than other consumer lending products. In recent years, lenders have seen an increase of nearly 20% in interest income growth from home equity loan origination. As of December 2024, the average national interst rates are approximately 8.41% for home equity loans and 8.56% for HELOCs.
• Unlock cross-selling opportunities. Borrowers with a home equity loan product are 40% more likely to engage in repeat borrowing from the same financial institution. It's widely recognized that offering home equity products can enhance customer retention and loyalty again from the credit union or bank.

Home equity lending isn’t just another product. It’s a strategic tool to enhance your institution’s financial health and member satisfaction. Credit unions and banks can unlock new revenue streams and create a lasting impact by making home equity a strategic growth focus.

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Now, let’s discuss the key to genuinely leveraging this opportunity in home equity: AUTOMATION!

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To truly understand the impact of automation, we first need to disconnect from what we’ve accepted as "normal." Ask yourself this: Why does most of the lending industry still consider a 4-to-6-week turnaround for home equity loans acceptable? This assumption is outdated and inefficient—not just for lenders but also for borrowers.

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Automation: A Transformative Force

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Automation isn’t just a tool; it’s a transformative force. Credit unions and banks can dramatically improve their operations by incorporating automation into home equity lending. Here’s how:

• Reduced cycle time. Gone are the days of waiting weeks for approvals and closings. Automation enables credit unions and banks to move faster—sometimes allowing a clear-to-close in days or hours. That’s not just good for efficiency; it’s what today’s borrowers—accustomed to instant gratification—expect.
• Speed to Revenue: By eliminating manual processes and automating established underwriting and processing parameters, financial institutions can significantly reduce the lending cycle, resulting in a faster path to revenue and fewer operational expenses.
• Data-driven decisioning. Automation isn’t about replacing human judgment—it’s about empowering it. Leveraging data-driven insights allows lenders to make more informed, accurate decisions, minimizing risk while enhancing overall performance.
• Enhanced borrower experience. Ultimately, automation is about delivering a better experience for borrowers and members. Faster processes, transparent communication, and seamless interactions aren’t just perks—they’re necessities for retaining and attracting borrowers in today’s market.

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Why does this matter now? Home equity loan demand continues to rise and consumer expectations are evolving. Today's borrowers anticipate an experience similar to applying for an AmEx or Apple Card—swift, immaculate and digital. The market is primed with no signs of slowing down, and neither are will borrower expectations. By embracing automation, community lenders can leverage lending experiences to expand share of wallet, increase deposits and organically become the primary banking source for their borrowers.

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Let’s divorce the mindset of "this is how it’s always been done." It’s time to redefine what’s possible in home equity lending.

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At Coviance, we are committed to helping our customers leverage home equity lending as a cornerstone of their growth strategies. Get in touch today and let's chat about leveraging automation to power your growth in 2025.