S&P to Change HELOC Analysis
Rating agency Standard & Poor's has revised its loss coverage and cash flow criteria used in the analysis of securities backed by home-equity lines of credit.
The new methodology, which became effective Aug. 1, applies to second-lien HELOC loans. Variables used in the model include credit score, combined loan-to-value ratio, utilization rate, back-end debt-to-income ratio, loan purpose, occupancy type, property type and documentation type.
S&P said the new methodology is less conservative than the previous one, which assumed 100% loss severity for all rating categories on second-lien HELOCs, regardless of cumulative LTV ratio.
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