Robert Stata has seen his share of changes during his 20 years in the subprime mortgage industry.

The onetime salesman-in-training for American Funding Corp. went on to start several successful nonconventional lending ventures, including Apex One, now part of Advanta Corp. He also co-founded Cityscape Financial Corp., which three years ago was one of the fastest-growing up-and-comers but now finds itself on the brink of bankruptcy.

Now Mr. Stata has signed on as a consultant with IMN Financial Corp., a Melville, N.Y.-based conventional lender, to start a retail subprime unit for its Citizens Mortgage Service Corp.

The new unit will complement IMN's existing businesses, Mr. Stata said. IMN, which expects to originate $700 million of loans this year, comes across all types of borrowers, including some who do not fit conventional loan guidelines, Mr. Stata said. Citizens Mortgage will help IMN "maximize sales efforts."

Mr. Stata said he was not making any predictions about what Citizens' loan volume would be, but noted that IMN is already active in 22 states. "It's a great marketing platform to start from," he said.

Citizens will sell all the loans it originates on the secondary market, rather than securitizing them, he said.

Several subprime companies have suffered serious setbacks in the past 12 months as competition pushed credit standards lower and raised prepayment rates.

But credit standards are starting to tighten up, Mr. Stata said. "You're seeing people pull in their reins a bit."

Last year lenders thought "If you originate it, someone will buy it," he said. "Now people are becoming more conscious of credit quality, in part because you saw big lenders take falls due to fraud and due to poor credit quality."

Citizens will concentrate on retail originations, but Mr. Stata emphasized that to be successful a subprime company "can't depend on any single source of business." Retail originations, he said, "give you more control."

Despite the subprime industry's recent growth and ensuing setbacks, Mr. Stata says it is still in its adolescence. "There is still plenty of untapped equity out there," he said. "People are realizing they have a powerful tool in the equity in their homes."

One change that still needs to be made in the industry is consistency of regulation, Mr. Stata said. "We need a uniform act to govern the industry on a national level, rather than on a state-by-state basis."

Are there any lessons to be learned from Cityscape's demise? "I learn in this business every day," Mr. Stata said. "I don't like to be a Monday- morning quarterback."

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