CWM Mortgage Holdings Inc. is weighing in on a hot area of wholesale lending.
The Pasadena, Calif., conduit has hired a top executive, Gregory Bowcott, to form a unit to buy loans of lesser credit quality from other lenders.
CWM is a publicly traded company, 3% of which is owned by Countrywide Credit Industries.
Mr. Bowcott joined CWM a week ago from Advanta Mortgage Corp., where he oversaw the San Diego mortgage bank's marketing and servicing operations as a senior vice president.
The CWM senior vice president will buy B- and C-quality mortgages from other lenders as president of a yet-to-be-named division of the parent. Most of the lenders will be customers of Independent National Mortgage Corp., CWM's principal subsidiary.
CWM will then bundle the loans into $50 million to $100 million securities and sell them in the secondary market.
With its high-profile hiring, CWM becomes the most recent entrant into credit-impaired lending.
Some lenders are betting that loans with less-than-perfect credit - current hot financial products - will buffer loses suffered from today's woeful origination levels in mortgages that conform to the underwriting standards of Fannie Mae and Freddie Mac.
David Olson, of David Olson Research Co., Columbia, Md., said the B-to-D market has been flooded in recent months by new entrants. He estimated that some lenders increased their nonconventional production 50% to 100% last year.
"The B-to-D market had its best year ever" in 1994, Mr. Olson said.
Michael W. Perry, executive vice president and chief operating officer of CWM, said Independent Mortgage customers will have access to B- and C- quality paper within a few weeks.
He has modest expectations for the new unit.
"We are not going to light the world on fire and anyone who thinks they are is crazy," he said. "We just feel that it can't be any more competitive than our jumbo and nonconforming businesses are."
He said he would be happy if the unit bought $50 million of loans a month. He said CWM would start making "significant money" if it purchased more than $30 million of B and C loans monthly.
Bigger players in the credit-impaired wholesale market - the Money Store and United Companies Financial, among others - buy $500 million to $1 billion of such loans a year.
Mr. Perry acknowledges that CWM is late getting into the B- and C-paper game. But he said the company will be able to compete with scant expenses.
A team of 10 to 15 will work with Mr. Bowcott on the project. Countrywide will service the loans. All secondary marketing and sales will be done through existing CWM channels.
