CWM to sell stock in secondary offering.

Bucking a trend in the mortgage industry, CWM Mortgage Holdings has a plan to sell common stock to the public in a secondary offering.

If the 6-million share offering -- still in registration with the Securities and Exchange Commission -- goes through, it would mark the third time CWM has accessed the capital markets in the last two years.

Of course CWM Mortgage is not the typical company in the mortgage banking arena. The company, which has close ties to Countrywide Credit Industries, is a real estate investment trust that acts as a sort of middleman for a number of the financial transactions necessary in mortgage banking.

CWM Mortgage, managed and partly owned by Countrywide honchos Angelo Mozilo and David Loeb, is principally engaged in the private conduit business. Private conduits perform much the same task as Fannie Mae and Freddie Mac -- but it is done for loans that total more than the government sponsored entities loan limit of $203,150.

CWM gathers together such "nonconforming" loans and assembles them into mortgage-backed securities which in turn are sold to investors by Wall Street firms.

This has been an extremely tough business this year. Rising interest rates put a choke hold on issuance of these securities. In the second quarter of 1994, CWM's volume of securities issuance dropped by more than 70% compared to its first-quarter volume.

CWM's stock has dropped as well -- to $8 1/8 from a 52-week high of $12.

But CWM seems to believe private conduits have a bright future.

Though company officials are unable to discuss the offering due to securities laws, they did give a talk about the industry as a whole at the recent Alex. Brown & Sons financial services conference.

Michael Perry, chief operating officer, points out that the private conduits enjoy an agility and an ability to develop new products quickly that will allow them to securitize new and different types of loans.

The immediate target is probably the types of nonconforming loans that currently are finding ways into lender's portfolios.

CWM also acts as a warehouse credit provider to mortgage banks. The company acts as a sort of credit retailer. It borrows money at low rates from Wall Street, usually in the form of repurchase agreements, and then lends that cash out to lower tier mortgage banks at higher rates.

The company also acts has a construction lending division that makes loans to individuals and small developers.

CWM said it hopes to sell some 6 million shares to the public, bringing it to 39 million total shares outstanding.

Underwriters are Merrill Lynch & Co., Alex Brown & Sons, Dean Witter Reynolds, PaineWebber Inc. and Salomon Brothers.

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