Oil Patch Still Looking Good

The same six states, including four known as oil-producing areas, remain on University Financial Associates' Nonprime Mortgage Report Best Places to Lend.

The fall 2004 list includes Alaska, Louisiana, Mississippi and Texas (the four oil states) plus North Dakota and West Virginia.

According to UFA, "best" places have expected loan values (what it defines as profitability) for a "constant-quality" borrower higher than in other states.

Until the summer 2004 report, a fifth oil state, Oklahoma, had been a member of this group.

As in previous reports, Dennis Capozza, professor of finance at the University of Michigan Business School and a principal in UFA, is quoted as saying, "Both borrowers and the underlying housing collateral in these areas are situated more favorably to withstand the consequences of an uncertain economy.

"Expected defaults in the best places can be as little as half the level of some of the less promising states. Losses can vary even more, since recoveries are also enhanced when economic conditions are favorable for lenders."

UFA said the Nonprime Mortgage Report makes its predictions based on "an extensive analysis of local economic conditions in each state and the relationship of those conditions to loan profitability.

"The historical record of millions of mortgage loans is studied each quarter to assess the vulnerability of each state to loan losses and prepayments."

SNAPSHOT: Best Places to Lend

Alaska Texas

Louisiana North Dakota

Mississippi West Virginia

Source: UFA

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