Wall Street will securitize $2 billion of home-equity loans this month, and because of the way the deals will be structured, either start a trend or set a time bomb ticking.

"The door is definitely open" for either possibility, said Catherine Needham, managing director of the structured finance group at Moody's Investors Service, New York. "It will depend on who rushes in, and how many times."

At issue is the way the loans will be packaged. The approach-a so-called senior-subordinate structure-segregates strong and weak loans. Under the tiering method, lenders must come up with more capital to prop up the securities if they begin to fail, or investors could suffer losses.

The method is a switch from the way most home-equity securitizations have been handled. Usually, lenders paid a fee to bond-insurance companies for providing triple-A ratings and guaranteeing against losses.

While big lenders are believed to have the financial muscle to support flagging loans, smaller companies could crowd in and then desert the securities if they run into trouble, industry observers said.

They point to other areas, such as credit-card securitizations, where the senior-sub structure is more frequently used, with mixed results.

Contifinancial Co. began pioneering the use of the senior-sub structure for home-equity deals last month, with a $400 million package whose takers included pension funds and insurance companies.

The reception prompted other home-equity lenders to approach ratings agencies about launching their own senior-sub deals. Michele J. Loesch, associate director at Fitch Investors Service, said she has $2 billion of loan packages from seven home-equity companies on her desk, ready to be reviewed and sold this month.

She said confidentiality agreements prevented her from disclosing the names of the companies, but she did say they were among the "top tier" in the home-equity industry. To avert problems for investors, ratings agencies look closely at deals to make sure that companies can live up to their promise to support the securities, Ms. Loesch said.

Contifinancial and Cityscape Financial Corp.-two of the industry's biggest home-equity lenders-are among the companies eager for senior-sub deals.

"The approach can be more economical for us," allowing the company to make more money from securitizations, said John Banu, senior vice president at New York-based Contifinancial.

By having the option of using bond insurance or another structure, "we have versatility we didn't have before," Mr. Banu said. "That can be appealing to investors."

Indeed, investors can run up against limits on how much bond-insured paper they can hold. The senior-sub structure gives them an opportunity to purchase more home-equity securities, making for a more liquid market, Mr. Banu said. As for offerings by smaller companies, Mr. Banu's advice was: Let the investor beware. "Each deal should be judged on its merits," he said.

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