Congress Acts To Lower Lending Standards
Fitch Ratings tells us that a little known act will throw some gasoline on the fire. "May 2, 2005: 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."
That a ratings agency would shake the pom-poms for yet another lowering of standards tell you a lot about the current environment. "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. '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."