North American Mortgage Co. is offering home equity lines of credit in tandem with first mortgages. Because the credit line closes at the same time as the first mortgage, there is no additional closing cost.
In introducing the product, Santa Rosa, Calif.-based North American joins other major California lenders, including Countrywide Credit Industries of Pasadena. The lenders have adopted the tandem package because it's a natural extension of their basic mortgage business.
North American, the second-largest independent mortgage banking company, also noted that the market for home equity loans was huge. The untapped market for equity loans has been estimated at $3.2 trillion based on loan- to-value ratios of up to 80%, the company said.
It also noted that many homeowners have been refinancing into 10-year, 15-year, and 20-year loans that have faster equity buildup than the popular 30-year variety. And equity loans are increasingly in demand because of the available tax advantages.
North American is also looking for an edge in competing against the big California thrifts. "Most banks and S&Ls offer equity lines of credit only on a stand-alone basis, and usually after the mortgage closes," the company said in an announcement.
Pete Bonnikson, executive vice president, said joining the two mortgages streamlined the process and added to customer convenience. "It's seamless and painless for loan officer and borrower alike," he said. The arrangement also provides an opportunity for loan officers to increase their production to the same customers.
The company says it's pricing the loans to compete with aggressive offerings by banks. The rate is now 0.25% point above the prime rate, or 8.25%. Combined loan-to-value ratios of 90% are available on tandem loans and 100% on stand-alone lines of credit.
The minimum credit line is $10,000 and the maximum $500,000 - a ceiling well tailored to the pricey California housing market.
In another development, Chicago-based Amalgamated Bank said it was introducing a home equity line of credit to members of its Union Advantage program, which is available to members of labor unions.
Amalgamated said the lines of credit were available without points and below or at the prime rate. Only a $150 application fee and a $30 annual fee are involved. The credit can be accessed by writing a check, and the initial rate structure remains in place for five years.
Amalgamated, founded by the Amalgamated Clothing Workers of America in 1922, has a long history of working with unions.
