Spokane Journal of Business

Home equity loan demand expected to rise here

HELOC volumes surpass peaks during recession era

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-—Kevin Blocker
Kevin Campbell, Spokane-based lending manager at Boeing Employees Credit Union, says the credit union’s branches statewide have experienced an increase in HELOC requests.

Spokane-area lenders say they’ve recently been approving more applications for home equity lines of credit, commonly referred to as HELOC loans, reminiscent of around the time of the Great Recession.

 “We’re seeing home equity lines of credit reaching the numbers that they did in 2010,” says David Flood, chief lending officer at Spokane Teachers Credit Union, which is headquartered in Liberty Lake.

Economists generally place the time frame of the Great Recession from December 2007 to June 2009.

“It’s a pretty hot topic, and we’re expecting a strong year for that product,” Flood says of home equity loans.

He says a rise in home values has created more equity for homeowners and led them back to lenders to secure home loans.

HELOCs enable homeowners to borrow against the equity in their homes, up to a certain maximum amount. A borrower can use the lump sum all at once or just a portion, and the borrower makes monthly payments each month until the debt is eliminated. Unlike mortgage loans, HELOCs don’t carry closing costs.

In a sign of rising home values, data gathered through the Spokane Association of Realtors’ Multiple Listing Service show that the median sale price for MLS-listed homes here was $195,000 in January, up 11 percent from $175,000 a year earlier. The average closed price for a home in January was $206,350, up 9 percent from $189,700 a year earlier.

Last September, CoreLogic Inc., a global property information analytics company based in Irvine, Calif., reported that home prices were rising across the country, except in Alaska and Connecticut. CoreLogic said it expects home prices to increase by 5.2 percent from September 2016 to September of this year.

“Home-equity wealth has doubled during the last five years to $13 trillion, largely because of the recovery in home prices,” said Frank Nothaft, chief economist for CoreLogic in a press release in September.

“Nationwide during the past year, the average gain in housing wealth was about $11,000 per homeowner, but with wide geographic variation,” Nothaft said.

Washington state had the highest price increases from September 2015 to September 2016, at 10.3 percent, followed by Oregon, at 10.1 percent; Colorado, 8.6 percent; Utah, 7.8 percent; and Florida, 7.5 percent, CoreLogic said.

Kevin Campbell, Spokane-based lending manager for Boeing Employees Credit Union, says BECU branches across the state have seen a rise in requests for home equity lines of credit.

“It’s the product where we’re seeing our greatest growth right now,” Campbell says.

At STCU, Flood says approved home equity loans plummeted from 1,085 in 2010 to 638 in 2011, and then rebounded to 1,031 in 2014 and 1,098 in 2015, before easing back to 1,061 last year.

“We’re averaging 88 home equity loans to start this year so we’re remaining consistent from what we’ve seen the last couple of years,” he says.

Unlike many HELOC loans that have variable interest rates, Flood says STCU allows customers to borrow at a fixed interest rate in a way similar to a mortgage. STCU has more than 160,000 members and manages more than $2.4 billion in assets.

Sherry Lotze, spokeswoman for Seattle-based Inspirus Credit Union, which has a branch in Spokane, says that institution has seen a sharp increase in applications for home equity loans since last fall.

“That spike has been in both Seattle and Spokane,” she says. “We had a real steady year last year, but as the end of 2016 approached, and even the start of this year, we’ve seen a real rise in applications.”

Lotze says what’s unusual about the recent spike in loan applications is their timing.

“It’s not uncommon to see an uptick of loan applications in the spring when members are planning for a summer vacation, or an uptick in the summer preparing for a child going back to school. But what we’re seeing now is earlier than usual,” she says.

Inspirus is the former School Employees Credit Union of Washington. Inspirus’ branch here operates in a three-story, 21,000-square-foot building at 5123 E. Third in Spokane Valley.

Inspirus, with two branches in Seattle, has 80,000 members and manages almost $1.2 billion in assets. It has close to 5,000 members in Spokane County, Lotze says.

Early in 2016, Lotze says, Inspirus built a feature in its home loan products for those with substantial equity in their homes. Inspirus members can roll their mortgages into a home equity line of credit for a fixed interest rate of 2.95 percent for either a 10-year or 15-year term, she says.

“It’s proven to be very popular among those who may be approaching retirement. The idea is to accelerate paying off the debt on the home. The advantage is that the home equity loan is faster, there are no closing costs, and it’s easier to get,” she says.

BECU’s Campbell believes home equity lines of credit are still generally underutilized by consumers.

“To me, without question, it’s the most prudent way to leverage assets. You’re often looking at an unbelievable rate that has more flexibility than a refinance on a mortgage,” Campbell says.

BECU is based in Tukwila and employs about 1,400 people throughout its 40 financial centers in the Puget Sound area. The credit union opened two branches here in 2016 and has 5,000 members in the Spokane area.

“I think the public still lacks an understanding of HELOCs, and when it comes to needing additional capital, are always thinking in the way of a second mortgage,” Campbell says.

He says he’s seen small business owners effectively use home equity lines of credit to pay initial startup costs.

Speaking from personal experience, Campbell says years ago he used the money he secured from a second mortgage on a home to buy a rental property.

“Looking back on it, I would’ve been better off getting a home equity line of credit because there are no closing costs,” he says. “I didn’t understand a HELOC, and didn’t have anyone at the bank where I secured the loan from walk me through my options.”

Campbell says at BECU, he and his team attempt to make sure customers know all that’s available to them. 

“It’s great to be in a position to be able to have the time to sit down and explain all of the products to the customers and help them make the best decision for their needs,” he says.

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