Magazine article American Banker

Competition Fierce as Home Equity Lending Comes Back to Life

Magazine article American Banker

Competition Fierce as Home Equity Lending Comes Back to Life

Article excerpt

As the economy snaps back, banks across the country are cranking up their home equity lending.

Banks are offering home equity loans at unusually low rates, sometimes lower than prime. They're often waiving fees. And many are promising no-hassle service.

"There's very heated competition in this market right now," said Harry Sisk, a senior vice president at San Francisco-based Union Bank.

Like many banks, Union is offering to make loan decisions within 24 hours. "To be honest, it's averaging three hours," Mr. Sisk said.

Reversing a Trend

All this marks a big change from the past few years, when many banks pulled back from home equity lending because of rising unemployment and falling home prices.

Last year, home equity lines of credit on banks' books declined by 0.8%, after increasing by 20% and more during the late 1980s, according to the Federal Deposit Insurance Corp.

Now, the improving economy is clearly bolstering lenders' spirits.

"The market has awoken," says Steven Fried, director of consumer credit policy for Citicorp's New York bank.

"All of our competition is advertising very heavily because we all need assets," added Robert G. Jones, senior vice president in charge of retail baking for keycorp, Cleveland.

"And it looks as if consumers have the wherewithal now."

Good Selling Points

Certainly, consumers have some solid reasons to look at home equity loans. With April 15 approaching, many consumers are considering consolidating other debt into home equity loans, the last consumer loans other than mortgages that have tax-deductible interest.

Also, spring is a traditional time for home improvement, and home equity loans often are the best way to finance such work.

Finally, while many consumers have been tapping their home equity by refinancing their first mortgages, those transactions are losing their appeal because of rising interest rates. …

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