Residential Funding Corp. has completed its first securitization of home equity lines of credit.
The Minneapolis conduit's $130 million securitization closed Feb. 3. It was a milestone in RFC's jump into home equity lending. It also highlights the growing role mortgage bankers are playing in the industry.
Bankers and consultants say home equity lending is becoming one of the hot growth areas in residential lending - especially now that interest rates have climbed.
Last week, CWM Mortgage Holdings Inc., a Pasadena, Calif., conduit partially owned by Countrywide Credit Industries, hired a high-profile home equity lender to form a new division that will originate credit-impaired loans.
There are three types of home equity lending: Open-end home equity lines of credit, which can be activated whenever a customer chooses, are the most popular; closed-end home equity loans work much as ordinary residential loans do; and many consider nonconforming loans "home equity loans."
RFC, a subsidiary of GMAC Mortgage Group, Minneapolis, began offering home equity lines of credit just over a year ago. A securitization of this size, so quickly, is noteworthy, said George R. Yacik, vice president of SMR Research Corp., Budd Lake, N.J.
"In terms of their production, I think it is fairly significant," he said. "We look to them to do a lot more."
Bruce Paradis, RFC's president, said the company plans to do just that. In two to three months, RFC will begin offering closed-end home equity lines of credit. It will also start hawking second liens with slightly impaired credit to its correspondent lenders and investors.
"For us to have a full line of products is very valuable," he said. "The diversification into other products is critical. And home equity lending is a big part of that."
He said he expects RFC to originate more than $750 million of home equity lines this year. It now originates about $40 million of home equity lines per month, he said.
The securitization "was a statement that we are a serious player" in home equity lending, he said.
RFC plans to continue to make bold moves. The conduit will soon have its own shelf just to securitize home equity loans, said Jeffrey S. Detwiler, managing director, GMAC Mortgage Group.