The refinance market may be all-but-dead for mortgage lenders, but not everyone is singing the blues. Home equity lenders, thanks to their specialized customer base, are still in a bubbly mood as the refi- driven market for home equity securitizations has surged through the first half of 1994.

Those HEL securitizations have soared through June, rocketing to more than $4.9 billion and setting a pace that would nearly double its 1993 output, which was roughly $5.75 billion. That dramatic rise is attributable to increased first lien refinance activity among finance companies, most of which have kept volume up despite the rise in interest rates.

The finance companies have done well in making new loans, said George Yacik, vice president of SMR Research, a Budd Lake, N.J.-based firm that tracks the home equity markets. Yacik said that most of the loans these finance companies are originating and securitizing arent garden variety second liens, but are, rather, first mortgages designated as home equity loans.

Most of these loans are, in fact, first mortgages, Yacik said. In fact, the deal that The Money Store had in May [a $350 million deal] was 90% first lien mortgages, he said, adding that securitizations for these loans is getting more and more attention from investors because the securities arent as interest-rate sensitive and provide a more attractive yield than their government and conventional mortgage cousins.

Yacik said the refi market for finance companies was still strong because the customers attracted to them typically have credit problems. Because those problems often preclude them from going to conventional lenders, they find themselves at the doorstep of finance companies. And recently, those customers have been refinancing often, even with the higher rates.

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