Total originations of open-ended Home Equity Lines of Credit (HELOCs) and closed-end home equity loans increased in 2023 by 1.5% compared to 2022, while debt outstandings increased by 8.3%. That's according to the Mortgage Bankers Association’s (MBA) 2024 Home Equity Lending Study, which was conducted in the spring of 2024.
“Home equity originations were relatively flat in 2023 compared to 2022,” said MBA’s Vice President of Industry Analysis, Marina Walsh, CMB. “Even with evidence of easing credit availability, with originations activity moving to lower FICO credit scores, higher combined loan-to-value ratios, the closings to applications pull-through rate dropped, indicating that home equity lenders were doing more work for fewer loans.”
Added Walsh, “Despite the tepid volume growth in 2023, our study shows an uptick in home equity debt outstanding. The elevated mortgage rate environment slowed servicing runoff, and utilization rates also increased. Given the substantial amount of accumulated equity in real estate, there is still untapped potential for home equity lending for lenders and borrowers.”
Total originations of open-ended Home Equity Lines of Credit (HELOCs) and closed-end home equity loans increased to $2.13 billion per company in 2023, from $2.10 billion in 2022.
MBA's study reported that in 2023, over 75% of total originations were subject to an Automated Valuation Model (AVM) or Desktop Valuation (DV), with most of both categories entailing an exterior/drive-by inspection or no inspection at all. Conversely, 22% of originations required a full appraisal with the majority entailing both an interior and exterior inspection.
The average HELOC commitment volume (total credit offered) was $1.8 billion per company in 2023, down from $1.9 billion in 2022.
The average FICO score fell to 760 in 2023, from 769 in 2022. Average combined loan-to-value (CLTV) for funded HELOCs at closing increased to 53% in 2023 from 51% in 2022.
Average closings-to-applications pull-through for HELOC accounts dropped to 48% in 2023 from 56% in 2022, with the report noting that lenders expect outstanding HELOC debt to increase by 2.3% in 2024 and 4.8 percent in 2025.
Average home equity loan originations were $657 million per company in 2023, up from $428 million in 2022. Average closings-to-applications pull-through for home equity accounts dropped to 39% in 2023 from 44% in 2022. Lenders expect home equity loan debt outstanding to increase 11.1% in 2024 and 7.2% in 2025.
