PennyMac jumps into home equity business

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PennyMac is betting on opportunity in home equity lending, announcing Friday that its Loan Services subsidiary will now offer HELOCs.

The company said its new HELOC product will roll out immediately in five states – available to borrowers in California, Florida, Oregon, Virginia and Washington – with expansion on the horizon. For now, the loan will only be available to existing PennyMac borrowers, but the company said it plans to increase availability once the program grows.

PennyMac said its HELOC offering will help $1.4 million borrowers access their equity for things like home improvements and debt consolidation.

The nonbank’s foray into home equity lending comes at an interesting time.

While some experts say certain market dynamics signal the likelihood of an impending home equity boom, others are not so sure.

Some argue that with mortgage rates rising, homeowners are increasingly likely to stay put to hold on to their low rate, accessing their equity and renovating instead of relocating.

Plus, homeowners are staying put longer than ever before, with the average tenure recently expanding to 10 years. As their equity continues to grow, they may look to tap that wealth with a home equity loan.

But that hasn’t convinced everyone that a boom is imminent.

Bank of America predicted that this segment of the mortgage market will remain flat in 2019, citing the fact that rising rates will make HELOCs more expensive and pointing out that since the recession, homeowners have been disinclined to tap this resource. Bankrate.com also recently said this will be weak year for HELOCS.

PennyMac, apparently, is siding with the former camp.

“We believe this is the right time to introduce this product to our customers who have seen the equity in their homes increase and want to keep their current first-mortgage interest rates,” said Chief Mortgage Banking Officer Doug Jones. “We expect our leading market position and operational capabilities to help fuel our HELOC production activities.”

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