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    Lending | 3 min read

    Deposit Rich & Loan Poor? Boost Equity Lending Without the Risk!

    Are you offering a value-added product to support your equity lending process? If the answer is no, you should know that right now, more than ever, is the ideal time to be doing so. With current renewed interest in equity lending programs and the refinance market on the decline, this is the perfect time to reconsider what value-added support products you offer.

    The Second Position Mortgage Program (SPMI) is designed to help financial institutions across the country safely approve more home equity loans & satisfy more customers. The program allows lenders another way to say yes to the borrowers they may normally have to reject due to equity constraints, and provides expansion on the underwriting criteria with protection against losses due to borrower default.

    The SPMI is a fully insured loan program designed to protect a lender’s home equity portfolio against losses due to borrower default. In addition to the default protection, the program enables the lender to reduce loan loss reserve requirements which can improve capital ratios. Equity loans up to 100% Loan-to-Value (LTV) and home improvement loans up to 133% LTV are available for coverage. Lenders have the ability to customize the program to meet their unique needs and are provided with delegated authority for loans within the guidelines.

    Eligible Loan Types Include:

    • Purchase Money Second

    • Closed-End Second

    • Home Equity Lines of Credit (HELOCs)

    • Home Improvement Loans (Secured/Unsecured)

    Below are some of the advantages of just one of the eligible loan types—the Purchase Money Second loan:

    • Enables the lender to do a conforming first mortgage and avoid private mortgage insurance (PMI), eligible on a purchase or a refinance transaction

    • Borrower saves money on their monthly payment by avoiding PMI

    • Enables the lender to avoid jumbo first mortgages which require PMI, adding additional fees when being sold to Fannie Mae or Freddie Mac

    • The conforming first mortgage is set by Fannie and Freddie. As long as the lender is selling to Fannie and Freddie, there are no regulatory concerns about not having PMI on the first mortgage.

    • Refinances can be completed as a HELOC, enabling the borrower to utilize the funds as they pay down the balance, locking in the borrower with the lender and eliminating the need to go to the competition for an additional loan

    • No additional costs for documents on the second mortgage when bound at the time of the purchase/refinance of the first mortgage since the same documents can be used to qualify the second mortgage

    • Loans can be be done behind a lender-originated first mortgage or a first mortgage originated by another lending institution

    Along with the advantages for eligible loans, the SPMI also has some noteworthy features. Here are some important highlights:

    • Expands LTV threshold to 100%

    • Increased loan volume with protection against borrower default

    • No foreclosure required

    • Premium is calculated on the monthly outstanding balance of insured loans

    • One rate for all loan types

    • Implementation is seamless, utilizing existing documents and loan systems

    • Provides balance sheet protection by eliminating charged off loans

    • Allows lower loan loss reserves thus improving one’s capital ratio

    • The ability to add 25%+ to the loan portfolio balance without additional risk

    • AM Best “A” rated carriers

    One of the main benefits of this program is that it offers lenders a streamlined claims process. In the event of a home equity default, the lending institution files a claim for the entire loan balance. No foreclosure is required to file a claim. A claim check for the entire loan balance is remitted to the financial institution in approximately 30 days. Using this program gives the lender a competitive advantage and a way to generate new loan volume as home purchases come back and people continue to take advantages of low interest rates to refinance.

    If you’d like to learn more about the SPMI and increase your equity lending, call 888-594-6575 today!


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    Kymberly Sims

    As the VP of Marketing & Sales Administration, Kymberly is responsible for overseeing all Marketing efforts of SWBC Lending Solutions. In addition, Kymberly works with internal and external customers to support the SWBC Lending Solutions sales team. Kymberly joined SWBC in 2008.

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