Economic indications predict little refinance volume through 2022, which is more than halfway over, while purchase volume confronts its challenges. In addition, the purchase and refinance markets are facing difficulties due to a shortage of supply, record high prices, rising interest rates, and significant affordability issues, creating an opportunity for home equity loans.
These economic indicators indicate that lenders should make sure their home equity lending programs are formed and capable of functioning at a high degree of efficiency straight away. However, many lenders have trouble developing profitable home equity programs due to various misconceptions about handling values in a way that assures they are underwriting quality loans. Here are the most common misconceptions around home equity loans that lenders need to clear off to increase their confidence in home equity lending operations.
- You need an appraisal for every loan: The appraisal process can be stressful and time-consuming for lenders and borrowers. However, unlike purchase markets, valuations can be done for home equity loans using a series of valuation products such as an AVM with a Property condition report, evaluations, desk reviews of current appraisals, and drive-by appraisals. Given this, it may seem evident that AVMs and PCRs are the more desirable option.
- AVMs are not an accurate way to gauge home value: An enduring myth about the accuracy of AVMs emerged as the US emerged from the Great Recession. The overuse of AVMs rather than their quality was the leading cause of the misperception. However, lenders now have a framework for the responsible use of AVMs thanks to the 2010 Interagency Guidelines, which also provide the essential framework to guarantee the correct use of the various valuation products.
- Expensive and complicated to test: Fortunately, third parties can offer lenders the impartial AVM testing data they need to adhere to accuracy standards. Regardless of the size of your company, these companies may work with lenders to provide the tools required to satisfy stringent testing standards.
To read more on misconceptions about using AVMs, click here.
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