As we enter the second half of 2026, the year seems to be playing out with few surprises. Interest rates have remained relatively high, depressing conventional loan volume and shifting consumer demand to home equity and non-QM products. Despite growing economic pressures on homeowners, loan performance — with the exception of government loans — is strong. Meanwhile, consolidation continues to occur, and perhaps accelerate, within the servicing space.
What we’re hearing from clients at conferences and in one-on-one meetings is that we now have the market that we planned for: not great, not dreadful, but steady and predictable. Looking at the second half of the year, no one is expecting big interest rate decreases, and given the global economic uncertainty and continued high inflation, a rate increase by year end isn’t out of the question.
The purchase market remains challenging for first-time buyers. Prices in many markets are still high, and inventory, while improving, is still being constrained by senior owners aging in place and homeowners with golden, record-low-interest-rate handcuffs. The deals that are still getting done tend to be at the upper end of the market, often with jumbo and non-QM products.
HELOCs and closed-end seconds look like they’ll continue to have wind at their backs and elevate originations because they’re the best alternative in a higher rate market. A new report by TransUnion puts the current home equity opportunity into perspective. In Q1, total tappable equity stood at $21.6 trillion. Although new home equity originations were up a healthy 16%, this hardly scratched the surface given that 85 million homeowners had an average of $277,000 tappable equity. When you compare this to 4.5 million homeowners that TransUnion says are in the money for refinances, it’s easy to see why lenders are focusing on home equity and cross selling and why we have seen growth in home equity securitizations year-over-year. Through May of 2026 there have been 10 HELOC securitizations, as compared with 8 through Q2 of 2025. Although the number of deals is close, the number of loans in the deals is up nearly 75% year-over-year.
Did someone not say “AI?”
Everywhere you go — every meeting, every conference, every industry webinar or podcast — it’s AI all the time, and probably no part of the mortgage industry is more focused on the potential of AI than servicers. They are beginning to deploy new tools and work with vendor partners to increase efficiency and effectiveness to improve margins. They are looking to these tools to stratify their portfolios in order to better identify recapture and cross-sell opportunities and to use agentic AI to personalize borrower outreach and enhance customer care. And do it better, faster and cheaper.
Being able to use AI at scale is one of the main drivers of the consolidation within the servicing sector that we have seen over the past year, and it is only going to continue.
What we’re rigging for
Like our clients, Covius’ focus in the first half of 2026 has been on some of the more dynamic sectors of the mortgage market. For example, our Clayton due diligence group has been heavily involved in loan reviews for non-QM and home equity securitizations, which, when those loan types are combined with the balance of the securitization market, is up more than 20% year-over-year at the mid-way point. And although there are areas of the market that have slowed as a result of the rate dynamics, Clayton is on pace to review a quarter of a million loans in 2026.
To handle the volume, we increased our staffing by more than 15% earlier this year.
In May, we completed the acquisition of Title365’s assets from Blend, which we announced last year. The acquisition has significantly expanded our national title capacity and given us a more prominent presence on the origination side of the business. We now have more resources and products, for example, property reports and legal and vesting offerings, that are available in hours versus days, to serve the growing home equity market.
Industry consolidation and large-scale servicing sales have resulted in major projects for our NTC solution, which in addition to being the market leader is lien release processing, also specializes in perfecting collateral, ensuring documents, recordings and assignments are managed in compliance.
On the AI front, Covius, like most of the rest of the industry, is actively examining ways that AI tools can optimize our business and workflows. We are exploring how AI can enhance recordation and modification support to effectively complement the servicer’s borrower outreach. For example, using AI for notary scheduling and signature reviews for document recording.
In our due diligence business, we’re looking at steps in the review process that can be automated: think indexing image and classification of the documents to be reviewed, etc. Importantly, what we are not using AI tools for is decisioning.
As I said at the outset, so far 2026 has been a relatively predictable year for our industry. While no one is happy with rates, volumes or the ongoing challenges of affordability and profitability, these headwinds are what the industry has rigged for, and this is giving us time (though not much) to rig for what’s next.