“By implementing a Pricing and Profitability Management approach we’ve gained a significant advantage that allows us to better manage our performance in a volatile home equity market.”
Home Equity Loan (HEL) or hybrid loan that you book?
Home Equity Lending Situation Analysis
As a home equity executive, you've probably encountered some of the following challenges:
- Your Q3 volume is 20% below plan: Should you change your pricing? If so, what is the appropriate change in APR to make up volume without dropping yield?
- Your biggest competitor drops rates by 25 basis points: How do you respond and how will your price move impact volumes and yield?
- Your HELOC utilization is below plan: Should you lower your rates? Run a promotion? If so, how will teaser rates impact your portfolio yield and volume?
- You're introducing a new Interest-Only product: How should you price it relative to your other products? What will be the impact of cannibalization?
According to a recent survey, 73% of home equity lenders plan to improve the way they answer these questions. Innovative home equity lenders are using Pricing and Profitability Management to set APR and fees that maximize profits while maintaining or increasing volume.
Why is Pricing and Profitability Management a Better Approach?
Innovative Home Equity Lenders are adopting a Pricing and Profitability Management approach to significantly increase profits, obtain valuable customer insight, and gain a competitive advantage. They have implemented Profit-Based Pricing solutions in 12 weeks, realized 10-20% profit improvements within three months, and have achieved a 10X return on investment (ROI) within a year of use.
Nomis Solutions developed the Nomis Price Optimizer™ for Home Equity specifically for the unique needs of Home Equity Lenders. By moving from risk-based or market-based pricing to Pricing and Profitability Management, the Nomis Price Optimizer for Home Equity helps maximize profits, while maintaining market share and revenue. Through the strategic use of customer data, the software allows you to optimize pricing by product and customer segment, across hundreds, thousands, or hundreds of thousands of pricing cells. The solution provides an understanding of how specific customer segments value your lending products and the optimal rate and price that should be offered.
The Nomis Price Optimizer for Home Equity enables you to:
- Better Tailor Prices and Maximize Profitability: Leveraging lost quote data, the solution provides a better understanding of consumer price sensitivity. By incorporating business goals, the solution increases profits while maintaining volume and credit quality. Accounting for adverse selection enables the solution to understand the critical interactions between pricing and risk.
- Enhance Customer Loyalty and Boost Lifetime Profitability: Taking multi-product information into account enables a full relationship view when determining price recommendations. Managing the impact of price-driven attrition, pre-payment, and default ensures that profit improvements are sustainable over time.
- Better Track and Control Pricing Decisions: An integrated view of the entire pricing process provides the ability to monitor performance, analyze gaps and opportunities for improvement, and learn how the market responds to new rates and prices. Having a record of all pricing decisions and the factors that influenced price provides more control over disparate impact and enables you to better meet regulatory requirements.
To learn more, request a copy of the Home Equity case study Enhancing Performance in Home Equity Lending
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