Home equity lending surged last year as refinancing tailed off, according to a study by SMR Research Corp.

The Budd Lake, N.J., consultancy estimates that outstanding home equity loans increased 12% last year. That would be the first significant increase in three years.

SMR put yearend outstandings of home equity loans at $299 billion.

Much of the improvement has to do with the demise of the refinance boom, said George R. Yacik, an SMR vice president and the principal author of "Second Mortgage & Home Equity Loans, 1995: Fast Growth, New Entrants, New Strategies." He said first mortgage refinancings often include second mortgage liens.

According to the report, the big players in home equity lending are changing. General Motors Acceptance Corp., Detroit; Ford Motor Credit Co., Dearborn, Mich.; and General Electric Capital Corp., Stamford, Conn., are gaining on companies like Bank of America, San Francisco, the top home equity lender in the nation.

The study also found that the potential for home equity lending has grown dramatically. Perhaps 10.4 million borrowers refinanced their first mortgages during the recent boom with rates under 7%.

The need for cash could become be critical for these people. The need to refinance will not. A logical solution: Take out a home equity loan.

Home equity loans did not have the poor credit quality many would expect, according to SMR. Revolving home equity lines had a lower delinquency rate than any other kind of loan, the study found.

Minnesota is the hot spot for home equity lending. And the most popular local market: Appleton, Wis.

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