With its biggest push in the U.S. ABS market this year, monoline surety provider XLCA wrapped its first-ever HELOC offering last week, a $1 billion series 2004-Q offering from Countrywide Home Loans Inc. XLCA plans to be aggressive in the HELOC sector going forward as part of the guarantor's broader

push in the home equity sector, sources confirmed.

More traditionally a guarantor of subprime auto ABS, the move into HELOCs offers XLCA the opportunity to wrap prime assets. On the flip side, the move provides a surety diversification play for investors who have seen record amounts of HELOC ABS supply this year - all of which has been wrapped. Countrywide, for example, has priced $19.5 billion of HELOC ABS in 2004, steadily rotating between Ambac, FGIC, MBIA and now XLCA for financial guarantys.

Initial indications were positive for XLCA's first HELOC wrap, pricing two basis points inside of the previous HELOC from Countrywide and syndicate sources reporting the deal "traded well". Countrywide Home Equity Loan Trust 2004-Q, with a 2.55-year average life priced its two triple-A rated classes at 30 basis points over one-month Libor. Countrywide's series 2004-P HELOC, wrapped by MBIA, priced Oct. 27, at 32 basis points over Libor.

An issuer source downplayed the significance of any single surety provider, but rather credited the pricing levels to broader market spread tightening. XLCA is also interested in wrapping more HELOCs and has been bidding with other issuers to wrap future deals, the source within XLCA said.

In addition to its activity in the subprime auto sector, in which XLCA has wrapped transactions this year from Consumer Portfolio Services, Credit Acceptance Corp., DriveTime Auto, Onyx Acceptance Corp. and Pacific Coast Auto, XLCA has wrapped the senior classes of home equity ABS from AmeriQuest Mortgage, C-BASS and Countrywide, as well as principal finance shelf deals from Citigroup Global Markets and Deutsche Bank Securities. XLCA has not wrapped a new issue credit card ABS this year.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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