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Deephaven Mortgage: second liens go from niche to necessity as equity hits $35 trillion

In a mortgage market still grappling with high rates and low inventory, one product category is quietly stepping into the spotlight − closed-end second mortgages. Once seen as a super niche tool for “special circumstances,” second liens are becoming a staple in borrower strategy, originator pipelines, and lender growth. Someone who’s seen this market take off first-hand is Tom Davis, chief sales officer at Deephaven Mortgage. Today, he’s one of the most vocal advocates of their broader role in the lending environment. “We have all-time high equity at around $35 trillion,” Davis tells MPA. “At the same time, consumer debt is at an all-time high − whether it’s credit cards, auto loans, or student loans.” That combination − record equity levels and rising consumer obligations − has created a demand profile that’s both urgent and highly specific. And as Davis notes, the structural shifts in homeownership are yet another key factor in this changing market.

Deephaven Mortgage is a pioneer and leader in non-QM since their origin in 2012. Their longevity and strength in the non-QM space have allowed a significant number of borrowers to achieve homeownership who otherwise would not have under traditional requirements. Deephaven offers a wide array of non-QM loan products that include a true LLC business purpose lending option. Their non-QM portfolio includes a DSCR cash-flow loan, expanded-prime, equity advantage second mortgage, equity advantage HELOC, and non-prime solutions for borrowers who miss traditional agency qualifications. As experts and educators in the non-QM sector, Deephaven offers extensive training to all of their mortgage partners.

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“If you’re not staying engaged with your borrowers today, in the future when it comes time for them to refinance, you’re more than likely going to lose the opportunity”

Tom Davis, Deephaven Mortgage

50 percent of second-lien originations are for renovation loans“The average age of a home in the US today is 40 to 50 years old − and close to 60 percent of homeowners have a mortgage rate under 4 percent. People are staying in their homes longer, and some plan to stay forever. They’re not trading up; instead, they’re looking to renovate.” In fact, more than 50 percent of second-lien originations are for renovation loans − that’s the largest segment, according to Davis. Debt consolidation comes next, followed by people leveraging equity to fund businesses or buy more investment properties. Davis notes that close to 30 percent of purchase transactions year-to-date have been investor properties. In fact, the really savvy investors aren’t refinancing a first lien at 3 percent just to pull cash out − instead, they’re using second liens to improve properties, expand portfolio, or both. Because, for many of these borrowers, the second lien is both convenient and necessary. Davis explains that at Deephaven they’re seeing people tap equity to pay off medical bills, send their kids to school, consolidate $1,100 in monthly debt, and take cash out for home improvements − all in the same loan.

Published Oct 20, 2025

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“You have to master the product. The brokers who become subject matter experts are the ones who will win”

Tom Davis, Deephaven Mortgage

“The non-agency market is expected to hit over $200 billion in 2025,” he adds. “Non-QM will be the largest part, around $100 billion. But the second largest? Second liens, whether HELOC or closed end, are expected to reach close to $60 billion.” That growth isn’t just speculative either; it’s actually grounded in the rate environment and borrower psychology. “I don’t think rates are coming down materially,” says Davis. “Marginally, maybe. But both times the Fed lowered rates recently, mortgage rates actually went up. And unless something major happens, we’re not going back to 3 percent anytime soon.”

A ‘great opportunity’ to stay in front of your clients Which means second liens aren’t a passing trend. As Davis explains, rates would have to come down 150 to 200 basis points for second liens not to be relevant − something he simply doesn’t see happening. What Davis does see here, however, is an opening for brokers and originators to re-engage dormant databases in a meaningful way. He urges brokers to pick up the phone and make that call − because it’s a relationship that the customer will remember down the line. “It’s a great opportunity to stay in front of your client,” says Davis. “Call them, congratulate them on their low rate, congratulate them on their equity, and just ask: ‘What are your goals right now? Are you thinking about a renovation? Want to consolidate some debt? Send your kid to college? Fund your business?’ That’s where the conversation starts.” Because if the loan officer doesn’t stay in front of the borrower, the servicer will. And if it’s the servicer who does the second lien, then they’re going to own that customer for the next refinance too.

“The recapture rate is close to 85 percent when the servicer holds both the first and second. If you’re not offering a second lien today, you’re not only losing the loan − you’re losing the borrower,” Davis warns. And the product’s value proposition is particularly strong for real estate investors, who face very different trade-offs than traditional borrowers. “You have to approach it like a financial planner,” explains Davis. “Look at the first lien: rate, term, payment. Then look at the second: how much cash is needed, what’s the cost? Then use a blended rate calculator to compare.” Say, for example, a customer has a half-million-dollar mortgage at 3 percent and they want to take out $50,000. It doesn’t make sense to give up a large balance at a low note rate. A second lien, however, lets them get the money they need without disrupting their primary mortgage − and it’s an easy target market.

The power of a strong marketing campaign “Go back through the last 10 or 15 years of borrowers − almost all of them have equity,” says Davis. “It’s such an easy call to make because you’re just picking up the phone and touching base with your existing client base. Pick up the phone, congratulate them on the equity, congratulate them on their low interest rate, and then just get a pulse check on their financial situation. We’ve seen cases where an investor took out $100,000 on one property as a second lien, split it into two $50,000 down payments, and bought two more investment properties.”

Davis adds that beyond just dialling, this process is really about delivering messaging at scale. As he tells MPA, the power of a drip campaign is huge. It’s about asking clients questions such as ‘Have you thought about renovating? Consolidating debt? Funding a business? Buying another property?’ Off the back of this, at Deephaven, Davis and team are working with clients to offer a bespoke marketing service that includes level-of-service templated messaging, email content, and strategy plans. And if they have a marketing department, even better − Deephaven will help build a full outreach campaign alongside it.

The future of closed-end second mortgages With such an interest in closed-end second mortgages, looking to the future, Davis is firm on his advice for brokers: educate yourself in order to remain competitive. “You have to master the product,” he says. “The brokers who become subject matter experts are the ones who will win. Because this isn’t going away, and borrowers are going to expect it. At Deephaven, we provide everything: white-labelled marketing materials, calculators, presentations.” However, all of this must be embraced at the strategy level. The broker must believe in it, train their people on it, and make it a part of their larger process. “If you’re not staying engaged with your borrowers today, in the future when it comes time for them to refinance, you’re more than likely going to lose the opportunity. This has to be a part of your strategic product offering − you have to embrace it, become versed in it. Because if not, you’ll lose borrowers today and in the future.”

Source: TransUnion Equity Report

Equity available, non-mortgage debt grows

86 million homeowners have tappable equity, with a median of $267K. Notably, 6.5 million of them have over $1 million in available equity HELOC and HELOAN originations increased 12% YoY Homeowners had $808 billion in non-mortgage debt in Q2 2025 – up 4% YoY 22.8 million homeowners carry at least $10,000 in non-mortgage debt 408,000 HELOCs are reaching end of draw periods in the next 12 months Early stage delinquencies for HELOANs and HELOCs remain at all-time lows

Source: Deephaven

Equity Advantage Closed-End Second

A standalone second mortgage to help borrowers unlock equity. Borrowers keep their first-lien mortgage and interest rate.

Primary, second homes, and investment properties Loan amounts up to $750,000 Full doc, 1-year P&L, personal and business bank statements Cash-out ownership seasoning − minimum 6 months DSCR income allowed – maximum loan amount $500,000