Pacific Guarantee Mortgage of Point Richmond, Calif., has signed up 10 branches in Arizona and Washington that had been associated with Southern Pacific Funding Corp.

Southern Pacific, one of the subprime mortgage specialists that ran into trouble this year due to intense competition, early repayments of home equity loans, and mounting concerns about credit quality, filed for bankruptcy in late October because it could not renegotiate its warehouse lines of credit.

After adding the branches-which had operated under the banner of a Southern Pacific subsidiary, Hallmark Mortgage of Seattle-Pacific Guarantee, a subsidiary of Prism Mortgage of Chicago, has 100 branches in 14 states.

Pacific Guarantee is expected to close $4 billion of loans this year.

Fred Biel, chief operating officer of one of the branches, said Pacific Guarantee enables him to offer "much better pricing than Hallmark did, because of sheer size."

Michael Hillman, a senior vice president of Pacific Guarantee, said it operates its branch system as a franchise business. "A Pacific Guarantee branch is a branch run by a mortgage broker who wanted to go off on his own," he said. "The branch operator takes the risk and liability for leases, equipment, etc."

Mr. Biel's branch, Federal Lending Corp. in Woodinville, Wash., generates about $2 million of loan closings a month.

"We just originate and process the loans, but they close in the name of Pacific Guarantee," Mr. Biel said. Before his company signed on last week, he said, it was acting as a broker, assigning loans to lenders on a per- loan basis.

"In return, we get to operate underneath their licenses," Mr. Biel said. "Pacific Guarantee will be our primary source of business."

Branch operators are free to broker loans to any lender, but funds will be funneled through Pacific Guarantee, and the branch pays on every loan closed.

"If Pacific Guarantee can't accommodate certain subprime loans, we will broker those loans out to a subprime lender who can," Mr. Biel said.

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