mortgage equity loan

Fitch Rates HSBC Home Equity Loan Trust (USA)(HELT) 2006-1

The 'AAA' rating on the senior certificates reflects the 39.50% total credit enhancement provided by the 10.5% class M-1 certificate, 7.80% class M-2 and the 21.20% initial over-collateralization (OC), and the 21.20% target OC. Initial OC is set at $279,407,406.

All certificates have the benefit of monthly excess cash flow to absorb losses. In addition, the ratings reflect the quality of the loans and the integrity of the transaction's legal structure, as well as the primary servicing capabilities of HSBC Finance Corp.

The mortgage pool consists of closed-end fixed and declining rate fully amortizing home equity loans with a cut-off date aggregate principal outstanding balance of $1,317,957,406. As of the cut-off date (June 14, 2006), the weighted average loan rate is approximately 8.42%, and the weighted average original term to maturity is 322 months.

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Equity loan or reverse mortgage?

DEAR BOB: My stubborn mother, 78, owns her home free and clear, is alert and in quite good health. The house is worth about $450,000. When I recently visited her (I live about 1,500 miles away so don't get to see her often), I was shocked at how run down her house has become. The roof leaks. I could smell the mold. She finally admitted to me, after a glass or two of champagne at Sunday brunch, that she has outlived her assets, except for social security and a small pension. When I suggested a reverse mortgage, which you often recommend, she said her banker recommends a home equity loan to pay for a new roof and other repairs. She wants to stay in her house "forever," especially because she loves her garden. What do you suggest?
-- Thomas R.
DEAR THOMAS: The big drawback of a home equity credit line is it requires monthly payments of at least interest only.

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