United States Government Publishing Office publisher pbl distributor dst United States Government Accountability Office General Government Division author aut Government Organization text government publication eng GAOREPORTS Legislative Agency Publications gao legislative 2010-08-12 U.S. Government Printing Office 1998-08-13 monographic deposited born digital 27 p. GA 1.13:GGD-98-169 https://www.govinfo.gov/app/details/GAOREPORTS-GGD-98-169 P0b002ee1803a4ac1 f:gg98169 DGPO 2010-08-12 2011-03-28 GAOREPORTS-GGD-98-169 machine generated eng fdlp REPORT GAOREPORTS-GGD-98-169 GGD-98-169 Loan defaults Mortgage loans Homeowners loans Credit Lending institutions Financial management Debt Losses Personal loans Letter Report GGD

Pursuant to a congressional request, GAO provided information on high-loan-to-value (HLTV) loans, focusing on the: (1) characteristics of HLTV loans; (2) major organizations that provided HLTV lending; (3) volume of HLTV lending in 1995, 1996, and 1997, and the expected volume in 1998; and (4) benefits and risks of HLTV lending for borrowers, lenders, investors, and regulated depository institutions.<p/>GAO noted that: (1) HLTV loans are considered hybrid loans because they have characteristics of both mortgage loans and unsecured consumer loans; (2) like mortgages, HLTV loans are secured by a lien on a house; (3) however, the lien itself may have less financial value than the amount of the loan in the event of a borrower's defaulting since the value of the HLTV loan and the original mortgage may exceed the value of the house; (4) thus, as with unsecured consumer loans, HLTV lenders rely more heavily on borrowers' creditworthiness; (5) according to industry officials, most borrowers use HLTV loans primarily to consolidate credit card debt or make home improvements; (6) while comprehensive industry data were not available, data provided by a lender responsible for about one-third of HLTV lending showed that, in 1997, HLTV loans averaged about $30,000; (7) the data also showed that the average contract interest rate was between 13 and 14 percent, with an average loan term of 25 years; (8) according to industry officials and GAO's review of the limited available industry data, from 1995 to 1997, HLTV loans were made or managed primarily by 10 institutions; (9) according to public- and private-sector officials, regulated depository institutions were not heavily involved in originating HLTV loans; (10) the involvement of these institutions would be important to any assessment of the potential exposure of federal deposit insurance funds to defaults of HLTV loans; (11) data indicate that HLTV lending has grown since its introduction in 1995 but remains small relative to other consumer lending; (12) data on the volume of HLTV loans were limited to those loans that were subsequently packaged into loan pools used to back securities sold to investors; (13) the volume of securitized HLTV lending has more than doubled from year to year from 1995 through 1997; (14) industry and securities firm representatives expected HLTV lending to increase again in 1998 to $12 billion or higher; (15) public- and private-sector officials pointed to several benefits and risks associated with HLTV lending to the borrower, lender, and investors; (16) while lenders and investors have benefited from the high rate of return on these loans, it is uncertain how these loans would perform during any future economic downturn; (17) if defaults were to increase, the rate of return would decrease; and (18) officials representing the two largest government-sponsored enterprises did not believe that HLTV lending posed greater risks to their portfolios than the existing credit card lending that the HLTV lending generally refinances. https://www.govinfo.gov/content/pkg/GAOREPORTS-GGD-98-169/html/GAOREPORTS-GGD-98-169.htm https://www.govinfo.gov/content/pkg/GAOREPORTS-GGD-98-169/pdf/GAOREPORTS-GGD-98-169.pdf GAO/GGD-98-169 https://www.govinfo.gov/app/details/GAOREPORTS-GGD-98-169 Letter Report GAO/GGD-98-169; High-Loan-to-Value Lending: Information on Loans Exceeding Home Value; Loan defaults Mortgage loans Homeowners loans Credit Lending institutions Financial management Debt Losses Personal loans Title 12 Section 2601et seq. 12 U.S.C. 2601et seq. Title 15 Section 1601et seq. 15 U.S.C. 1601et seq. Volume 108 Page 2106 108 Stat. 2106 Public Law 103-325 Title 12 Part 226 12 CFR Part 226