Banks have devoted a tremendous amount of time, money and effort into automating most retail banking services, but there is one area where they still seem to be stuck in the 1990s: home-equity lending.
Compared with nuts-and-bolts banking services such as depositing checks, paying bills and applying for personal loans, banks’ digital offerings in the HELOC space leave much to be desired, according to a new J.D. Power report. To put a fine point on it, most consumers still need to enter a branch to apply for a HELOC, said Craig Martin, senior director of wealth and lending at J.D. Power.
“It’s not a very seamless proposition to apply online” for a HELOC, Martin said.
Still, some banks do perform well when it comes to providing customer service on HELOCs, according to J.D. Power. SunTrust Banks, BB&T and Huntington Bancshares were tops for customer service based on loan rates and terms; the ease of the application and approval process; interactions with the lender; billing and payment servicing; and post-closing interactions.
But those three banks did not score well because of their technology offerings, Martin said. Like other banks, none has made much progress shifting their business from physical branches to digital.
“Their performance was based more on their front-line folks, how they connected, explained and communicated things to the customers,” Martin said. “They still don’t have cutting-edge digital platforms for HELOCs.”
Ignoring the digital aspect of HELOC applications could be a mistake for banks, as HELOC demand is expected to increase in the coming months and years. TransUnion estimated in October that about 11.4 million Americans will take out HELOCs between 2017 and 2022, more than twice the number who borrowed against their homes between 2011 and 2016.
Two factors have contributed to banks putting a lower priority on moving HELOC applications to the digital sphere.
For one, it’s a market that banks and credit unions have virtually all to themselves, Martin said. Big nonbank mortgage lenders, like Quicken Loans and Veterans United Home Loans, as a general rule don’t do HELOCs.
“There’s nothing in the market to aggressively push them from a competitive standpoint,” Martin said.
Another reason is that the HELOC business is much smaller than traditional mortgage lending, which is also more advanced in digital offerings than HELOCs. Total HELOC balances held by banks was $411 billion at Dec. 31, compared to $2 trillion for one- to four-family mortgages, according to BankRegData.
Citizens Financial Group, Citigroup and Fifth Third Bancorp were the bottom three banks in the report. But Citizens, for one, has made it a priority to use technology to speed up the home-equity lending process. Bruce Van Saun, the CEO at the Providence, R.I., company, told American Banker late last year that the bank was using analytics to preapprove eligible borrowers so that they can have their funds in one to three weeks.