To the Editor:

We were pleased to read Lawrence Richter Quinn’s coverage of Irwin Home Equity Corp. in his Oct. 11 article “Irwin Gets High Grade in Scoring Technology” [page 11].

We would, however, like to point out one misconception: that Irwin is a subprime lender. Irwin is a high-loan-to-value, junior-lien lender offering debt consolidation loans to consumers not well served by conventional lending channels.

Mr. Quinn’s characterization of Irwin as a subprime lender is not uncommon. We believe that we and other mortgage lenders are so misidentified largely because there is no other available description. It seems that anything that is not a conventional, conforming, first-lien mortgage is categorized as “subprime.”

There is a great deal of confusion today about what is and isn’t subprime. Over the past two decades a plethora of products have evolved from the traditional, fixed-rate, conforming first and second mortgages.

The industry actively markets a range of programs and pricing options to tailor its products to the borrowers’ needs and qualifications. The bank that used to offer only a 30-year, fixed-rate, first-lien mortgage now offers adjustable-rate mortgages; home-equity loans and lines of credit for home-improvement or debt-consolidation purposes; subprime loans; high-loan-to-value second mortgages; reverse mortgages; firsts and seconds with convertible features and multiple indices; and any combination or permutation of these.

There are nonbank lenders competing in the marketplace as well, yet we still attempt to identify the risks in terms of prime and subprime.

Recently this lack of differentiation has become even more problematic, since there is no distinction being made between subprime and the current hot button, predatory lending.

We believe that, given the regulatory and legislative efforts under way to address the matter of predatory lending, the time has come for the industry to step up its efforts to educate the media, the public, and the policymakers on the different programs in today’s marketplace, as well as the distinctions between legitimate loan program features and predatory practices.

This need was made clear during and after the Federal Reserve Board’s recent round of Home Ownership and Equity Protection Act hearings.

Not only was there a misconception among the panelists about where predatory lending problems are to be found, but the local press’ coverage of the hearings showed a lack of understanding of the mortgage industry. Unable to accurately cover the story, the press perpetuated the public’s misunderstanding of the issues.

Given the wide variety of mortgage products, broad-brush regulation meant to combat predatory lending will not achieve the desired results. The regulatory and legislative focus at the federal and state levels should be on managing the practices that result in the loss of a borrower’s equity or home.

Expanding disclosure requirements and establishing broad rules that restrict rates and product features will hamper legitimate lenders in meeting the credit needs of their customers, forcing these lenders out of the marketplace.

While the recent Fed hearings were a good starting point for discussion between all players in the industry, the next step should be to gather and share data among the parties in an effort to start the education process.

Ideally, this process should eliminate misconceptions about mortgage categories and provide an opportunity to address predatory lending with a shared understanding in a unified way.

Elena Delgado, President and CEO, Irwin Home Equity Corp., San Ramon, Calif.

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