Norwest Widens Conduit for Subprime, Jumbo Loans

Norwest Mortgage plans to boost its correspondent business by purchasing subprime, jumbo, and other loans that it used to shun.

The Des Moines subsidiary of Norwest Corp. will now buy loans that established lenders underwrite to their own guidelines, rather than requiring that all purchased loans meet Norwest's underwriting criteria.

"We are essentially expanding to accommodate third-party criteria," said Eric Stoddard, a Norwest Mortgage vice president who is chief of Institutional Conduit Sales, the unit handling the purchases. "We'll tailor programs to our national accounts on the buying and selling sides," said Mr. Stoddard, who came to Norwest through the company's 1996 purchase of Prudential Home Loan.

The goal of the program, which Norwest started pilot testing this year, is to boost securitization business through its in-house conduit and make Norwest a one-stop shop for larger lenders.

Norwest will receive fees for securitizing the loans through its conduit or negotiating whole-loan sales to investors.

The company also sees the program-open to roughly its 50 largest correspondent lenders-as a way to build cross-selling opportunities for Norwest mortgage and other services, like trust management, Mr. Stoddard said.

The operation will position Norwest Mortgage "to best serve the acquisition, origination, and portfolio management needs of our institutional accounts," said Patrick Sheehy, executive vice president in charge of institutional lending.

With the move, Norwest is expanding the use of the conduit it acquired in the Prudential deal.

Until now, Norwest processed only its own nonconforming loans through the operation.

The company is taking on additional risk by agreeing to accept loans that are not underwritten to its own standards, industry analysts said. But Norwest Mortgage is also known to evaluate risks thoroughly before taking dramatic steps, the analysts said.

Norwest is comfortable with its plan because it will be dealing with large, successful lenders, Mr. Stoddard said. "These companies have substantial track records and net worth."

Norwest also appears to be giving top spots in the unit to veteran loan executives.

For instance, Mr. Stoddard said, regional sales managers Patricia Holmes and Dianne Johnson have both been in the mortgage business for more than 20 years.

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