last have reduced homeowner equity, lenders were told here at the home equity lending conference of the Consumer Bankers Association. The result: There has been relatively little growth in the amount of home equity lines of credit actually tapped by potential borrowers, David Olson, president of David Olson Research Co., told the group. He said home equity credit lines used by consumers in 1994 and so far this year have gone up less than 5%, while revolving credit lines outside the mortgage homeownership field have increased 21%. Mr. Olson also tried to help lenders overcome the common fear of increased delinquencies for home equity lines of credit and second mortgages. "There isn't a bad story here," he said. Delinquencies are on the rise but the percentage is still average, he declared, and lenders shouldn't be very concerned. Losses on home equity loans are greatest in California, which is no surprise to anyone who has witnessed the decline in real estate values there, Mr. Olson said. The Midwest has the best record because the economy in the heartland is healthy. *** Lenders that have been successful in making high-risk home equity loans told potential entrants into the market what it takes to originate and handle such risky loans. "We really work (our high risk) portfolio hard," said Thomas Huddleston, vice president of Mellon Bank. More money and more personnel can be used to handle the loans, he said, because the high margins associated with high- risk loans bring in more money than traditional loans. California lenders are expanding their loan-to-value ratio to compete in a tough market, according to a lender in that market. Bank of America offers 100% loan-to-value on home equity loans, said Ronald N. Gerber, vice president. He said BofA made the move after Wells Fargo Bank offered similar loans. Mr. Gerber advised lenders to make sure borrowers have a strong credit background when the LTV is high. Complete documentation and full appraisals are also recommended. "This field is finally realizing who to sell to," he said, "and it's not just anyone who walks through the door."

*** One of the last sessions was on business process improvement, staged by Regina Reed, a senior manager at KPMG Peat Marwick. The most important factor is to keep costs down in every way, she said. Ms. Reed recommended that to maximize profits of their home equity departments lenders process as many applications as possible, approve loans quickly, keep origination costs down, and make the process as painless as possible for borrowers. Lenders should reduce the amount of contact borrowers have when originating home equity loans, Ms. Reed advised, particularly customers with an established relationship with the lender. A customer should not have to duplicate information the lender already has to originate a home equity loan, she said. She also suggested that lenders try to reduce approval time by walking a customer through the process over the phone. Heather Timmons contributed to this article.

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