Home equity loans are on a pace so far this year to overtake credit card balances as the most securitized asset type.

According to Securities Data Co., the volume of securities backed by home equity loans in the first half increased more than 30% from the first half of 1996, to $27.1 billion. Volume of securities backed by credit card loans declined 47%, to $14.6 billion.

The sea change in the asset-backed market reflects a change in consumer behavior, a tightening of standards by credit card issuers, and increasing competition among home equity lenders, said Len Blum, an analyst at Prudential Securities.

Homeowners have been opting to transfer high-interest-rate credit card balances to longer-term, lower-rate home equity loans in recent months.

"We're seeing a lot of debt consolidation," Mr. Blum said. The home equity product can be a win-win situation for both customer and lender, he said.

"In many cases, home equity loans are the best deal for the consumer, rate-wise," he said. "And from the lender's perspective, it's a good product because you're lending on a securitized basis."

But the practice has attracted some criticism. As James Grant, editor of Grant's Interest Rate Observer, commented: "Having hocked their income streams, people now are opting to hock their homes."

The "wealth effect" may also be contributing to consumer behavior, said David Levy, director of forecasting at the Jerome Levy Economic Institute, Mount Kisco, N.Y.

Homeowners with investments in the stock market are particularly confident now, he explained, and may be making more purchases.

But these newly wealthy consumers will be more apt to take out a home equity loan rather than cash in their investments, Mr. Levy said. "It's tough to take your money off the table when the gambling is good," he said.

Credit cards have held the lion's share of asset-backed securities issuance since 1993. But in the past year, banks have generally tightened their credit card lending standards.

Unexpected losses and intense competition have resulted in more rational card marketing efforts, a Goldman, Sachs & Co. report noted.

Where the credit card market has shrunk, the home equity market has stepped in. For every lender that tightens up credit card lending standards, "there seems to be a complementary relaxation in the standards of home equity lending," Mr. Grant said.

The popularity of loans that exceed a home's value are an indication that "no one is being timid," added Mr. Levy. "The early '90s scared a lot of people away from real estate lending. This is a sign that confidence has returned."

Dozens of new players have entered the home equity market in recent years, drawn by the high profit margins the loans carry. The increase in competition among home equity lenders has served to educate consumers about the loans, Mr. Blum noted, and therefore created even more demand for them.

Wall Street's rush to securitize home equity loans is not without its potential dangers, Mr. Blum said.

"You have a lot of people that have never traded or banked this paper," he said, "and we're going through a bull market." If the market turns sour, these newcomers are apt to dump the securities immediately, he said.

The overall asset-backed securities market may not grow as much in 1997 as originally projected, the Goldman report noted. Issuance in the first half of this year trails 1996 by 17% and is unlikely to increase substantially in the second half of the year.

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