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Countrywide Capitalizing on Demand for Home Equity Products

Countrywide Home Loans here originated a record $3.1 billion in home-equity loans in August, according to new figures released by the company.

Countrywide's home-equity volume rose 8% compared to July and a stunning 80% compared to August of last year.

The funder, according to figures compiled by this newspaper, is already one of the largest second-lien lenders in the U.S., a business it has not been in for very long.

Traditionally, commercial banks have dominated the home-equity and "HELOC" market, but that dominance is fast fading.

In the second quarter, for instance, Countrywide ranked fifth among all home-equity lenders, originating $7.3 billion. (Its second-quarter 2004 home-equity volume rose 67% compared to the same quarter last year.)

Countrywide, which has a national bank affiliate, puts some of the home-equity loans it originates on the balance of its depository. It also continues to issue home-equity, asset-backed securities. In early September it priced a $2 billion ABS deal, insured by MBIA Inc., and rated "Aaa" by Moody's.

The company is also the largest overall funder of first-lien home mortgages. In the second quarter, Countrywide originated $99.6 billion in residential mortgages, a figure that includes both first and second liens. (Wells Fargo Home Mortgage, Des Moines, ranked a close second at $96.1 billion.)

The home-equity market continues to be a hot niche right now, thanks to rising home prices which feeds the "cash out" refi market. Also, second liens increasingly are being used in 80-10-10 loan structures, which allow consumers to avoid paying private mortgage insurance.

An 80-10-10 structure translates into an 80% mortgage, a 10% downpayment and a 10% second lien. By achieving an 80% loan-to-value ratio the consumer does not have to pay PMI.

There are variations on the 80-10-10 including the 80-5-15 and other combinations. Countrywide has been, and continues to be, heavily involved in these "piggyback" loan structures.

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