Banks are always looking for ways to provide more services to their customers, while also gaining more loan opportunities to generate more interest income. The IBA is excited to announce we have a new Preferred Service Provider that can assist in this area. The Equity Protection Program powered by NFP allows a bank to increase loan growth, mitigate their losses and retain customers.
NFP — a leading provider of risk, benefit, wealth and retirement plan advisory services — offers specialized expertise and customized solutions across various insurance and benefit landscapes, worldwide. Its Equity Protection Program has been in place for a few years and demonstrated great success in financial institutions across the country. This credit enhancement covers insured home equity loans and HELOCs against borrower default. It provides coverage for insured loan defaults up to the terms of the insurance policy. The balance of the loan would be paid, in most cases, without the need to go through the foreclosure process.
This product increases loan growth by creating more loan opportunities and measurable growth for your home equity portfolio by expanding your CLTV and guideline parameters; along with delegated underwriting authority and prudent guidelines that safely improve net interest margin. This product will also assist in replacing lost revenue from declining mortgage and auto lending. The bank can mitigate losses because claims are paid for 100% of the outstanding balance up to coverage limits, and no foreclosure is required, avoiding the cost of long-term collections. This eliminates or at least reduces loan loss reserve requirements, freeing up capital for lending and supporting a strong balance sheet; and displays proactive risk management and is regulator friendly. In addition, there is no cost to the lender, as premiums are passed through to the borrower through a slight increase in interest rate.
The ability to drive higher loan margin volume and interest income, while also safely protecting your balance sheet, is definitely a win.
Retaining and attracting new customers is a primary goal for financial institutions, and with this product lenders can increase CLTVs to 80%-100%, attracting a broader base of homeowners. It also allows for more HELOC and home improvement choices for borrowers, with the same pricing for secured and unsecured loans. The ability to drive higher loan margin volume and interest income, while also safely protecting your balance sheet, is definitely a win.
The loan types covered by this product include:
- 100% HELOC and Closed End
- 100% Purchase Money 2nd
- 100% Doctor’s Purchase Money 2nd
- 100% 1st Lien HELOC
- 133% Secured Home Improvement
- Unsecured Home Improvement – two options
This program is an easy lift for your team, with no system integration or heavy IT involvement. All that is required is a simple monthly report of your outstanding loans utilizing the program. If the loan does default, you complete your normal collection processes and, if they are unsuccessful, the bank files a claim, and the loan will be fully paid off.
As you try to continue to find ways to increase lending, consider the Equity Protection Program and allow your customers to make those home improvements, while not having to refinance their first mortgage. For more information on this opportunity, contact Todd Andritsch at [email protected]; or me at [email protected].
