JHM Mortgage Securities LP is the latest casualty of heavy prepayments stemming from the boom in mortgage refinancings.

The McLean, Va.-based company, one of the few owners of servicing rights that farms out the actual servicing announced it would take a writedown against its portfolio in the third quarter. It said a loss of $4 million to $6 million would result.

The company also announced plans to convert from a limited partnership to a public company. It will apply for a listing on the New York Stock Exchange.

Appealing to Investors

The company said it was seeking to broaden its appeal to individual investors, who have been deterred by complex tax-reporting requirements, and to eliminate unfavorable tax consequences for institutions.

At its inception in 1988, JHM Mortgage was 100% invested in mortgage securities. Over the past three years, the partnership has moved more into mortgage banking, first becoming a major investor in servicing rights, then founding an affiliate, JHM Mortgage Services Corp., which originates mortgages.

$2 Billion Servicing Portfolio

The next step, according to JHM chairman Steven P. Gavula, is the formation of a conduit to securitize nonconforming loans. Mr. Gavula plans to have the conduit running in time to do $100 million in quarterly volume by next year.

The company currently has a servicing portfolio of $2 billion - which, as the expected loss indicates, has been hit hard by accelarating prepayments.

C. Thomas Williamson 3d, president of JHM, believes that unless prepayments rates accelerating further, originations will be sufficient to keep the portfolio at a minimum of $2 billion.

"That's not to say we might not decide to sell servicing, if the price is right, or buy it for that matter. Since we have no servicing platform, we don't have to worry about keeping our people busy," he said.

Through the first eight months of this year, the company originated $222 million of mortgages.

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