Home-Equity Delinquencies Remain Low

A strong housing market and low interest rates has helped keep the delinquency rate on securitized home-equity loan portfolios low, according to Moody's Investors Service.

In February, the 60-plus-day delinquency rate was 5.53%, a 23% decline from one year earlier when the 60-day past due rate was 7.19%.

However, the February delinquency rate was a slight increase from the recent three month average of 5.49%, Moody's noted.

The February charge-off rate was 0.77%, a slight increase from 0.75% one month earlier. But the February charge-off rate was a 34% improvement from one year earlier, when the rate was 1.17%, Moody's said.

The Moody's home-equity index consists of three major types of loans: subprime, high loan-to-value (which includes home improvement loans) and traditional home-equity loans (which includes lines of credit).

Earlier, Fitch Ratings, in a separate report, indicated that it sees signs that the market for home-equity lines of credit continues to grow.

Rising interest rates and appreciation in home prices portend an increase in HELOC demand, Fitch said.

Fitch also noted that the American Jobs Act of 2004 allows for HELOCs to be securitized using a REMIC structure, which was previously not possible because each HELOC draw was considered a new loan.

Fitch said it has already rated two senior-subordinated HELOC transactions this year, from Lehman ABS and GreenPoint Mortgage Funding. And the rating agency said it expects to see more transactions through the year.

SNAPSHOT: Moody's HE 60-Day Past Due Rate

Feb '05 5.53%

Feb '04 7.19%

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