NationsBank Corp. is cobbling together a new venture aimed at raising its profile in the increasingly competitive business of extending subprime mortgage loans.

The banking company is preparing to merge Portfolio Acceptance Corp. - a Dallas-based unit that lends to people with impaired credit - with a New Jersey-based home equity operation, executives confirmed. The new business, which will be based in Dallas, is expected to begin operations this spring as a division of the company's NationsCredit Corp. subsidiary.

Dubbed NationsCredit Home Equity Services, the division will offer home equity loans, manufactured-housing loans, and so-called B and C loans - mortgages that don't meet the standards of credit quality prescribed by the secondary-market agencies.

The goal "is to build a home equity company that is an industry leader with a national presence," said William Sherwood, who has been named president of the new unit. He is currently president of NationsBank's home equity unit.

With the consolidation, NationsBank is following the model of finance companies that have long offered home equity and B and C loans under one umbrella. Increasingly, banks are recognizing that their prized home equity lending activities have much in common with other types of subprime mortgage lending that they have previously spurned.

NationsBank's move is a part of "a progressive trend by banks," said John Hess, vice president at United Companies Financial Corp., Baton Rouge, La. "Having all the resources under one roof is a more-effective, efficient way to serve customers."

Lenders made $90 billion of B and C loans last year, and volume is expected to grow to $100 billion this year. The products are seen as a more profitable alternative to conventional loans, which carry narrower margins. Subprime loans can also pick up slack when demand for conventional loans is weak.

"We'll be able to stretch out nationwide" with the merger, said Michael Douglas, sales manager for Portfolio Acceptance.

Portfolio Acceptance was acquired by the Charlotte, N.C., banking company in 1992. Its president, Gene O'Bannon, has been named executive vice president of NationsCredit Home Equity Services.

An industry executive familiar with the restructuring said he had heard that Mr. O'Bannon would soon be leaving, however. NationsCredit officials denied this.

NationsBank's home equity unit has operated as a division of NationsCredit Corp. since last year. Its chief, Mr. Sherwood, 61, is a seasoned lender who was recruited last year from GE Capital Home Equity.

Mr. Douglas, the Portfolio Acceptance sales manager, said the consolidation would bring "economies of scale." Such a statement usually suggests staff cuts, but he said none of Portfolio Acceptance's employees would be let go.

The 20 employees at the home equity's unit's New Jersey office have all been offered jobs in Dallas, a spokeswoman for NationsCredit said.

The merger will combine two "modest" players and position them to grow, said Cristine Clifford, an analyst with David Olson Research, Columbia, Md. Industry estimates place Portfolio Acceptance's annual volume between $150 million and $300 million. NationsBank's home equity unit does about $235 million of volume a year, Ms. Clifford said.

NationsBank is not the only lender to cast a more serious eye on B and C loans.

Fleet Mortgage Group, First Tennessee National Corp.'s mortgage unit, and Poughkeepsie Savings Bank are among the lenders that recently announced plans to enter the market.

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