HomeSide Lending will start the new year in a new business-as a packager, or securitizer, of mortgage loans.
The Jacksonville, Fla., lender expects to bring a $350 million deal to market in January that will carry its own name.
The addition of in-house securitization could boost income, executives said. "This allows us to have all the sources of liquidity," said Blake Wilson, HomeSide's capital markets chief. "We'll have access to the best execution, which will translate into the best prices" for banks and other lenders that deal with HomeSide.
HomeSide originates loans through branches of BankBoston Corp. and Barnett Banks, its founding owners, and also buys loans from outside originators.
Mr. Wilson projects that HomeSide will now bring to market one or two deals a quarter, with each package containing several hundred million dollars of nonconforming loans.
But the move to issue its own mortgage securities does pose some challenges for HomeSide.
The two-year-old company, unlike the handful of other lenders that produce their own securities, does not have a track record on Wall Street and might have to offer more of a premium to entice investors, industry observers said.
Still, the market is gaining an appetite for so-called private-label mortgage securities because of groundwork laid over the past few years by giants like Citicorp, Norwest Corp., and BankAmerica Corp.
"It's a way for HomeSide to receive more of the pie," said Jeffrey M. Levine, director of investment banking at Bayview Financial, Miami.
Most lenders pay fees to private companies, known as conduits, to oversee securitization of mortgage loans too big or too low in quality to be sold through Fannie Mae, Freddie Mac, or Ginnie Mae. The conduits back the securitized loan pools and put their own names on them.
Mr. Wilson said the kind of loans that HomeSide will package in-house- jumbo A-quality mortgages-account for about 15% of its roughly $21 billion of annual volume.
HomeSide is taking the necessary steps to be a credible, long-term securitizer of loans, Mr. Wilson said.
The company has registered its intentions with the Securities and Exchange Commission, is working closely with credit rating agencies, and, at least for the first deal, is distributing through traders from Donaldson, Lufkin & Jenrette, a well-known name in the industry.