Rising rates, an appreciating housing market and the recently passed Jobs Act may set the stage for a large increase in issuance of home equity lines of credit (HELOCs) in the U.S. residential mortgage-backed securities sector, according to Fitch Ratings in the latest edition of ‘Mortgage Principles and Interest’.
‘HELOCs were not able to be securitized using a REMIC structure as each additional draw was considered a new loan prior to the passing of the American Jobs Creation Act of 2004, which went into effect Jan. 1 of this year,’ said Andrea Murad, Director, Fitch Ratings. ‘The Jobs Act addresses the revolving nature of a HELOC that allows borrowers to draw on their lines, after the loan has been securitized. HELOCs offer borrowers a cheaper means for home purchases, home improvement, to finance cars or tuition, or to pay off credit card debt.’
Fitch has already rated two senior-subordinate HELOC transactions this year from Lehman ABS and Greenpoint Mortgage Funding, with more anticipated throughout 2005.
The newsletter also includes an overview of disaster recovery when assessing RMBS originators, and analysis on option adjustable-rate mortgages (ARMs). To view or download a copy of ‘RMBS Mortgage Principles and Interest’, log on to the Fitch Ratings web site located at [www.fitchratings.com], choose ‘RMBS’ under the ‘Sectors’ heading and then select ‘Newsletters’.