Despite fears that new entrants to the market would cut into their business volume, established home equity and subprime lenders recently posted record figures, and analysts continue to be optimistic about their performance.
All prominent lenders continue to originate and securitize loans at a rapid clip.
Money Store Inc., Sacramento, Calif., nearly doubled its home equity loan volume in the 12 months through April 30, according to a company statement. Volume climbed from $841.9 million in the period a year earlier to $1.23 billion.
In April, volume increased 54% to $322.7 million.
The key to the boom in origination volume has been securitization, which has became widespread over the past few years.
United Companies Financial Corp., a home equity lender based in Baton Rouge, La., announced a record securitization last week. A $650 million pool of B and C mortgage-backed certificates is now available through Prudential Securities Inc..
It was the second securitization this year for the company, which has been making home equity loans since 1946.
Contifinancial Corp., New York, another established home equity lender, is also expected to perform well, according to an analyst with Lehman Brothers Inc.
Coverage of the company was initiated this month with a "strong buy" rating by Lehman's Michael Millman.
In giving the positive rating, he cited the company's excellent growth potential. Contifinancial began securitizing loans in February of this year with a transaction that netted the company $149 million before fees.
The company's 109% increase in gross income for fiscal year 1996 can be attributed to expanding securitization volume and its alliance with seven different finance companies, said James Moore, president and chief executive at Contifinancial.
Mr. Millman expects Contifinancial to post earnings of $2.21 a share for the fiscal year ending March 31, 1997, a 21 cent increase from the previous year's earnings. He is predicting an even larger earnings jump the following year, to $2.71 a share.
Contifinancial is planning to expand its presence in the West, Mr. Moore said.