Huntington National Bank 2011 Annual Report Download - page 69

previously discussed, a significant portion of recent originations are secured by first-liens on the underlying
property as high quality borrowers take advantage of the current low variable-rates available with a line-of-credit.
If the current 30-year fixed-rate declines substantially from its already low level, we would anticipate some
portion of these first-lien line-of-credit borrowers to refinance to a more traditional residential mortgage at a
fixed-rate.
We believe we have underwritten credit conservatively within this portfolio. We have not originated home
equity loans or lines-of-credit with an LTV at origination greater than 100%, except for infrequent situations with
high-quality borrowers. However, continued declines in housing prices have likely decreased the value of the
collateral for this portfolio and have caused a portion of the portfolio to have an LTV ratio greater than 100%.
These higher LTV ratios are directly correlated with borrower payment patterns and are a particular focus of our
Loss Mitigation and Home Saver groups.
We obtain a property valuation for every loan or line-of-credit at origination. The type of property valuation
obtained is based on a series of credit parameters, and ranges from an AVM to a complete walkthrough appraisal.
While we believe an AVM estimate is an appropriate valuation source for a portion of our home equity lending
activities, we continue to re-evaluate all of our policies on an on-going basis with the intent of ensuring complete
independence in the requesting and reviewing of real estate valuations associated with loan decisions. We are
committed to appropriate valuations for all of our real estate lending, and do not anticipate significant impacts to
our loan decision process as a result of these guidelines. We update values as appropriate, and in compliance with
applicable regulations, for loans identified as higher risk. Loans are identified as higher risk based on
performance indicators and the updated values are utilized to facilitate our portfolio management processes, as
well as our workout and loss mitigation functions.
We continue to make origination policy adjustments based on our assessment of an appropriate risk profile,
as well as industry actions. In addition to origination policy adjustments, we take actions, as necessary, to
manage the risk profile of this portfolio.
Residential Mortgages Portfolio
We focus on higher quality borrowers and underwrite all applications centrally. We do not originate
residential mortgage loans that allow negative amortization or allow the borrower multiple payment options.
All residential mortgage loans are originated based on a completed full appraisal during the credit
underwriting process. We update values on a regular basis in compliance with applicable regulations to facilitate
our portfolio management, as well as our workout and loss mitigation functions.
At December 31, 2011, 50% of our total residential mortgage loans have adjustable rates. At December 31,
2011, ARM loans that were expected to have rates reset totaled $1.9 billion through 2015. These loans scheduled
to reset are primarily associated with loans originated subsequent to 2007, and as such, are not subject to the
most significant declines in underlying property value. Given the quality of our borrowers and the relatively low
current interest rates, we believe that we have a relatively limited exposure to ARM reset risk. Nonetheless, we
have taken actions to mitigate our risk exposure. We initiate borrower contact at least six months prior to the
interest rate resetting, and have been successful in converting many ARMs to fixed-rate loans through this
process.
Several government programs continued to impact the residential mortgage portfolio, including various
refinance programs such as HAMP and HARP, which positively affected the availability of credit for the
industry. During the year ended December 31, 2011, we closed $605 million in HARP residential mortgages and
$62 million in HAMP residential mortgages that are either in our residential mortgage portfolio or serviced for
others. We utilize these programs to enhance our existing strategies of working closely with our customers.
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