As many HEL investors might suspect, a borrower's loan-to-value ratio is perhaps the leading factor in a given loan's loss severity. Studies show that borrowers are far less likely to abandon their homes - instead attempting to refinance or find a way to pay their monthly mortgage payment - when they have built substantial equity in them.

The findings are particularly relevant to portfolio selection, investors say, as home price appreciation sputters in states that have experienced unprecedented growth in recent years.

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