Countrywide Credit Industries is pushing its home equity products.
The nation's biggest independent mortgage company last week issued a "reminder" that it offers home equity lines of credit that let homeowners borrow up to 100% of the value of their properties.
"We felt it was a good time of the year to remind people that that vehicle is available to them," said G. Richard Bright, senior vice president of the Calabasas, Calif., company's home equity lending division.
The winter holidays aren't the only seasonal factor driving the company to market home equity lines. Interest rates have risen this year, causing conventional loan production - the company's bread and butter - to fall. Countrywide originated just $4 billion of loans last month, half the amount it closed in January. Refinancings accounted for 24% of 'its volume, down from 60% a year earlier.
Such an environment can leave mortgage companies that have extensive branch networks with excess capacity. "We need to fill that void with something," Mr. Bright said.
Home equity helps it do just that. It is considered a countercyclical product; demand increases when rates rise, because homeowners want to preserve the lower interest rates on their first mortgages. Loan officers in Countrywide's retail branches "know that when refis are down they can go through the last six months of closed loans, pull people's names, and generate additional business that way," Mr. Bright said.
Home equity production has bolstered earnings for other large mortgage companies this year, including Chase Manhattan's home loan unit.
These alternative products will not make up for the lost volume, however. David Olson, who is the managing director for Wholesale Access, a mortgage consulting and data gathering company in Columbia, Md., estimates that home equity line of credit originations are between $30 billion and $40 billion a year for the entire industry.
By comparison, the Mortgage Bankers Association of America expects that total mortgage originations will fall $218 billion this year and another $349 billion next year.
Even Mr. Bright was quick to say that home equity is "not completely countercyclical." Many of Countrywide's home equity loans are originated at the same time as first mortgages, he said, so writing fewer first mortgages means having fewer opportunities to sell home equity lines.
That is one reason why Countrywide's monthly home equity production has zigzagged: $243 million in May, $434 million in June, $282 million in July, and so on. The other reason, Mr. Bright said, is that draws on home equity lines are erratic.
Still, the entry of giants like Countrywide into the subprime and home equity businesses is affecting competition in home equity lending. Scott McAfee, president and chief executive of WMC Mortgage Corp. of Woodland Hills, Calif., said the influx of deep-pockets competitors will force the small independents that have dominated the market to become more efficient.
For example, he said, subprime lenders close only one-quarter to one-third of the loans in their pipelines, compared with 85% for mainstream lenders: "We spend a lot of money underwriting and documenting loans we never get paid for," Mr. McAfee said. "There's huge room for improvement."
He added that the banks and big mortgage banks are welcome competitors, because they are more rational about pricing loans than the securitizers that had dominated specialty lending until the meltdown in capital markets last year.
"I love it when a company like Countrywide comes in," he said. "They're logical. The same for the Chases of the world. They're not going to come in with an attitude of: 'Let's go buy the market.' There's too much intelligent analysis." 
