“People have some credit card debt, and they’ve got a 3% first mortgage, and you don’t want to do a cash-out refinance at 7% or 7.25%,” Ryan said. “So, they think, ‘Why don’t I just borrow $50,000 to $70,000 in a home equity and maybe debt consolidate, pay down that 15% to 20% credit card debt, and maybe do the addition to the home.’
“Consumers need cash. They are healthy enough to afford a little bit more debt, and they don’t want to pay down their first mortgage. So that’s the setup.”
Stacey Melton of Reasy Financial cautions potential homebuyers against expecting a significant drop in home prices or interest rates. She highlights the current mortgage market’s stability compared to 2008.https://t.co/P08RTpSWcY
— Mortgage Professional America Magazine (@MPAMagazineUS) May 22, 2025
While lenders know they won’t be able to sell these second-lien mortgages to Fannie Mae or Freddie Mac, Ryan noted there are investors who will buy these loans.
“The capital markets’ desire to buy these loans, because we can’t sell them to Fannie and Freddie, is really high right now,” he said. “We price everything to where our capital markets take out is. We’ll get bid sheets from our credit fund or dealer desk on Wall Street. Right now, we feel the buyers are paying a healthy gain on sales to us for those products relative to the risk.”
Ryan also notes a fairly even split between borrowers looking for fixed-rate HELs and variable-rate HELOCs. While there is an expectation of falling rates, making the variable-rate loan more attractive, some like the certainty of a fixed payment and full amortization schedule.