Despite rising interest rates and the cooling of the national housing market, banks typically characterize their year-to-date 2006 home equity originations as "strong" and are, on average, on target for achieving nearly 100% of HE originations goals by year-end, finds a report by CBA ASaP Research, entitled Home Equity Standalones, Piggybacks, Production Sales and Originations Goals.

The report presents the results of a survey of seventeen banks undertaken in October, and finds that new marketing campaigns—usually direct mail campaigns—have played an integral role in sustaining healthy originations in 2006. The seventeen banks profiled in the ASaP report estimate that, on average, approximately 30% of their YTD originations are owed to marketing initiatives launched in 2006.

According to the report, standalone HE products, i.e., HE lines and loans originated on their own, rather than in conjunction with a first mortgage, dominate banks’ portfolios when compared to piggyback products, or lines and loan originated alongside a mortgage. The average HE portfolio for participating banks is 86% standalones and 14% piggybacks.

Most banks reported that poor alignment of pricing and sales incentives structures between mortgage and HE groups has inhibited mortgage-to-HE originations potential, when asked why the first mortgage channel is typically underutilized, in a rising interest rate environment, wherein HE channel maximization can be critical to offsetting the negative impact that rate hikes typically have on HE originations.

Most banks, survey results show, wish to increase their piggyback percentage significantly to improve their HE originations—to comprise between 20% and 70% of portfolio—though none of the banks reporting a desire to increase piggybacks had any plan or strategy in development to harmonize prices/incentives between their HE and mortgage groups.

The ASaP report is available free of charge to CBA corporate members by calling CBA Research Manager Richard Caponetti at (703) 276-3880, or emailing Caponetti at rcaponetti@cbanet.org.   ASaP Research is currently conducting surveys on Wholesale Home Equity Brokers and Mortgage/Home Equity Loan Applicaton Cycles. To participate, please contact CBA Research Manager Richard Caponetti at (703) 276-3880, or email Caponetti at rcaponetti@cbanet.org.