WASHINGTON – Home Equity Lines of Credit (HELOCs) are quicklyaccounting for a growing portion of credit unions' loan portfolio.In a Callahan & Associates-hosted Webinar March 22, creditunions already involved with HELOCs had the opportunity to sharetheir lending success stories and strategies for “Helping MembersUnlock their HELOC's Potential.” The Webinar was led by Callahan& Associates' Industry Analyst Tom Geggel and featured asguests: Tom Gray, SVP Lending, Workers CU, Fitchburg, Mass.; ScottRichter, VP Mortgage Lending, Eli Lilly FCU, Indianapolis, Ind.;and Mark Antonioli, VP Lending & Collections, Meriwest CU, SanJose, Calif.. How popular are HELOCs? In 1993, only 2,596 creditunions offered HELOC programs, but in 2004 that number was up to3,759 CUs. In addition, HELOCs were the second fastest growing loancategory for credit unions in 2004 – 29.61% (business loans rankedfirst with 34.23%). Among CUs with over $50 million in assets,HELOCs totaled $34.8 billion in outstanding loans for the industry.Geggel cited several factors fueling this growth – increased valueof homes means more equity can be drawn out (average U.S. homeprices rose 13% in the year ending Sept. 2004 and are up 50% overthe last five years); the public in general is more aware of HELOCproducts; credit unions have reduced their turnaround time onmembers' applications for HELOCs; and members have a higher comfortlevel with drawing against their home equity. The growingpopularity of HELOCs is not limited to credit unions, it's anationwide phenomena. The outstanding value of home equity loansrose 68% from 4Q 2000 to $827 billion as of September 2004 (FederalReserve); 1 in 4 households with a mortgage has a home equity loanor line of credit (National City Corp.); and $8.6 trillion canstill be borrowed nationally (Federal Reserve). “The beauty of theHELOC is its flexibility and ability to be used for variousthings,” said Geggel who mentioned some of the most popular uses ofHELOCs by members including home improvement, unsecured debtconsolidation, school tuition, buying a second home, vacations, andbuying a car. Gray said Workers CU has been offering HELOCs forover 20 years, and the product currently accounts for 26.1% of the$485 million CU's loan portfolio of $429 million. It has $115million in HELOCs outstanding and $25 million in home equity loans.Its delinquency rate for HELOCs 60 days or more outstanding is.20%. Gray described Workers CU's primary HELOC as being a “verystandardized product.” It is an 80% LTV, there are no introductoryteaser rates, and the CU charges prime minus .25 for life (with amaximum of 18%). The product is primarily for owner occupiedproperty although Workers does approve the loans on a case-by-casebasis for one-to-two family and condo apartments. There is also nominimum draw. Workers also recently introduced a 95% LTV productwith a minimum $10,000. it requires the borrower have mortgageinsurance in Massachusetts, and the CU added 1.75% to the ratewhich covers the insurance. Eli Lilly FCU has 3,033 Line of Credit(LOC) accounts with $132.4 million outstanding. It has anadditional $87.8 million outstanding in what the $626 million CUrefers to as its Home Equity Loan Program (HELP) Line of Credit.The CU initiated its program in 1986. Eli Lilly has two HELPproducts – a closed end HELP (15-year loan, no fees, members getsapproved amount in one lump sum) and a HELP 5/10 product (15-yearloan, fixed rate for five years then a variable rate, .75% basispoint fee). Neither product has a teaser rate. Eli Lilly promotesits LOC program by stressing to members the benefits of the productincluding spending flexibility, tax advantages, and itsavailability in all 50 states. Like Workers CU and Eli Lilly FCU,Meriwest CU has also seen tremendous success from its HELOC product– a $32 million portfolio net growth, increased penetration ofmember households, minimal delinquencies, and a 46% lineutilization. The $940 million CU's primary HELOC product is an 80%LTV to $250,000 product. Meriwest originates 100-200 new HELOCs amonth and says it makes decisions on applications within 30 minutesand has documents ready for signing within three days. Antoniolisaid Meriwest decided to offer HELOC's because it's a `sticky'product that has member and market driven demand. It's a verycompetitive product in our markets, he said, noting that Meriwesthasn't suffered any losses from its HELOC portfolio. -

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