Huntington National Bank 2014 Annual Report Download - page 54

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Table 11 - Selected Home Equity and Residential Mortgage Portfolio Data
(dollar amounts in millions)
Home Equity Residential Mortgage
Secured by first-lien Secured by junior-lien
December 31,
2014 2013 2014 2013 2014 2013
Ending balance $5,129 $4,842 $3,362 $3,494 $5,831 $5,321
Portfolio weighted average LTV ratio(1) 71% 71% 81% 81% 74% 74%
Portfolio weighted average FICO score(2) 759 758 752 741 752 743
Home Equity Residential Mortgage (3)
Secured by first-lien Secured by junior-lien
Year Ended December 31,
2014 2013 2014 2013 2014 2013
Originations $1,566 $1,745 $872 $529 $1,192 $1,625
Origination weighted average LTV ratio(1) 74% 69% 83% 81% 83% 79%
Origination weighted average FICO score(2) 775 771 765 756 752 757
(1) The LTV ratios for home equity loans and home equity lines-of-credit are cumulative and reflect the balance of any senior loans. LTV ratios
reflect collateral values at the time of loan origination.
(2) Portfolio weighted average FICO scores reflect currently updated customer credit scores whereas origination weighted average FICO scores
reflect the customer credit scores at the time of loan origination.
(3) Represents only owned-portfolio originations.
Home Equity Portfolio
Our home equity portfolio (loans and lines-of-credit) consists of both first-lien and junior-lien mortgage loans with underwriting
criteria based on minimum credit scores, debt-to-income ratios, and LTV ratios. We offer closed-end home equity loans which are
generally fixed-rate with principal and interest payments, and variable-rate interest-only home equity lines-of-credit which do not
require payment of principal during the 10-year revolving period of the line-of-credit. Applications are underwritten centrally in
conjunction with an automated underwriting system.
Given the low interest rate environment over the past several years, many borrowers have utilized the line-of-credit home equity
product as the primary source of financing their home versus residential mortgages. The proportion of the home equity portfolio
secured by a first-lien has increased significantly over the past three years, positively impacting the portfolio’s risk profile. At
December 31, 2014, $5.1 billion or 60% of our total home equity portfolio was secured by first-lien mortgages compared to 58% in
the prior year. The first-lien position, combined with continued high average FICO scores and high LTV, significantly reduces the
credit risk associated with these loans.
Within the home equity portfolio, the standard product is a 10-year interest-only draw period with a 20-year fully amortizing term
at the end of the draw period. Prior to 2007, the standard product was a 10-year draw period with a balloon payment. In either case,
after the 10-year draw period, the borrower must reapply, subject to full underwriting guidelines, to continue with the interest only
revolving structure or begin repaying the debt in a term structure.
The principal and interest payment associated with the term structure will be higher than the interest-only payment, resulting in
maturity risk. Our maturity risk can be segregated into two distinct segments: (1) home equity lines-of-credit underwritten with a
balloon payment at maturity and (2) home equity lines-of-credit with an automatic conversion to a 20-year amortizing loan. We
manage this risk based on both the actual maturity date of the line-of-credit structure and at the end of the 10-year draw period. This
maturity risk is embedded in the portfolio which we address with proactive contact strategies beginning one year prior to maturity. In
certain circumstances, our Home Saver group is able to provide payment and structure relief to borrowers experiencing significant
financial hardship associated with the payment adjustment. Our existing HELOC maturity strategy is consistent with the recent
regulatory guidance.