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To: Giordano Bruno who wrote (248909)	7/8/2003 9:54:12 PM
From: Giordano Bruno	Read Replies (1) \| Respond to of 436258

Asset-backeds - Home equity sector heats up Tuesday July 8, 3:42 pm ET NEW YORK, July 8 (Reuters) - The home equity sector, as expected, heated up on Tuesday, with several large mortgage lenders planning to offer more than $2 billion in new supply this week, market sources said. Those lenders included Countrywide Financial Corp. (NYSE:CFC - News), H&R Block Inc.'s (NYSE:HRB - News) Option One Mortgage unit and the Residential Funding Corp. unit of General Motors Corp.'s (NYSE:GM - News) General Motors Acceptance Corp. While there are fears over more borrowers defaulting and falling behind on their loan payments, investors have not stayed away from home equity ABS, analysts said. Attractive yields on bonds backed by home loans, which have risen recently due to growing supply, have spurred healthy buying from investors, analysts said. "There is demand in the home equity sector. Their spreads have widened," said Kishore Yalamanchili, analyst at State Street Research and Management Co. in Boston, which oversees $26 billion in bonds. For example, spreads, or the yield premium, on five-year, floating-rate home equity ABS, with a bond rating of BBB, were quoted anywhere from 3.25 to 4.50 percentage points over one-month Libor. This compared with spreads of 1 point on BBB-rated credit card ABS with similar maturity. The tepid economic recovery has yet to improve the U.S. employment picture, as was evident in the June U.S. employment report when the jobless rate hit a nine-year high. But most consumers have managed to pay their bills and debt on time, analysts said. As a result, delinquencies and defaults have not risen to the alarming levels that hurt the returns of asset-backed securities backed by consumer credit like credit cards and home equity loans, analysts said. Even loan delinquencies and losses among subprime borrowers, or people with patchy credit histories, have not deteriorated greatly, they said. But "future subprime performance may suffer if increased competition between lenders leads to a relaxation of underwriting standards, since this would ultimately result in a weakening of the credit quality of subprime (loan) pools," Julia Tung, an analyst at Moody's Investors Service (News - Websites), said in a statment on Tuesday about a new Moody's report on subprime home equity loans. biz.yahoo.com Now divide that by 2 million unemployed telemarketers