California-based Pennymac Financial Services’s broker division, Pennymac TPO, launched a home equity loan product as tappable home equity nears its 2022 peak.

“Pennymac’s broker partners can now offer their clients a home equity loan as a second lien solution to access more cash, while still preserving the low interest rate of their first mortgage,” the company said. 

A home equity loan — also known as a second mortgage — enables a homeowner to borrow money by leveraging equity in a home. The borrower receives the loan amount in one lump sum, which is paid back in monthly payments, typically for a term of up to 30 years.

The product is eligible only for primary residences with fixed-rate term structures of 10, 15, 20 or 30 years.

Currently available in 11 states, the minimum loan amount is $50,000 and the maximum is $500,000 with an 85% loan-to-value (LTV).

Pennymac’s home equity loan for brokers comes as U.S. homeowners sit on some $16.4 trillion of home equity in the third quarter of 2023. Tappable equity – the amount that can be accessed after retaining a 20% equity stake – stood at $10.6 trillion, nearing the peak in 2022, according to ICE Mortgage Technology‘s mortgage monitor report. 

While cash-out refinancing was a popular way to access accumulated home equity when mortgage rates were lower, that’s a lot less appealing with rates over 7%.

Even with higher levels of home equity, borrowers are more likely to take out a second-lien mortgage rather than lose a low rate on their first mortgage through a cash-out refi.

Pennymac reported a total of $19 billion in total acquisitions and originations to date in the fourth quarter, including $16.3 billion in correspondent acquisitions; $1.6 billion in broker direct originations; and $600 million in consumer direct originations, according to its latest 8-K filing with the U.S. Securities and Exchange Commission (SEC) on Monday.