Five Questions With: Brendan Coughlin

Citizens Bank recently conducted a survey of 1,003 consumers who have a home equity line of credit or are planning to take one out soon and found differing responses among generations as to the purpose for the loans. People under the age of 40 were more likely to use their HELOCs for nontraditional uses, such as caretaking or financing an education.

In a recent interview, Brendan Coughlin, president/executive vice president for consumer deposits and lending at Citizens, spoke about the uses and perceptions of this loan product.

PBN: Within Citizens, how important is the home equity line of credit business and is this something the bank is aggressively trying to grow?

COUGHLIN: Home-equity lending is perhaps one of our most important product lines inside of the bank. It’s about $13 billion in size, in terms of balances. And we have No. 1 market share in home equity lending in all 11 states we operate in, from a brick-and-mortar perspective. In Rhode Island, we have an extraordinarily dominant market share.

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PBN: What is the origin of that market share? Are you aggressive in marketing this product?

COUGHLIN: Citizens has always been very strong in home-equity lending, all the way back to the pre-financial crisis boom. We’ve always leveraged this product as a lead acquisition product, for growth in the bank. We make the product extremely attractive from a pricing perspective. We have an exceptionally well-run customer experience. And we spend a lot of money on marketing. Our orientation is this is a lead product. If we can go out and give them a great deal, and their first taste of being at the bank is exceptional, then they’re likely to trust us. And we’ve earned more of their relationship to bring over. And that’s precisely how it’s played out.

And do we want to grow this? The answer is unequivocally, absolutely yes. We’re very aggressive in that for a lot of reasons. One of the challenges is, if you think of the pre-financial crisis and today, the last two boom cycles of the economy, the tap-able home equity across the U.S. has increased 15 to 20 percent for the average American. From 2006, prior to the crash, point to point, to 2018, the home equity people have in their home has gone up 15 to 20 percent. That’s a national figure but Rhode Island is in that same boat. While equity has accumulated, home equity [loan] balances have reduced over that same time period.

PBN: The survey focused on the millennial market, younger people who are now buying homes and moving into first homes. The survey indicated they are not as interested in HELOCs. Is this because they haven’t yet built up enough equity in their homes?

COUGHLIN: We’re very big on this generation, particularly those who have already gotten to home ownership or are likely to. We have seen a decent cohort of the older millennial generation … it goes up to [age] 36. The older side of the millennials, their attitudes and uses of this … of the ones that do [have home equity], we’re really looking carefully at it. How do we serve this population and are they different than the baby boomers and Gen X?

PBN: One of the findings of your survey was that instead of using home equity loan proceeds for home improvement, this generation is more likely to use it for covering expenses, to help them care for a baby, or another family member, or for repaying student loans. Those uses, other than home improvements, are no longer tax deductible under the new federal tax law. Is the loss of the tax incentive a challenge for the bank in marketing HELOCs to millennials? 

COUGHLIN: As a general statement, which crosses generations, there is a ton of confusion about the tax change. But put the tax stuff aside. [Say] you have a student loan at whatever rate. Unless it’s a subsidized student loan, say you have a Grad Plus loan, then throw out the tax treatment. If you’re moving your Grad Plus loan to a HELOC, you’re likely to save a lot of money. The tax-law change itself does not make this product unattractive. The same for debt consolidation. If you’re going to move an 18 percent credit card to a 4 percent home equity loan, that’s a huge win.

PBN: Your repayment of a HELOC is guaranteed by a house. Are millennials remembering that people lost their homes in the Great Recession because they got overextended, in part because of HELOCs?

COUGHLIN: If you look at the different generations, the older, non-millennial generation has almost exclusively migrated to this product for those uses that are exceptionally responsible: home improvement, debt consolidation, paying for your kid’s education, those are the three big ones. The days of using it as a piggy bank are not there.

Mary MacDonald is a staff writer for the PBN. Contact her at macdonald@pbn.com.