Norwest Mortgage Inc., already the largest originator of conventional mortgages, now wants to become a dominant player in the lucrative business of subprime lending.
And in a move that surprised some industry observers, the company has tapped Judith Berry, an executive with no direct subprime lending experience, to head the unit.
At stake is a share of the more than $100 billion of mortgage loans made annually to people with tarnished credit histories.
Ms. Berry, while lacking B and C lending credentials, has hit the ground running. In an interview last week, she said Norwest wants to dominate the subprime field, becoming good enough to give the top lender, Money Store, a run for its money.
Her enthusiasm notwithstanding, the hiring of Ms. Berry goes against the trend of mortgage banks' getting top executives with B and C experience to lead their subprime programs.
"The nature of B and C lending, which is riskier and potentially more rewarding, requires someone who thoroughly knows the business," said Allen Hardester, a consultant based in Columbia, Md.
Ms. Berry, who came to Norwest with 16 years of general mortgage experience, said she is well qualified to be president of Directors Acceptance Corp., Norwest's subprime lending division. "I'm a pretty seasoned mortgage executive and familiar with all types of lending," she said.
Norwest hired Ms. Berry after she had spent two years as an industry consultant. Before that, she had been chief financial officer of American Residential Mortgage Corp., which was bought in 1994 by Chase Manhattan Mortgage Corp. American Residential started a B and C unit in the months before the buyout, but Ms. Berry said she had not supervised its day-to-day activities.
Mark Korell, Norwest Mortgage's group president and Ms. Berry's boss, said the company made the right choice. "She is a very established professional in the mortgage finance industry," he said.
Certainly, Ms. Berry is setting high goals for the Norwest unit. She wants to see its volume triple, to $500 million, in the next three years. That pace would put the company on a par with Money Store, the leading originator of B and C loans.
Norwest believes it can produce that kind of volume by tapping Norwest customers who were turned down for conventional loans.
Last year, for instance, Norwest rejected more than 30,000 applications, Ms. Berry said, many of which were from prime candidates for subprime loans. "That's a lot of potential leads for a subprime lender," she said.