Heartland Financial offers low-income borrowers home improvement loans

Heartland Financial USA Inc., or HTLF, a bank holding company based in Dubuque, Iowa, is offering a home improvement loan product designed for low- and moderate-income homeowners through its 11 chartered units in 12 states.

This fixed-rate installment loan is secured by the borrower's primary residence. It has a 60-month term, with dollar amounts between $5,001 and $14,999.

"This is another way we can help serve the communities that we're in," said Brian Jensen, senior vice president, segment marketing director at HTLF. "We know that a lot of larger national banks have announced they're discontinuing some lending, pulling back on some lending, but we're actually doing the opposite."

Eligible property values will vary by ZIP code and by low or moderate income segments.

Home improvement activity has been trending upwards since the beginning of the pandemic, helped by several converging factors, including the expected rise in interest rates over the next two years, ever increasing home prices and the long-term inventory shortage.

Existing home maintenance volume — along with remodeling, a subset that includes renovations, additions and alterations activity — increased on a year-over-year basis for each of the last 12 months, according to BuildFax.

During July, maintenance activity rose 10.19% over 2020 with a 12.31% increase in remodeling. The cash spent on maintenance in July increased 29.26% over the prior year, while for the remodel subset, it was up 31.24%.

That upward trend is not likely to slow down. The average tenure an American spent in their current residence reached an all-time high of 10.62 years as of June, according to the First American Potential Home Sales Model.

"A number of factors are contributing to homeowners staying in their homes longer, including seniors aging in place, some homeowners feeling rate-locked into their homes, and homeowners afraid to sell because there isn't anything better for them to buy in a limited inventory market," said First American Chief Economist Mark Fleming said in a blog post. "On a year-over-year basis, the length of time homeowners live in their homes increased 3.8%, resulting in approximately 160,000 fewer potential home sales."

Annual growth in home renovation and repair expenditures will reach 8.6% by the second quarter of 2022, according to the Joint Center for Housing Studies of Harvard University's second quarter Leading Indicator of Remodeling Activity index.

"Home remodeling will likely grow at a faster pace given the ongoing strength of home sales, house price appreciation and new residential construction activity," said Chris Herbert, JCHS managing director. "A significant rise in permits for home improvements also indicates that owners are continuing to invest in bigger discretionary and replacement projects."

Annual remodeling expenditures for owner-occupied properties are expected to surpass $380 billion by the middle of 2022, added Abbe Will, associate project director in the JCHS' Remodeling Futures Program.

This program is available at all of HTLF's 11 chartered banks, and each will keep the loan in its own portfolio.

"This is not the only type of thing we've done but it's just another component of a broader strategy really to serve the communities we're in and make sure that we have credit products for everybody," Jensen said.

HTLF created a Buy Local loan earlier this year, which provides credit of up to $5,000 for unexpected expenses while shopping locally to support small businesses.