00:00From Las Vegas, Nevada, I'm Allison LaHorja, managing editor of HousingWire's Content
00:11Studio, and I am with CEO and Executive Chairman Joe Steffa from Spring EQ. Joe,
00:17thank you so much for joining me today. Thanks for having me. Excited to be here.
00:20So you were recently appointed CEO of Spring EQ. Talk to me a little bit about your vision
00:27for the future of the company. The vision starts really with the homeowner and thinking about what
00:32the homeowner needs today and for ways for them to continue to tap into the equity that they have
00:37in their homes. Home equity has been on the rise, volumes have been on the rise, and if we continue
00:42to meet the homeowner on their journey, wherever they are, we feel like we'll continue to be successful.
00:48We also need to think about who our customer is. The customer might just be an individual,
00:54but for us at Spring EQ, the customer might also be a broker partner or a third-party vendor that we
00:59work with as well. So we want to make sure that we're prepared to meet all of those different
01:03constituents at the right part of their journey. You just mentioned that there's been an increase
01:09over the past decade of people who are exploring their home equity options. Talk to me a little bit
01:14about why you think that we're seeing that trend and why people are choosing to explore their home
01:18equity options. That's a good question. If we think about the rise in home equity in our country,
01:23since January of 2020, you're seeing home prices up nationally somewhere around 50%.
01:29So you have three main reasons that our borrowers cite when they're taking out a home equity loan.
01:34One, debt consolidation. Two, replenishing savings. And three, the most commonly cited reason that we see,
01:42is home improvement. The average age of our homes in our country is around 40 years old. So as you think
01:48about the lock-in effect that was created because of the low interest rate environment during COVID,
01:53partnering that with the fact that people are sitting on all this cash that's trapped in their
01:57homes, they're starting to use some of that cash to do the home improvement that they did, whether it
02:01be renovating a kitchen, thinking about doing their basement over, work on the outside of their house.
02:06All those reasons are the main ones that they come to when they cite why they're taking out the home
02:10equity lines of credit today versus what it was years ago.
02:13So we've mentioned that home equity is in a really strong position. There's that increased
02:19trend in people wanting to use their home equity. So let's tie in Spring EQ here. What's on the horizon
02:24for Spring EQ and what does your growth plan look like? Good question. Where you're seeing today
02:31for Spring EQ and where we're going hopefully are aligned. What I like about Spring EQ right now is we are
02:39set up for continued success based upon home equity because of the many reasons we just talked about
02:44and the growth of the the possibilities in home equity. But what I would say is we also have
02:49expansion. So to answer your question more succinctly, we're currently thinking about more of the same.
02:56How do we grow volumes from a billion seven in 2023 to three billion last year to four billion of
03:02Spring EQ volumes this year to what's going to be five to five and a half billion of home equity volumes
03:07within Spring EQ. And also on top of that, we're going to be looking at product expansion. We just
03:13started piloting our non-QM program, in particular DSCR, very popular, very common. You think about some
03:20of the growth that you could see from there. And then Q1 of 2026, I think we're going to be rolling out
03:25a bank statement program. We're excited about that. When you think about the growth potential,
03:30non-QM is predicted to be somewhere between 75 and 85 billion dollars of originations next year.
03:36We're already a top three player in the IMBs for home equity. Now, as we expand into non-QM,
03:43how do we become a top three player there as well? And if we could become a top three player in non-QM,
03:49in addition to what we're doing in home equity currently, then I think you're looking at a 10
03:53billion dollar plus year originator. It sounds like there's some impressive growth in the works,
03:59but I want to touch on something that you just mentioned about being a top three player in the home
04:03equity space. Talk to me a little bit about the misconceptions, because I think there are many
04:08when it comes to home equity. And as a leader in that area, I would love to hear your perspective.
04:14There are definitely misconceptions. One is you don't need perfect credit to take out a home equity
04:19line of credit or a closed-end second mortgage. We go down to as low as 640 FICO. We go up to 90 LTV,
04:25so we have a fairly wide expansive credit box. And many of our peers do as well, but we make sure that we
04:30cover a large part of the customers in the country. In addition to that, there are more and more
04:37people tapping into their home equity for a variety of reasons that we already discussed.
04:42You don't need a scenario where the borrowers necessarily need the money. It might just be that
04:47it's a nice to have. Historically, people thought of HELOC as an emergency fund. Now, talk about home
04:54improvement, now they're using it to actually improve the value of their homes, which at some point,
04:58maybe interest rates are lower, maybe they're moving, maybe that lock-in effect alleviates a
05:02little bit. And as such, they've improved the value of their homes and they're going to be able to
05:05extract that equity or get it back out. I think that's why you've seen a real rise in the use of
05:11home equity, because now you're able to get something back for it. Versus if you look at what
05:15happened during the 2008 crisis, you saw homes that were significant underwater and people were giving
05:19back their keys. Today, very much different value proposition. We're entering at a much lower LTV
05:25standpoint, so you have a lot of equity built up in these homes and that we as lenders feel
05:29comfortable and the borrowers also feel comfortable. So you just mentioned that shift in why borrowers
05:35are tapping into their home equity or an expansion of the usage of it. Talk to me a little bit about
05:40what you would say to somebody who's interested in getting a home equity loan or HELOC.
05:46Do your research, right? Think about all the different borrowers that are out there. SpringQ was
05:50started in 2016 doing home equity then. We were way early to the party, but now as you've seen the
05:57rise and many banks returning to that, to the products as well, how can you do your proper
06:03research to make sure, okay, am I working with a bank partner? Am I working with an IMB? What are my
06:08needs? Do I need to fund quickly? Do I feel comfortable with the underwriting that they're doing? So I think you
06:14need to do your research on your various lenders that are available to you out there. And there are plenty
06:19of resources to be able to do so. The other thing I would tell you Allison is to partner with someone
06:24like SpringQ because we are a Better Business Bureau A-plus rated company that has been serving
06:31over 120,000 customers at this point and funded over 11 and a half billion in origination since our
06:37inception on home equity alone. So if you think about those numbers, they're pretty staggering.
06:41Very impressive numbers and congratulations on those numbers. That is an impressive feat. So I have to ask you
06:47with the success that you've had, the growth plans that you have in place for the future,
06:52how do you see the next two years playing out in the second mortgage space? Good question. Second
06:56mortgage space, I think even in a down interest rate cycle, still provides plenty of home equity to be
07:01done. For example, there is a little over five trillion of agency mortgages alone trapped in
07:09in Fannie and Freddie loans, okay, in a three and three quarter coupon or less. So even in rates down
07:18a hundred from here we are today, if you think about the Fed forward path, you still have significant
07:22equity trapped in. So I think home equity volumes, now they're somewhere around 250 billion between
07:28HELOC's closed and etc. I think can continue to rise even in a potentially down interest rate cycle
07:35or in a certain area where we stay where we are today. I feel good about the continued growth
07:40of home equity. I think there's also more and more lenders that are getting into the space and borrowers
07:44are becoming more comfortable with it. Home equity second mortgages used to be a little bit of a
07:50dirty word. A lot of that has been alleviated over the past few years and a legitimization via some of
07:56the banks returning to the space or many of the independent mortgage banks that are continuing to offer
08:01more expensive products. Joe, thank you so much for taking us through what's going on with SpringEQ
08:07and the plans that you have for the future of the company. I think that it's a very exciting space.
08:12It sounds like there's some new things coming and that we'll hear more from you soon. We're excited.
08:17Thank you for taking the time. I think the growth opportunities are there and we just have to go out
08:20and achieve them now. Thank you so much for joining me today. Thanks Alison.
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