Why Would a Financial Institution Consider Home Equity Insurance?

A lot has changed over the course of the last few years, and the pandemic has shifted the landscape of residential real estate. As remote and hybrid work is adopted as the norm by many employer corporations, the new changes we’ve seen could be permanent. The pandemic and record low interest rates drove millions of new home seekers into the real estate market, with consumers seeking more square footage indoors and out. And at the very same time, many people who were already in a home were staying put, seeking refinancing to improve their home, rather than trying their hand in this red-hot market.

Now more than ever, financial institutions need to start shifting their focus to home equity lending. Homeowners have a record amount of equity in their homes due to the significant increase in home values.  This can help these potential borrowers by providing home equity products that compete with the Fintech providers. These Fintech providers often offer quick close loans and will loan well above 80% of the home’s value. However, many community lenders are still reluctant to make equity loans that go over 80% CLTV. Sticking to these parameters can often lead to your customer going somewhere else. How can your financial institution expand your guidelines without increasing the risk of default? Implement an Equity Protection Program. 



What is Home Equity Insurance?

Whether your clients want to expand or add a home office or a year-round sunroom, replace their roof, tackle a long-standing list of home improvement projects, or even fulfill a promise to help finance a college education – you want to help them be able to accomplish this goal. Enter: Red Rock Financial’s Home Equity Protection Program.

Red Rock Financial’s home equity protection program allows lenders to meet clients where they are, all while mitigating the risk associated with expanding equity loan portfolio parameters. Red Rock Financial’s insurance partner insures loans with augmented loan-to-value thresholds, debt-to-income ratios, and credit score ranges, so you can maintain your lending operations without worrying about the effects of default. If a client does default, the covered loan balance becomes payable.

Our home equity protection program at Red Rock Financial protects you against borrower default for any reason. There is no foreclosure required when you file a claim and either greatly reduced or totally eliminated REO charges for your financial institution. We also provide delegated loan underwriting authority by A.M. Best A-rated carriers and a customized rate structure. An increase in APR covers the cost of risk transfer without any required additional disclosure to your clients. With the home equity protection program, you can reduce or eliminate your loan loss reserve requirements and see a stronger bottom line overall as a result. 

Pricing for this program is customized to your financial institution. We’ll deliver a quote quickly based on multiple factors, including your lender loss history, the types of loans you select, as well as the expected volume of all covered loans. Your payable rate will be based in large part on the total outstanding balance of all loans insured with us.



Eligible Loan Types under Red Rock Financial’s Home Equity Protection Program: 

Interested in a comprehensive backstop that will allow you to secure your loan deals while managing a favorable loss ratio? We offer the following insurance on the following loan types to protect you against default:



• Home Equity Lines of Credit (HELOC)

• Home Improvement Loans (secured and unsecured)

• Purchase Money Seconds (combo, piggyback, and subordinate financing for 1^st)

• Closed-End Seconds 

Home Improvement:

An unsecured home improvement loan means you and your clients will no longer have to worry about expensive and time-consuming closing processes. You may expect unsecured home improvement loans to translate to an exorbitantly high interest rate. When you partner with Red Rock Financial, however, you’ll see a reduction in those interest rates, in turn helping you make more clients happy. Of course, you can see secured home improvement loans insured as well. We work with our lenders to make sure they can lend up to over 100% of the client’s property equity, all while mitigating risk.

HELOC:

Home equity line of credit (HELOC): Our HELOC loan coverage helps our lenders ensure their clients are happy and stay with the lender for good. Clients make monthly payments all while keeping a credit line open and available for future use.

When you partner with Red Rock Financial, we’re with you every step of the way, and so are our underwriters. We pay attention to what makes your institution unique, tailoring each equity protection program to your specific covered loan needs. After we’ve structured your program, we stick around for assistance with filing claims, dealing with premiums, reporting, and loan origination. 

Taking the Next Step: 

To summarize, Red Rock Financial’s equity protection program increases available loan options by expanding loan guidelines and parameters for a variety of home equity products in a fully insured portfolio program. By insuring loans with augmented loan-to-value thresholds, debt-to-income ratios and credit score ranges, you’ll be able to expand the equity loan offerings without taking on additional risk. 

Red Rock Financial can guide you to a competitive, easily managed equity protection program – giving you a leg up in this competitive market. Do you think our equity protection program might work for your institution? Let’s start a conversation. Red Rock’s purpose is to help lenders add value and solidify relationships. You can always get in touch with our team of insurance consultants at (847) 867-3311 or by filling out our online contact form.