Two years ago, high loan-to-value (LTV) lending was the Gold Rush of mortgage banking. FirstPlus Financial Corp. of Dallas, the market leader, was still a darling of Wall Street and dominated the business of lending consumers money based not on what their house was worth, but their ability to pay.
For a while, high LTV--mostly a second lien product--looked like the greatest thing to come down the mortgage turnpike since, well, the creation of the adjustable-rate mortgage. But alas, the high LTV boom--a $10 billion-a-year, high-profit-margin niche-- didn't last, virtually collapsing with the bond market turmoil and subsequent flight to quality in the fall of 1998. FirstPlus has since filed for bankruptcy (see "A Comet Falls, An Industry Shifts," August 1999).