Nationstar Mortgage LLC, which exited the wholesale lending channel last year, is planning to jump back into the business of originating loans through brokers.

Many saw the mortgage broker model as a primary factor in the subprime lending crisis. Executives at Nationstar, a Dallas unit of the New York private-equity firm Fortress Investment Group LLC, said they are installing safeguards to improve the underwriting standards of its broker partners.

Starting next month Nationstar will "re-enter the wholesale broker business," focusing primarily on originating Federal Housing Administration loans, Peter Schwartz, its chief information officer, wrote in an e-mail Monday. It plans to resuscitate its previous relationships with more than 3,400 brokers to capitalize on "this high-growth channel."

Nationstar has made "a major commitment" to being a prime retail lender, he wrote. It originates conforming and FHA loans in 47 states.

Like several recent newcomers to the wholesale business, Nationstar is hoping to take advantage of a market that has become less competitive. A handful of large banking companies have recently left, citing higher fallout rates and a preponderance of nonperforming loans originated from the broker channel.

Hoping to avoid those issues, Nationstar said it is planning to use an automated underwriting and decisioning platform from Overture Technologies of Bethesda, Md. Mr. Schwartz said that the platform could give loan officers better visibility of eligible loan programs and prices.

Nationstar has roughly 200 loan officers in its Lewisville, Tex., call center but does not operate any retail branches. It expects its monthly originations to reach $75 million to $100 million by mid-2009.

Last year it was the 20th-largest subprime originator, according to National Mortgage News. Its subprime originations dropped 50% from a year earlier, to $2.3 billion.

Mr. Schwartz said his company also has "a significant portfolio of strategic partnerships" with hedge funds, investment banks, and government-sponsored enterprises that use its origination platform "for supporting their servicing renewals or as a means to refinance high-risk or whole loans."

Despite liquidity concerns and more stringent state licensing requirements that have raised barriers to entry, a handful of privately held start-ups have entered the wholesale mortgage market in recent months. These lenders say they are enjoying fatter profit margins because of decreased competition.

Fortes Financial Inc. of Dallas acquired five regional wholesale mortgage offices from National City Corp. last month and has combined them with a small retail lender and a reverse mortgage lender it bought this year.

Long & Foster Cos., a Fairfax, Va., real estate company, expanded its wholesale mortgage unit last month, saying it had hired a team of loan officers from a large banking company.

Also, Kenneth D. Lewis, Bank of America Corp.'s chairman and chief executive, who has been averse to third-party origination channels, said last month that it planned to keep the wholesale and correspondent lending businesses it acquired with Countrywide Financial Corp.

And Sig Anderman, the founder and chief executive of the mortgage technology vendor Ellie Mae Inc., said last month that he planned to fund loans for brokers. Like Nationstar, Ellie Mae will use loan screening and origination software to keep a close tab on brokers.

Mortgage experts say that despite the added scrutiny, brokers remain a low-cost alternative to expensive retail operations, and that the channel will bounce back after coming under fire for steering customers to more expensive products with higher fees in recent years.

Roy DeLoach, an executive vice president at the National Association of Mortgage Brokers, said many start-ups do not have "the baggage" of problem loans that caused an exodus from broker originations last year.

"They see this as a time to get back in because of the weakness of other players," he said.

Also, wholesale lenders "are utilizing the next wave of technology" to examine loans on a more granular level, "with more quality control," Mr. DeLoach said.

Some banks that eliminated wholesale subsidiaries may have kept some wholesale origination capacity in-house and could revive third-party originations once the market bounces back, he said.

David Olson, a managing director at Wholesale Access Mortgage Research and Consulting Inc. in Columbia, Md., said Nationstar's return to the wholesale channel was a positive sign for the industry, given the recent exodus of large lenders, including JPMorgan Chase & Co., HSBC Holdings PLC, and Washington Mutual Inc.

However, he also said Nationstar is "quite small" and "won't make the impact that one of the big banks will on the market."

According to Wholesale Access, brokers' market share climbed from 5% in the mid-1980s to 20% in 1991 and 68% in 2004. Since the mortgage crisis began last year, that share has fallen below 40%.

Nationstar, which Fortress bought last year from Centex Corp., has been originating loans through Champion Mortgage, a nonprime lender Fortress acquired in 2006 from KeyCorp. In addition, Nationstar will continue to service distressed subprime loans acquired by another Fortress unit, Newcastle Investment Corp.

Currently, Nationstar services 90,000 loans worth about $12 billion.

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