For the first time, commercial bankers are expected to be the majority at the National Home Equity Mortgage Association's annual conference.

The change reflects both an increase in home equity lending by banks, which view the loans as a way to hedge against the loss of mortgage volume when interest rates rise, and a period of consolidation and retrenchment among home equity specialists.

The ranks of specialized mortgage banks and specialty finance companies were drastically thinned after the Russian debt default dried up the market for the asset-backed securities they used to fund their loans. "First of all, the liquidity crisis knocked the hell out of a lot of them, then some of the larger ones got bought," said Jeffrey Zeltzer, executive director of the association.

Reflecting consolidation of the industry and the smaller contingents sent by some members, attendance is expected to drop to about 650, from 890 last year and about 1,000 in 1997, Mr. Zeltzer said. Association membership has dropped by about 60 as a result of the shrinking industry, he said.

High on the list of topics to be discussed are the competitive challenges posed by the big, well-capitalized players that are coming to dominate the business. In addition to banks, which can keep loans in their portfolios when no secondary market for them exists, these big lenders include diversified finance companies such as Associates Inc. and Household Inc. that can cross-sell other products to their borrowers.

What's more, Fannie Mae and Freddie Mac, two huge government-sponsored enterprises that buy home loans, are taking a higher profile in subprime and home equity finance, prompting fears that pricing of higher-quality loans will tighten.

The conference agenda, however, is dominated by sessions on what many home equity lenders view as potentially burdensome predatory lending legislation.

Responding to consumer groups' complaints that lenders were making loans that borrowers could not afford, then foreclosing on their property, North Carolina last year enacted a bill regulating what it defined as "high cost" mortgages.

North Carolina has barred lenders from charging fees to modify or extend a loan, accelerating payment schedules, requiring balloon payments, increasing the interest rate on a loan after default, or providing for negative amortization on a loan. The home equity association is tracking similar initiatives in 10 states.

Mr. Zeltzer said the association is emphasizing self-regulation as an alternative to government regulation. It is promoting a code of ethics, which specifies, among other things, that lenders should not lend for the purpose of foreclosing on property, and emphasizes clear communication of loan terms to borrowers.

The association also has "best practices" guidelines that suggest internal reviews of procedures and diligence in reviewing the qualifications of brokers and other vendors.

M. Jack Mayesh, chief executive officer of Long Beach (Calif.) Financial, is scheduled to make a presentation on ethics on Thursday. U.S. Federal Trade Commissioner Orson Swindle is scheduled to speak Friday about enforcement.

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