Others, including self-employed borrowers or those with variable incomes, often struggle to meet common underwriting standards. HighTechLending said these factors contribute to an estimated $240 million in annual loan defaults among homeowners age 40 and older.
The company’s EquitySelect HELOC is designed to allow borrowers to access home equity without repaying their principal, with a payment structure intended to provide more flexibility while maintaining equity-based underwriting standards.
“Life changes, incomes change, and financial needs change,” said David Peskin, president and CEO of HighTechLending. “Homeowners deserve options that reflect those realities. Through our partnership with Better-backed NEO Home Loans, we’re expanding access to responsible home equity solutions for borrowers disqualified under traditional guidelines but who are strong, qualified homeowners.”
Based on a review of rejected home equity applications from NEO Home Loans, HighTechLending estimates that approximately 20% of these applications would qualify under the EquitySelect HELOC structure.
In interview no HousingWire prior to the announcement, Peskin said the offering was designed to provide a “flexible monthly payment” to borrowers. The second goal is to serve the segment of borrowers who have a fixed job or fixed income.
Peskin said HighTechLending analyzed the portion of loans Better and NEO could finance because of debt-to-income (DTI) limits. “And based on using that data by use – obviously, it was very basic data – but it showed that we were able to give about 20% of those foreclosed access to equity in their home at the price they wanted.”
Peskin clarified that borrowers who use the product do not have to pay a premium. He said “flexible” payments are possible because each loan is tailored to the borrower’s desired monthly payment. HighTechLending then calculates the amount of the loan to match that payment over the expected time the homeowner will live in the home.
“Every customer is presented with a unique gift,” he said. “The reason we’re able to let them make that payment is that we’re offering a low LTV with the idea that they’re going to make that payment full time.”
Unlike traditional HELOCs, which often require full repayment after an interest-only period, Peskin said the loan is non-revolving, allowing for predictable, stable payments over the life of the loan.
The product is expected to give borrowers another option to access capital for use as home improvement or debt consolidation.
“The problem is that the old underwriting guidelines put you at 50% of your income liability,” Peskin said. “You may be offered a low loan, but maybe that low loan isn’t enough to pay off the debt you’re looking to pay off, or maybe it’s not enough to make the home improvements you want to make.
“There’s a good portion of borrowers who want to pay off debt or make home improvements. … A lot of people have really low rates, and they don’t want to touch them.”
Under the agreement, NEO Home Loans will offer EquitySelect HELOCs as part of its product lineup, while HighTechLending will purchase loans originated through the program.
