For the first time, Texas is a factor in American Banker's annual home equity rankings.
Bank United Corp. of Houston led the nation's banks and thrifts in rate of growth for home equity loans in the 12 months through June, reflecting both the legalization of the loans late last year and the banking company's push to take advantage of it.
"The night Texans elected to pass home equity, we had truckloads of direct mail sent out offering our home equity loans," said Ron Coben, executive vice president and director of community banking at Bank United. "We had full-page ads in major Texas papers advertising our product the very next morning."
Though its growth rate was by far the fastest, Bank United remained a relatively small home equity lender, with only $626.2 million on the books. The statistical rankings (pages 14 and 15) show First Union Corp. atop the list, with $12.9 billion of loans and lines on the books, followed by NationsBank ($12.7 billion) and BankAmerica Corp. ($10.1 billion.)
NationsBank and BankAmerica Corp. have since merged, creating a home equity lender more than twice the size of its nearest competitor. Banc One Corp., which ranked fourth this June, with $9.3 billion, merged with First Chicago NBD Corp., $2.8 billion-for a total of $12.1 billion.
The merged Wells Fargo & Co. and Norwest Corp. would have had about $9.5 billion of home equity loans on the books as of June 30.
No Texas lender seems likely to challenge the leaders any time in the foreseeable future.
Mr. Coben said the Texas law, passed last November, holds lenders to some unusual rules.
There are no open-ended lines of credit. Because of the state's homestead laws, lenders can only offer fully funded, closed-end loans. Consumers must also have a 12-day cooling-off period and a three-day right- of-rescission period before their loans are processed.
Additionally, Texans can only borrow an aggregate of 80% loan-to-value, as opposed to 125% in many states. And refinancing is allowed only once a year in Texas.
"Texas is a conservative state and there's a great belief that people would make bad decisions about borrowing against their equity and end up losing their homes," said Mr. Coben. "Before, Texans would have to sell their home to get use of their equity and they couldn't borrow with a real estate secured loan at the best rates and deduct their interest."
But he added, "We've done a couple of hundred million dollars in lending that we wouldn't have otherwise."
Legalization has had an impact for some out-of-state companies with a presence in the state.
"Home equity lending is the reason consumer loans are up for Bank One," said Jeff Culberson, senior vice president for retail. "Texas is enjoying a very beneficial year in home equity loans compared to other branches throughout the country."
At First Union Corp., Charlotte, N.C., James E. Maynor, executive vice president of consumer lending, said marketing and direct mailing efforts have been ramped up companywide.
Mr. Maynor said he did not expect mortgage refinancing to continue at its current pace, but predicted strong demand for home equity loans would continue through the end of the year and into the first quarter of 1999.
Crestar Financial Corp. of Richmond, Va., ranked second in growth rate, nearly doubling its portfolio to $2.2 billion.
"We redesigned the types, terms, and requirements of the equity product we offer as of yearend '97," a bank spokesman said. "The lower rates have renewed the interest from consumers to obtain equity financing and we're in a very attractive place for equity product because the D.C.-area has a lot of population."