Huntington National Bank 2008 Annual Report Download - page 48

Collection action is initiated on an “as needed” basis through a centrally managed collection and recovery function. The collection
group employs a series of collection methodologies designed to maintain a high level of effectiveness while maximizing efficiency.
In addition to the retained consumer loan portfolio, the collection group is responsible for collection activity on all sold and
securitized consumer loans and leases. Please refer to the “Nonperforming Assets” discussion for further information regarding the
placement of consumer loans on nonaccrual status and the charging off of balances to the ALLL.
Our consumer loan portfolio is primarily comprised of traditional residential mortgages, home equity loans and lines of credit, and
automobile loans and leases. The residential mortgage and home equity portfolios are diversified throughout our geographic footprint.
As the performance of our automobile loan and lease portfolio changed during 2007, adjustments were made to our underwriting
processes and modeling approach that resulted in increased average FICO score and lower LTV ratios. The positive effects have
continued into 2008 as originations have shown lower levels of cumulative risk compared with 2007 originations. Our automobile
loan and lease portfolio is primarily located within our banking footprint, with no out-of-footprint state representing more than
10% of our 2008 originations. Florida, an out-of-footprint state that we have consistently operated in for over 10 years, represented
10% of our automobile loan and lease originations during 2008.
The general slowdown in the housing market has impacted the performance of our residential mortgage and home equity portfolios over
the past year. While the degree of price depreciation varies across our markets, all regions throughout our footprint have been affected.
Given the market conditions in our markets as described above in the single family home builder section, the home equity and
residential mortgage portfolios are particularly noteworthy, and are discussed below:
Table 25 — Selected Home Equity and Residential Mortgage Portfolio Data
12/31/08 12/31/07 12/31/08 12/31/07 12/31/08 12/31/07
Home Equity Loans Home Equity Lines of Credit Residential Mortgages
Ending Balance $3.1 billion $ 3.4 billion $4.4 billion $ 3.9 billion $4.8 billion $ 5.4 billion
Portfolio Weighted Average LTV ratio
(1)
70% 69% 78% 78% 76% 76%
Portfolio Weighted Average FICO
(2)
725 732 720 724 707 709
Home Equity Loans Home Equity Lines of Credit Residential Mortgages
Year Ended December 31, 2008
Originations $501 million $1,939 million $607 million
Origination Weighted Average LTV ratio
(1)
66% 74% 74%
Origination Weighted Average FICO
(2)
741 755 735
(1) The loan-to-value (LTV) ratios for home equity loans and home equity lines of credit are cumulative LTVs reflecting the balance of any senior loans.
(2) Portfolio Weighted Average FICO reflects currently updated customer credit scores whereas Origination Weighted Average FICO reflects the customer credit scores at the time of loan origination.
HOME EQUITY PORTFOLIO
Our home equity portfolio (loans and lines of credit) consists of both first and second mortgage loans with underwriting criteria based
on minimum FICO credit scores, debt-to-income ratios, and LTV ratios. Included in our home equity loan portfolio are $1.5 billion of
loans where the loan is secured by a first-mortgage lien on the property. We offer closed-end home equity loans with a fixed interest
rate and level monthly payments and a variable-rate, interest-only home equity line of credit. The weighted average cumulative LTV
ratio at origination of our home equity portfolio was 75% at December 31, 2008, unchanged from December 31, 2007.
We believe we have granted credit conservatively within this portfolio. We have not originated home equity loans or lines of credit
that allow negative amortization. Also, we have not originated home equity loans or lines of credit with an LTV ratio at origination
greater than 100%, except for infrequent situations with high quality borrowers. Home equity loans are generally fixed-rate with
periodic principal and interest payments. Home equity lines of credit generally have variable-rates of interest and do not require
payment of principal during the 10-year revolving period of the line.
We have taken several actions to mitigate the risk profile of this portfolio. We reduced, and in 2007, ultimately stopped originating
new production through brokers, a culmination of our strategy begun in early 2005 to diminish our exposure to the broker
channel. Reducing our reliance on brokers also lowers the risk profile as this channel typically included a higher-risk borrower
profile, as well as the risks associated with a third party sourcing arrangement. Also, we have focused production within our
banking footprint. In 2008, a home-equity line-of-credit management program was initiated to reduce our exposure to higher-risk
customers including, but not limited to, the reduction of line-of-credit limits.
We continue to make appropriate origination policy adjustments based on our own assessment of an appropriate risk profile as well
as industry actions. As an example, the significant changes made in 2008 by Fannie Mae and Freddie Mac resulted in the reduction of
our maximum LTV ratio on second-mortgage loans, even for customers with high FICO scores. While it is still too early to make any
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Management’s Discussion and Analysis Huntington Bancshares Incorporated