Following a tough year for home-equity, with various headline-risk issues (i.e. predatory lending) and continued industry consolidation, the home-equity sector might have scored a few points last week when Chase Manhattan confirmed that it is, in fact, Advanta's suitor.

This, combined with Citibank's acquisition of Associates First Capital, adds to the sense that the market is maturing, analysts said, as the larger banks move further into subprime.

"This shows that these major financial institutions view the subprime market as a part of the mortgage market they want to be major players in," said Tom Zimmerman, asset-backed securities analyst at UBS Warburg. "They're legitimizing what for some years has been viewed with some skepticism by some investors, and I think these companies are putting their stamp of approval on it, which is a pretty strong stamp."

Also working in the market's favor, large, well-capitalized entities like Countrywide Credit Industries and GMAC Residential Funding Corp. continue expanding their product bases. Countrywide recently brought its first high-loan-to-value transaction to market.

In terms of securitization, the Chase mortgage unit has been a regular player in the home-equity sector over the last few years, averaging roughly $1.5 billion in home-equity issuance each year since 1998, according to Thomson Financial Securities Data.

However, the subprime mortgage ABS that Chase has brought to market has not been associated with Chase's consumer finance arm, but has been collateral acquired through other channels, including bulk purchases, according to a source close to the Chase.

The real question is, does J.P. Morgan Chase intend to use Advanta as part of its Consumer Finance unit, and keep the loans on its books, or does Chase intend to fold Advanta into its mortgage unit and use the retail production as a source of collateral for deals?

According to a spokesman at J.P. Morgan Chase, the Advanta operation is in the hands of the consumer-finance unit. "We will not see it on the capital markets side," he said.

Whether or not J.P Chase will eventually issue self-originated home-equity ABS remains to be seen, for unlike the specialty finance companies that dominated the market just two or three years ago, the new, large, well-capitalized subprime players are not reliant on the market for funding.

Bank of America, which acquired EquiCredit Corp. (via the acquisition of Barnett Banks) in 1998, has yet to bring a home-equity deal to market from that portfolio, although, according to a source at BofA, Equicredit had not been reliant on securitization for some time before the acquisition.

As for Advanta, the company said it will continue working on its small business credit card product, which it debuted in the ABS market last year.

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