U.S. homeowners are sitting on more than $30 trillion in home equity, according to the Federal Reserve — creating one of the largest untapped opportunities in today’s mortgage market.
For originators, the shift is clear. Borrowers are no longer willing to give up low-rate first mortgages to access liquidity. Instead, they are turning to second-lien solutions such as HELOCs, closed-end seconds and non-QM products to tap equity while preserving their existing financing.
The End Of The Traditional Cash-Out Play
With millions of borrowers locked into sub-5% rates, the traditional cash-out refinance has become increasingly difficult to justify.
“Eighty percent of Americans have rates under 5%, so they’re not going to cash out of their mortgage,” said Tom Davis, Chief Sales Officer at Deephaven Mortgage. “They’re going to tap into the equity to do so.”
That shift is fundamentally changing how borrowers and originators approach financing.
“The cash-out game has been sidelined. The cash-out game is equity products,” Davis added.
A Market Driven By Debt, Aging Homes, And Investor Demand
Several macro trends are converging to accelerate demand for equity-based lending.
Homeowners are sitting on record levels of equity while living in aging housing stock that often requires renovation. At the same time, consumer debt has climbed to record highs, creating additional pressure for borrowers to access liquidity.
“You’re going to see originators leverage their equity to consolidate their debt because consumer debt is at $5 trillion. It’s at an all-time high,” Davis said.
Investors are also playing a major role. Rather than refinancing out of low-rate first liens, many are turning to second liens to fund new acquisitions and projects.
“Savvy investors are not going to get rid of their first rate if it’s at a low interest rate,” Davis said. “What you are seeing people do is tap into the equity through a DSCR second or a HELOC to buy more investment properties.”
That behavior aligns with broader market trends showing investors becoming more selective and strategic in how they deploy capital.
Tom Hutchens, President at Angel Oak Mortgage Solutions, said that shift is creating an opportunity many originators are still overlooking.
“I would say the best ‘sleeper’ product is the bank statement HELOC. We have record amounts of equity along with record amounts of credit card debt, and these self-employed borrowers can tap into their equity without losing their ultra low first lien rate,” Hutchens said.
“The best marketing practice would be to go after investors with the DSCR program as well as the bank statement loan for self-employed borrowers. Both of these markets are in high demand and are still very underserved by originators.”
A Market Approaching Non-QM Scale
Equity lending is no longer a niche segment of the market.
Industry estimates suggest originations in the equity space could range from roughly $150 billion to more than $250 billion annually, putting it on par with the non-QM market in the near term.
“That tells me that the equity space is going to be the size of the non-QM space,” Davis said.
For originators, that represents not just incremental volume but a potential shift in where core production comes from.
A Retention Battle Originators Can’t Ignore
Beyond new production, equity products are becoming a critical tool for retention.
Servicers are actively targeting past clients and improving their ability to recapture business, raising the stakes for originators who are not offering second-lien solutions.
“If they don’t, you know who’s going to? The servicer,” Davis said.
Retention rates that once hovered around 25% have climbed significantly higher, making it increasingly difficult for originators to win back clients after the fact.
“If originators don’t offer those products, not only will they lose the client today, but they’ll lose that client in the future,” Davis said.
The Bottom Line For LOs
The equity is already there. The demand is already there.
What’s changing is how borrowers access it and who helps them do it.
“It’s critical that originators adopt equity products because it should be part of their recapture and retention strategy,” Davis said.
In a market where rate-driven refinances have slowed, second-lien and non-QM solutions are emerging as one of the clearest paths to new production.
For originators willing to lean in, the $35 trillion in home equity is not just a data point. It is the next pipeline.
