The loans might seem a trifle ugly to some. But to Equicredit Corp., home loans that do not meet agency standards present one of today's best lending opportunities.
To capitalize on the growing market for second- or third-quality mortgages, Equicredit has formed a wholesale division to buy such loans from other originators.
"We think there is a lot of business to be had through these channels," said John T. Hayt, president and chief executive officer of the Jacksonville, Fla., lender.
The nation's recent recession left many borrowers with poor credit, Mr. Hayt said. That means more individuals with less-than-ideal credit are borrowing, thus creating more opportunities in so-called B and C paper for wholesalers. Such lenders buy pools of home loans from originators such as banks and brokers.
Allen F. Tuthill has been hired to run Equicredit's new wholesale group. Mr. Tuthill had been business board chairman of the consumer finance business group of American Bankers Insurance Co. since 1990.
Mr. Hayt said most of the unit's loans will initially come from East Coast and Midwest lenders, where the nonconforming markets are most bountiful. By the end of 1995, he hopes the wholesale group will have originated $100 million of nonconforming loans, he said.
While Equicredit's new division will buy some conforming loans, most of its purchases will be of nonconforming loans, Mr. Hayt said. "There has been a void there," he said.
But that void is filling fast. Besides Equicredit, several other mortgage companies that specialize in the nonconforming-loan market have wholesale divisions.
Among those are Advanta Mortgage Corp., San Diego, and United Companies Financial Corp., Baton Rouge, La.
