BBVA and Prosper are partnering to launch a digital home equity line of credit.
At the start, the online application will live on Prosper’s website. Over time, it will become available on BBVA’s site and its mobile banking app.
BBVA gets a faster, easier, more convenient and presumably cheaper way to make home equity lines of credit. Prosper, meanwhile, gets a new revenue stream and a chance to broaden out its business model. (BBVA will pay Prosper a fee for each HELOC booked through its platform.)
Both companies were thinking about digitizing the home equity line of credit at the same time, according to Cagri Suzer, head of retail banking at BBVA USA.
BBVA has already been working with Prosper, one of the first peer-to-peer online lenders for unsecured personal loans, for some time. BBVA buys some of the loans granted through Prosper’s platform.
Currently, if someone wants to apply for a home equity line of credit at BBVA, they go to the bank’s online banking site and fill out an application form. A banker then calls them to go over the rest of the application.
In the new process using Prosper’s platform, as the customer fills out an online application, Prosper will verify the person’s identity, conduct fraud reviews and apply the bank’s underwriting rules. The approved customer will receive the funds within three weeks. (The industry average is about 42 days, according to Suzer.)
Prosper is contributing more than software in this arrangement, according to CEO David Kimball.
“This is not software as a service, it’s loan origination as a service,” he said. “We are able to take what has historically been a pretty [cumbersome] process and make it a much more succinct, more customer-friendly process. Over $16 billion worth of loans have been originated in the course of our existence through our platform. So origination is something we know well. And so in this case we're able to take the combination of our tech platform and our ability to do the overall verifications and do the overall origination and be able to provide that as a service to BBVA.”
It also provides support. If a BBVA customer experiences any problem while in the Prosper platform, Prosper personnel will take care of it, Kimball said.
“We have a group of engineers here focused on that,” he said.
BBVA is Prosper’s only bank partner for the digital HELOC within the bank’s footprint: Alabama, Texas, New Mexico, Colorado and Arizona. Prosper is signing other partners in other geographic regions.
“BBVA is a very tech-forward partner and that's the reason they were one of the first financial institutions that we thought of when we thought of this product,” Kimball said.
Both companies believe there will be a boom in demand for home equity lines of credit, even though such loans have been declining of late. Suzer noted that personal loans and home equity lines of credit are offered side by side in BBVA’s branches today. The HELOC has no closing costs and can be used on demand.
Kimball suggested that better technology could help drive HELOC activity.
“When we started in the personal loan business 13 years ago, there was a lot of excitement about home equity and there wasn't a whole lot of excitement on the personal loan side,” he said. “And part of that was because the personal loan process was difficult and there wasn't a whole lot of innovation there. We were able to make that change. And now one of the reasons that you hear about why people don’t want to do home equity is that personal loans are so much easier than home equity is as the home equity process is difficult. We want to do in home equity what we've done in personal loans, which is make that process much easier.”
Though they’re launching the customer-facing portions of their HELOC technology right away, Prosper and BBVA will continue to work together to integrate all the steps after an application is approved, like asset verification and closing. For instance, currently BBVA uses robotics on the back end to retrieve title. In the future, Prosper will be able to incorporate that in its process.
