equity products across the country. The Charlotte, N.C., banking company's home equity unit will begin a large-scale push in January, beginning with correspondent lenders that already offer the company's nonconforming mortgage loans. The home equity line, on which borrowers can draw amounts as needed, "is one of the hottest loan products out there," said Dave Courier, vice president of First Union Home Equity Bank. The product also requires a committed lender behind it, since its credit line can extend for decades. First Union, for instance, is offering a 20- year line in its wholesale push. Mr. Courier said he expects First Union's product to be a hit, with as much as $200 million placed in 1996. He said he expects a large share of business from the 60 banks, savings and loans, credit unions, and mortgage brokers that already tap the First Union unit for nonconventional loans. These so-called B and C loans are made to borrowers with tainted credit histories. The B and C program, which received a wholesale push early last year, has seen its volume grow fourfold in the past 12 months, to $250 million, Mr. Courier. First Union wants to do the same for its home equity lines with the new wholesale effort. Companies that supply ratings for loans sold in the secondary market say home equity lines, because of their convenience, are indeed popular. "There certainly is demand for that kind of product," said Jennifer Schneider, a vice president with Duff & Phelps Credit Rating Co., New York. But, Ms. Schneider warned, the wholesale program will require "greater scrutiny" than retail efforts that rely on in-house employees. To be on the safe side, First Union may find itself reevaluating credit and property appraisals that accompany loan applications from outside brokers, Ms. Schneider said. Mr. Courier said the bank already has a good track record with its B and C program, and is taking additional steps to maintain close contact with correspondents. Also, the bank will make the home equity loans available only to borrowers with top-notch credit histories. At the same time, First Union is spending $250,000 to develop a more accessible product for the clients. "Our investment is heavy on the initial start-up," although the money will be well-spent, Mr. Courier said. Much of the money will help develop loan documents to meet specifications in different states. First Union will handle the task with help from an outside company that specializes in preparing and processing legal documents. To make the loans more attractive to its wholesale clients, First Union is offering a variety of payout options. Lenders can receive an up-front fee of as much as 2% of the line amount, or 4% of the initial advance from the credit line. Or, lenders can opt for an annuity, by receiving a share of the interest payments that First Union will take in. First Union is also striving to make the loans appeal to customers. In an unusual twist, borrowers can choose to make interest payments only, or to pay a flat percentage of the balance. Customers can tap the line, for the first time, during any time in the loan's 20-year life.
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