Home Equity Emerges As A Generational Growth Strategy For Originators

With refinance activity constrained and purchase volume under pressure, lenders are being forced to rethink their sustainable growth plans. The answer is becoming clear: home equity. As millions of homeowners remain locked into low mortgage rates, they are turning to second liens and mortgages to access equity without disrupting their primary loan.

Tom Davis, Chief Sales Officer at Deephaven, explains why home equity is no longer a niche product but has emerged as one of the most significant opportunities in today’s lending environment.

He shares how originators can reposition their approach and what it takes to compete as retention and recapture dynamics shift across the industry.

Home equity is today’s biggest lending opportunity

HousingWire: You see home equity as a “generational opportunity.” What makes this cycle different, and why aren’t more lenders treating equity as a core strategy?

Tom Davis: The backdrop is simple: The U.S. is very equity-rich. Seventy percent of borrowers have mortgage rates below 5%, effectively freezing the traditional cash-out refinance market. Borrowers don’t want to give up those low rates, so they’re looking for other ways to access liquidity.

At the same time, U.S home equity has surpassed a record high of $35 trillion in tappable equity across U.S. households. A significant portion of wealth is tied to housing. In fact, there are roughly 24M millionaires in the U.S., and an estimated 75% of that wealth is built through home equity. That reality is reshaping how borrowers think about liquidity and how to use it for practical needs. 

The typical U.S. home is now 40-50 years old, driving a surge in renovation activity. Industry forecasts call for more than $600 billion in home improvement spending in 2026, as more homeowners plan to stay in place long term. Reinvesting in aging homes has become a practical and strategic decision.

Beyond renovations, demand is driven by high consumer debt, which has reached $5 trillion as borrowers consolidate high-interest obligations such as credit cards. Self-employed borrowers are leveraging equity to fund businesses, and investors are using it to expand portfolios without disrupting low-rate first liens. The use cases are broad, but the common theme is that equity is now the primary liquidity tool.

As for why lenders haven’t fully embraced it, most are still focused on purchase volume. But that leaves a gap. Originators underestimate both the size of the opportunity and the role equity plays in retaining clients. The data shows that more than 70% of borrowers don’t return to their original loan officer for their next transaction. That’s a major missed opportunity, and equity products are among the best ways to stay connected with that borrower. 

Why borrowers need alternatives to refinancing

HW: How should originators shift the conversation from refinancing to equity solutions like HELOCs or closed-end seconds?

TD: This is where the role of the originator evolves into more of a financial advisor. Instead of defaulting to a refinance, originators need to walk borrowers through the economics. If someone has a $500,000 mortgage at 3% and needs $50,000, it rarely makes sense to refinance the entire balance at today’s higher rates. A second lien loan allows them to preserve that low first mortgage while accessing the funds they need.

Using tools like blended rate calculators helps illustrate this clearly. When borrowers see the difference between total payments and long-term costs, the decision often becomes obvious. It’s about giving them options and helping them make the most financially sound choice.

If you put a borrower into a worse financial position, you risk losing them permanently. But if you guide them correctly, you build trust and create a long-term relationship.

HW: Deephaven has leaned into a broader equity portfolio, including closed-end seconds, DSCR second liens and digital HELOC options. How important is product variety right now, and where do you see the biggest opportunity to improve product delivery?   

TD: It’s critical. The equity market is growing quickly and is expected to represent a meaningful share of total originations. But borrowers don’t all have the same needs. Some want fixed payments and stability, which makes closed-end seconds attractive. Others need flexibility, especially investors or self-employed borrowers, where HELOCs or alternative documentation products make more sense.

That’s why having a full suite of options matters. It allows originators to match the product to the borrower’s situation rather than forcing a one-size-fits-all solution. At Deephaven, we’ve built an arsenal of products to give originators that flexibility across primary, secondary and investment properties.

Retention and recapture are the real battle

HW: Let’s talk about customer retention. How do equity products fit into a broader recapture strategy, especially as servicers become more aggressive?

TD: Servicers have mastered retention. Years ago, client retention rates were around 25%. Today, they’re over 70% and, in some cases, even higher after a second transaction. Once a loan is sold, servicers immediately begin targeting those borrowers with new offers. They have the data, the analytics and the timing down to a science.

If originators aren’t offering home equity products, they’re not just missing a deal today; they’re also losing the borrower to future transactions. That’s the bigger risk. With more than 40% of American homeowners now mortgage-free, a significant portion of the market has no relationship with a lender at all. 

The most successful originators treat equity as a core part of their retention strategy. They stay engaged with past clients, offer relevant solutions and position themselves as the go-to resource. Equity products create natural reasons to reconnect, whether it’s renovations, debt consolidation or investment opportunities.

How originators can build an equity strategy 

HW: Where do you see the biggest gaps in today’s digital HELOC landscape?   

TD: Most digital HELOC solutions are highly automated, but they lack flexibility. They rely heavily on automated valuation models and rigid underwriting parameters, which means if a borrower doesn’t fit neatly into the box, the deal falls apart.

What we’ve focused on is a hybrid approach. You still get the speed and efficiency of digital, but with manual off-ramps when needed. That includes the ability to use appraisals for more accurate valuations, to review bank statements for nontraditional income and to handle edge cases more effectively.

That human element makes a big difference. Borrowers aren’t always standard, and originators need tools that can adapt to real-world scenarios. 

HW: What does it take for originators to successfully integrate these products into their business? 

TD: It starts with training and mindset. The difference between average and top-performing originators is their level of expertise. The best professionals invest in understanding these products and how to position them.

From there, it’s about being strategic. Instead of chasing low-probability leads, focus on segments with real opportunity. Investors, for example, account for a significant share of transactions and often complete multiple deals per year. That’s a much higher lifetime value than a traditional borrower.

The same applies to referral partners. A small percentage of real estate agents control the majority of listings. If you can bring differentiated expertise, especially in non-agency and equity solutions, you can break into those relationships.

Finally, it’s about leveraging your existing database. Every past client likely has equity. Reaching out with a simple, value-driven conversation can open the door to new opportunities. The best originators stay connected, provide solutions and continuously create value.

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