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Welcome everyone to Ideas for Growing Your Home Equity Portfolio in 2026. Thank you all so much for joining us.

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Please send your questions through the Zoom Q&A located on your menu bar.

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Today's presentation is being recorded and will be shared in the coming days.

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At this time, I'd like to hand over the call to Kent Stoudmire, Vice President of the Sales Program Division at NFP, an AON company.

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Kent, the floor is yours.

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Uh, thank you, Amber. Um, and thank you everyone for attending the webinar. Uh, we appreciate your time. Uh, I'd like to also thank the Texas Bankers Association and Ken Dirks and Trey Dupree, uh, for helping set this up. Um, as you folks know, uh, Ken and, and Trey, when you probably dealt with them in the past, you're usually dealing with them on items like executive benefits, compensation, or BOLI services.

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Well, um, Ken and Trey also have access to a suite of NFP solutions for banks, for the community banks out there. And, um, one of the, uh, items that they wanted me to talk about was second liens. And so today we're gonna talk about ideas for growing your home equity portfolio in twenty twenty-six.

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Uh, my name is Kent Stoudmire. I've been, uh, at NFP for going on eighteen years.

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I am joined by Tony Scott, uh, from NFP, and Tony and I combined have over sixty years experience in, um, second lien home equity lending.

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Um, it's funny, Tony has more experience than me, but he's younger, but that's another conversation.

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So, um, today, today we're, we're gonna review ideas, okay, to broaden and expand your, your loan offerings, and give you some ideas on streamlining your, your second lien offerings.

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We'll take a look at the current state of the, the home equity landscape, uh, in today's, uh, webinar. We'll also discuss your current, uh, competitors out there in the marketplace, and we'll discuss ways for, uh, the community bankers to be more competitive in the, in the home equity marketplace.

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This, this slide contains some of the current metrics out in the, the home equity landscape. Um, and as you can see, there's, you know, it says twenty trillion is, is in, uh, tappable, uh, you know, home equity out there for, for borrowers. I think about ten trillion of that might be in the Texas market, but, um... And then, you know, the, the whole point is, is that all of your, your potential borrowers out there have a, a great deal of home equity, uh, available to tap, and around a hundred and ninety-five thousand dollars, uh, to be exact. And the other part of the equation here in the home equity landscape is first mortgages. Your, your borrowers, uh, you know, over fifty-two percent are sitting on a first mortgage, you know, interest rate that's low, well, probably lower than four percent. And, you know, the point there is, they're not gonna, um, refinance their first lien. They're gonna look for a second lien to finance any of their potential, um, uh, projects or, or, or lending needs going forward. So, um, so, uh, the bottom line here is there's just a lot of untapped opportunity out there for, for bank space.

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Let's take a look at, you know, who's taking advantage of this untapped opportunity? And from a HELOC perspective, you can see the community banks are, you know, originating, uh, you know, twenty-five percent of the HELOCs out there, um, which is a very good, you know, sizable amount. Um, I mean, who better to, um, foster good relationships, uh, from a financial perspective than, uh, the community bank space? Um, and then we've, we've- we also look at home equity loans, and, and as you can see, the fintechs out there are doing a significant amount of origination from that product line. And then, um, you know, you, you take a look at the, the fintechs, the non-deposit institutions out there, and, uh, you know, they're, they're growing their, their, their market share, and their, their market share has been growing, um, consistently over the past few years. And, um, uh, what if- for whatever reason, I know that these fintechs, um, you know, compared to the community bank, uh, you know, it seems like the community banks, uh, might be a little hesitant, uh, from a risk perspective, or from the Texas lending laws, or the limited products available in the state of Texas, that they might shy away from, from getting into the home equity side of things.

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And, um, you know, the, the... bottom line here, in it to stay, and, you know, they're gonna eventually try to cross-sell all these folks. Uh, if you're not doing home equity lending now, um, it's, it's something you, you'd wanna look into going forward.

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Um, and, you know, looking at, at, at this also from, like, a HELOC perspective, you see that there's a lot of large banks that origin- have originations, and you see that you've got the fintech space. So we see where, you know, we see opportunity here where, um, you can take market share away from the larger banks and the, and, and these, and these fintechs. So, um, so, um-... you know, I guess the question to ask is, you know, what are you doing to compete with these, these larger banks? So, you know, w- with that said, um, let's take a look at, you know, what Texas banks are doing now to, to, quote, unquote, "spur on growth." Um, Tony, do you have anything to add on this slide at all?

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I don't. Uh, the only thing I'll say is, um, just today I thought it was pretty appropriate, I saw an article from, you know, one of the vendors that send us, uh, emails on, like, the news, uh, for equity lending, and the headline this morning was, uh, "Fintech HELOC Origination Growth Dwarfs Depositories." And so that, that was specific to HELOC, but I don't think it's just HELOCs.

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I think it's, you know, uh, we've seen the same for closed-end loans, and then, of course, we know from experience, the, the home improvement space and purchase.

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All right. Well, thanks. Um,

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so, you know, when, when we talk about, you know, home equity lending and second lien lending, you know, uh, in our travels, we, we find that, you know, many of the community banks have a, a, a high credit score floor, such as, like, 740. And, you know, uh, you know, provided you've got qualified underwriting and qualified loan products, we feel you could migrate that, that down to a 700 score, um, and, and, and therefore open up the, the lending a little bit to in that seven to 740 space.

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Um, later in the, in the webinar, we'll, we'll talk and discuss about credit enhancements and how that might impact your, your credit floor, but we, we recommend migrating that down to, you know, 700. Um,

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and then, um, you know, these, these fintechs out there, um, they're doing a lot of originations, and they're, they're closing their, their home equity loans in, in a very quick fashion. And how they're doing this is they're, they're using items like, um, a- alternatives to a full appraisal. They'll use automated valuation models, and these, these AVMs, as they're, they're referred to, um, provide great, you know, uh, solid values. They're very quick, you know, at getting you the value, and it's a lot less costly than a, than a full appraisal or, or a drive-by appraisal.

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Um, and then they're also taking advantage of, of alternatives to, to title, you know, title insurance. They'll look at something like a current owner's search, okay? And they, they may... We, we see some of these community banks that they'll do a current owner search, but they'll wrap it with an insurance, uh, program that, that protects them from some additional items that might come up in the title.

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But they're, they're not using full title insurance, and, and it's allowing them to close the loans more quickly and at a less expensive cost to, to the, to the bank.

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Um, and then I know we've got some folks here that are not in the state of Texas, and we'll, we'll touch base on that, but in the, in the state of Texas, you know, purchase monies, uh, programs, and secured home improvement loans in the, the second lien space can go above eighty percent loan-to-value. They can go up to a hundred percent loan-to-value.

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So we, we, we find that, uh, some of our bank partners are taking, uh, advantage of, uh, of these, uh, of these programs and, and expanding their, their LTV position with, with them.

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And then, you know, these purchase money loans, uh, we'll talk a little bit more about them down the road, but, um, your Texas banks can also, you know, uh, originate, um, well, professional loans, like medical doctor loans.

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We, you know, from a purchase money loan perspective, we're seeing that people are targeting these, these medical professionals, um, you know, uh, to, you know, uh, grow their, their, their home equity portfolios.

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And so, um, now, NFP, we do have a medical doctor program, and we'll, we'll talk about that later, later in the, in the, in the program.

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And then one thing that we, we see out in the marketplace is that the community banks need to advertise their, your home equity loan programs, whatever you're, you're offering, okay? I- we see very often that they'll make mention that they do home equity loans, but there's really not a lot of information touting them on the, on the website.

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So, um, that's a, I guess, a, um, suggestion that everyone look over their, their, their marketing side and their, and their websites.

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So, um, anything on that, Tony, that you'd like me to add?

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Yeah, I think the only thing there, um, that we, we encounter a lot, um, it's- it kind of goes to the advertising. You know, um, a lot of times, a senior leader at a bank or another, you know, lending institution will, will, uh, be fully on board, uh, with doing, you know, higher loan-to-value, but, um, seconds.

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But a lot of times, the, you know, the loan officers or the tellers or, you know, the, the different people, uh, they don't know how to listen for the right things to, you know-... to, to start the conversation about, um, the product and how to suggest, sell, um,

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you know, their, uh, customers on, you know, the different alternatives, um, that are out there. So give them choices.

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So, um, that's something that we see a lot, is as soon as they can get the frontline workers, um, you know, familiar with the options, then, um, that a lot of times spurs more business.

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Well, that's, that's a true statement. You, you need to make sure that your loan officers are trained in any new programs that you have. Um, and sometimes we see the banks will incentivize, you know, their, their loan officers for their second lien program. So that also, you know, spurs on growth, uh, for, for, for the bank.

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So, um, well, let's, um, let's, let's just kind of review what is allowed in, in Texas.

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Um, and, uh, you can do, you know, purchase money loans up to a hundred percent, uh, loan-to-value. You can do secured home improvement loans, uh, okay, up to a hundred percent combined loan-to-value.

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And then your HELOCs and your home equity loans are limited to eighty percent, uh, loan-to-value, uh, but we'll, we'll talk about that, uh, later in the program also.

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And then, you know, one thing to remember, and there's banks here that are outside of Texas, that once you get outside of Texas, you can lend over eighty percent loan-to-value in other states, you know, such as like Oklahoma.

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And then the-- another item we see is that these, the, the banks can do unsecured loans, and they can also do unsecured home improvement loans. So we, we, we see that quite often, um, in our travels.

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Um, so these are the, the, the loans, the loan programs that are available in, in the state of Texas.

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Now, now we'd like to talk about how broadening your home equity loan offerings impacts your, your, your loan growth.

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Um, so, um, you know, we spoke about, you know, the options available in Texas. And, you know, one of the things we, we've been speaking about is these purchase money loans, so, uh, and also the secured home improvement loan program and the unsecured home improvement loan program.

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By, by offering these types of products, it just allows you to say yes to your, your borrowers more often, and by giving them more choices, um, it, it, it also, uh, helps with the borrower's experience, um, uh, through the lending process.

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And then, um, when we- when we're talking about expanding your LTV positions, um, there's additional risk that goes with expanding the LTV. The higher the LTV and the interest rates charged when you go above eighty percent loan-to-value, for example, are, are a tick higher than your normal rates.

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And so by getting into these higher LTV products, they're, they're a more profitable product because of the higher margins that are placed on there. So that's just something to think about from a profitability standpoint.

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And then, you know, we've also talked about, you know, the, again, the loan officers, they, they need to be trained, they need to be incentivized, if you feel so. And, um, and that just spurs success with your, your home equity, uh, lending programs.

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Um, Tony, anything else you'd, you'd add on that, that slide?

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I don't think so. I think you covered it.

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Okay. So, um, what I'd like to do now is just take a, take a look at a, um, a case study of a Texas bank, okay?

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And, you know, this bank, sixteen billion in assets, they do lend in Texas and Oklahoma, okay? Primarily, most of their loans are in the state of Texas.

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And what happens here is we deal with this bank on some ad-additional loan programs, and, and we'll talk about that later. But we are privy to their, their, their numbers, and, and they originated in the over eighty percent loan-to-value space with purchase money loans and, and secured home improvement loans, over thirty-two million in twenty twenty-five. And so, um, you know, we do have four other banks that we deal with, but, uh, we wanted to use this bank as, as an example from a case study standpoint.

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Uh, and then out of this thirty-two million, over thirty-two million, let's take a look at how that impacts your, your, your, your bottom line by having that additional, uh, loans in your portfolio.

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So this particular slide, uh, shows, um, our interest income calculator, okay? And we'll, we'll provide everyone with a copy of the slide deck and this, uh, this income calculator because it is, um, interactive, and you can put in different parameters.

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But this, this particular, uh, bank on that thirty-two million or a little over thirty-two million, in s- the first sixty months, their interest income is gonna be over four million dollars, and that's by originating an additional one hundred and fifty loans. So, you know, um, some additional ten, twelve loans a month, but the, the main point here is you can see how big of an impact it has on your bottom line by, um, you know, originating these additional loans in the higher, higher LTV space. Um,

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Tony, anything to add on that at all?

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No, I'd just say that, um, we've seen this, uh, revenue calculator used as a great way to, you know, like you said, show the actual impact, uh, to the bottom line, to boards and, uh, other folks that might be somewhat skeptical of, o- of, uh, of doing this, you know, implementing.

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So all right, well, um, with, with that said, let's, let's take a look at, you know, what, what NFP does to help out in this, this home equity space, okay?

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And, and what we do is, um, Tony and I sell a program called the Equity Protection Program, and what it does is it's an insurance program that, um, uh, the premise of the program is if, uh, an insured loan through the program defaults, that, uh, the bank would file a claim with us. Okay, there's no foreclosure necessary, and then in turn, we would receive the claim, and then we would then pay the entire loan balance plus interest, and essentially paying, paying the loan off.

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And then once that is done, the bank would assign the mortgage and note over to NFP, and therefore, um, there's no losses shown on your, your, your balance sheet. It's all, uh, transferred, the loss is transferred to, to NFP, and you're made whole, okay?

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So, um, you know, with, with that said, not going through foreclosure, you don't have the REO costs associated with it, okay? So, um, this particular program is, is, is, um, you know, uh, just allows, um, banks to feel a little bit more comfortable from, from a risk standpoint.

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Um, the, uh, the, the program is, since it's an insured program, and, and we refer to it as a credit enhancement, this program, and what this credit enhancement does is, again, it protects against defaulted loans, so you're not expecting any losses on your insured portfolio. So when the banks are doing their CECL, uh, loan loss calculations, they're anticipating no losses. So they will weight these loans less than a loan that is not insured, and therefore, they'll set aside less in their loan loss reserve accounts.

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So the, this particular program helps preserve capital that can be, you know, you can preserve that capital and deploy in other areas o- of, of the bank.

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Okay? Um, and then our, our equity protection program also, we have several different loan programs. We have a HELOC home equity loan, we do purchase money loans, and we also do the purchase money medical doctor loans, and we spoke about secured home improvement loans and then unsecured home improvement loans.

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So we, we protect the bank, uh, against default on several different loan options.

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So, um... And then one of the other things that this program does is that if a bank- some banks will go out there and buy a whole portfolio of HELOCs, and then they'll want it insured, and we will, we will look at those whole loan, um, you know, sale.

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And then we also have a third party that we deal with that originates unsecured home improvement loans, and then we allow banks to participate in the loans, or they can wholly, uh, whole loan purchase the loans.

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But this is a great way that, you know, banks will have their organic growth, but this is a way that, you know, they can, um, couple that with their organic growth to, to even further grow their, their home equity, uh, loan portfolio.

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So, uh, Tony, would you have anything to add on, on, on that note?

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Only thing I'd add there is, um, that our products are, um, not cookie cutter, one size fits all. They are fully customizable, so, uh, based on what you want to do and, uh, how you want to structure it, uh, we've probably seen it, and, uh, you know, we can do it. That's true. That's true.

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And, you know, and-... simple reason, transfer your default risk, okay, you know, uh, uh, to a third party. Um, so, uh, just protecting your balance sheet. And so, and, you know, this product is, you know, it's a proactive risk management tool, and, and the, the regulators like it. They like it, you know, from a concentration risk and a default risk per-perspective.

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And to me, the favorite part, uh, about why people use this program, and why banks use this program, is there's no direct cost to the bank, okay? The, the premiums are passed through the borrower, through the interest rate, so there's a slight, uh, increase in the rate that you charge.

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Um, but as we've discussed, once you go above eighty percent loan-to-value, the marketplace drives a slightly higher rate. So it's, it's a very competitive, uh, program in the, in, in the marketplace. Um,

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Okay.

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So at this point, I'd, I'd like to recap, you know, um, the, the items that we've covered in the, in the webinar.

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And, um, you know, uh, increase... You know, by increasing your home equity loan, you know, by migrating that score down a little bit, you're, you're, you're gonna see scores, you know, you're gonna see growth by opening up that additional credit score, I guess, tranche.

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And then I know with our equity protection program, you know, the floor might migrate a little lower, just knowing that you have that additional protection, um, on, on the loans that you're originating.

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And then, um, you know, I feel the banks need to start offering this unsecured home improvement loans. I mean, this, this loan program that competes with the fintechs, there's no, you know, there's very, you know, lower closing costs and quicker closings.

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And, um, it's a, it's, uh, you know, there's no three-day right of rescission because these loans are unsecured, so you can, you can take care of your borrower right away.

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So it is, it is something that you should look into. And, and again, competing with that fintechs is, is big.

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And then what our, what our bank, uh, partners do when they offer this unsecured home improvement program, they're out there talking to their local window companies, their local HVAC companies, and, you know, they let them know that they have this program available.

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Because these, these loans are better for the borrower from, instead of putting it on a high rate credit card. Um, you know, um, and then even more so if the loan is insured through the equity protection program, you can extend your loan terms out more comfortably, making a very low monthly payment for, for the borrower.

00:27:38.540 -- 00:27:49.660
So it is a great little, little program, and, and again, it competes with a lot of the, um, you know, fintechs out in the, out in the marketplace.

00:27:49.760 -- 00:28:02.920
Um, and, you know, again, broaden your offerings by offering a secured home improvement loan program and a purchase money loan program.

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You know, if you expand these up to a hundred percent loan-to-value, you know, with or without, you know, um, you know, some type of credit enhancement on there.

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But what it does is it, it positions you in the marketplace as, as having a, a, a niche product that, uh, will bring in more, more folks.

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And that, that can be said too about, you know, the professional loans, such as the medi-medical doctor loans. If you're in an area with a, you know, a big, you know, uh, presence, uh, a medical presence, it's a great way to specifically market to, to, you know, uh, with medical doctors out there.

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So, and then, you know, um, the other thing we talked about is the turn time.

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I mean, by offering these ADMs, uh, you know, incorporating them into your underwriting, um, guidelines and policies, it just speeds up the transaction, and it's a lower cost.

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And same is true with the, with the, uh, you know, current owner search as opposed to a full title insurance.

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It's just quicker, it's less expensive, and, um, it, it's, uh, a better borrowing experience for, for your, for your borrowers.

00:29:14.420 -- 00:29:20.980
Um, so, Tony, do you have anything else to add on, on, on this?

00:29:23.400 -- 00:29:34.280
I think you covered it. Um- You sure? Yeah, I think you did. I was gonna... There was something else I was gonna mention, but I think you hit it as I was thinking about it.

00:29:34.360 -- 00:29:50.320
Okay. Okay. And then, you know, um, we, we just asked the question of the group. I mean, uh, I know we've gone over what we experience out there in the marketplace.

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I didn't know if anyone has any, uh, successes that they, that they would like to share with the group. Um, but, um, just, uh, always good to hear good, good news out there.

00:30:05.960 -- 00:30:24.910
Well, I, I'm not sure if we have any success stories, but I, I would like to say, you know, that thank you for attending. Um, Tony and I appreciate your, your, your time.

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I hope you found everything, you know, informational and, uh, and helpful. And, you know, again, we'll be sending a copy of this slide deck out to everyone that attends, and we'll also be sending our interest income calculator.

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Uh, and you'll have our contact information on there, and should you have any additional questions, please don't hesitate to reach out to us.

00:30:48.120 -- 00:31:06.370
Yeah, and I'll just add, I, uh, um- Add on to that, Tony. Yep. Can you hear me? Okay, yeah. I was gonna add, um, w- we might... I'm sure, um, there's people on the phone that have success stories, but, uh, aren't, uh, speaking up.

00:31:06.920 -- 00:31:22.080
But, uh, I will say we have lots of success stories, and if you have an idea or if you have a product, a specific product that we've talked about that you'd like to, you know, discuss, um, we're happy to talk to you about that and even give you some real-world examples.

00:31:22.140 -- 00:31:26.750
Of how we've, uh, we've helped, uh, lenders in Texas and, and all over the country, uh, you know, meet those needs.

00:31:26.780 -- 00:31:28.560
That's it for me.

00:31:29.740 -- 00:31:34.820
All right. Well, Amber, I don't know if you- Thank you, everyone, and, uh, Amber?

00:31:34.840 -- 00:31:38.830
Yep. Thank you.

00:31:38.980 -- 00:31:49.900
Okay. Well, thank you to our speakers for sharing your, your valuable time and expertise with us today. That concludes our webinar for today. Thank you, everyone, for joining us.