Corporate Settlement Solutions (CSS), a full-suite provider of real estate settlement solutions, recently released results from its full-year 2024 Home Equity Valuation Analysis which shows a continued increase in the use of automated valuation models (AVMs) among lenders originating home equity loans, according to a release.
The CSS Home Equity Valuation Analysis reviews the valuation products that CSS lenders used for home equity originations, specifically, automated valuation model/property condition reports; appraiser-valued hybrids; full appraisals; non-appraiser-valued hybrids and drive-by appraisals.
According to the report, in 2024 CSS clients used AVM/property condition reports on 34 percent of their home equity loans compared to 2023 when AVMs were used on 25 percent of loans. AVMs were the only product category among the five that had an increase on a year-over-year basis.
Appraiser-valued hybrids were the second most-frequently selected valuation model in 2024 at 25 percent (down from 29 percent), followed by full appraisals at 18 percent (down from 19 percent), drive-by appraisals at 12 percent (no change) and non-appraiser-valued hybrids at 11 percent (down from 15 percent).
As the real estate market continues to face headwinds for purchase originations, CSS said, home equity lending is an opportunity many lenders are leveraging. Because home equity lending is typically a no- or low-cost offering by most lenders, AVMs have grown in popularity since they deliver valuations quickly and inexpensively.
Homeowners across the U.S. have an average of more than $320,000 in equity, and, all told, about 90 percent of homeowners have some level of “tappable” equity available for withdrawal. Moreover, homeowners with historically low first mortgage rates often opt for home equity products for renovations and debt consolidations rather than refinance their mortgage.
“Given continued tight mortgage market conditions, home equity lending is a bright spot for many lenders with expectations that it will only increase over the next several years,” said Ashley Jelinek, CEO of CSS CEO Ashley Jelinek said in the release. “The key to profitable home equity lending though is efficient, accurate and cost-effective valuation of properties. Our analysis shows that lenders continue to see and take advantage of the value—both from a cost and timing perspective—of using AVMs.”