Ultraprise.com, an Internet wholesale mortgage marketplace, this month automated the pooling of home equity and nonconforming mortgages for sale in the secondary market.
The company-which plans mainly to trade specialty finance products but will also deal in conforming and first mortgages-said it expects volume to total about $5 billion this year, including $4 billion of nonconforming business.
David Levine, president and chief executive officer of the Shepherdstown, W.Va., company, said the new trading site will make it easier to sell specialty loans.
"We will focus on B- and C-rated loans, nonconforming, and home equity because that is mostly where the liquidity problems are," Mr. Levine said. "Lenders for those types of products go through crisis cycles that happen every couple of months, where they start thinking, 'Who is going to buy these loans?'"
Mr. Levine said the site reduces lenders' risk of being caught with unwanted loans in portfolio. Gathering more potential investors for funded loans in one place, he said, boosts the loans' value.
City Holding Co., a Charleston, W.Va.-based banking company, is an initial investor in Ultraprise.com and was the first to sell home equity loan pools on the system-$500,000 worth last week.
Steven J. Day, president and chief executive officer of City Holding, said that Ultraprise.com allows his company and its Irvine, Calif., division, City Mortgage Services, to act as the government-sponsored mortgage agencies do.
"The problem with the specialty finance sector is the lack of liquidity from Wall Street, but we think there is a lot of liquidity in the banking industry," Mr. Day said. "While we may deal with a lot of mortgage bankers, we deal very little with large commercial banks.
"This network allows those banks who are looking to add nonconforming loans to their portfolio, but do not understand the market or know how to get to it, to review those products in one place at the same time."
Mr. Day said his company will depend on Ultraprise.com when the bond market retreats from certain products, making securitization difficult, and to provide a less segmented market.
"Profit margins will come down with nonconforming products as soon as we have a more fluid market," Mr. Day said. "But at least it will be more market-driven, as opposed to Wall Street turning the money on and off."