Norwest Buys No. 3 in Title I Home Fixup Lending

Norwest Corp. has bought a leading player in the fast-growing business of making federally insured home improvement loans.

Terms of the deal for Statewide Mortgage were not disclosed. The company, based in Birmingham, Ala., originated $115 million of Title I home improvement loans in 1996, placing it third in the field.

With the acquisition, which closed last Wednesday, Minneapolis-based Norwest becomes the first big banking company to date to plunge into Title I lending. These loans, which are insured by the Department of Housing and Urban Development, are offered to homeowners with little equity in their property.

"This is an alternative for consumers who don't qualify for traditional loans for property improvement," said Kirk Simpson, a senior vice president of Norwest who became chairman of Statewide upon its acquisition. A Norwest official said Statewide is keeping pace with the strong growth of Title I lenders generally but declined to be more specific.

Maurice D. Gulledge, a HUD official who oversees the home improvement loan program, said he expects more lenders to be looking at Title I because it yields higher profits than conventional loans. Countrywide Credit Industries, for instance, started a division to originate Title I loans last year.

Volume in the loans has nearly tripled in the past five years, although growth has recently slowed from a torrid pace. Last year, lenders originated $1.46 billion of Title I loans, up 9.8% from 1995.

"The market likes the Title I product because it's a solid product with good fundamentals, a strong yield, and it's backed by FHA insurance," said Peter Bell, executive director of the Title I Home Improvement Lenders Association, a trade group in Washington.

Norwest's Mr. Simpson said the Statewide deal rounded out the banking company's stable of home improvement loan products. The company's mortgage lending arm, Norwest Mortgage, Des Moines, currently offers a variety of home equity loans to high-quality borrowers that can be used for home improvement purposes. But many lower- and middle-income borrowers cannot get approval for these loans, Mr. Simpson said.

Statewide will be a unit of the holding company, he said-not of Norwest Mortgage-because Title I loans are serviced much differently than conventional mortgages.

He added that Statewide's distribution network would expand under Norwest, making it possible for the company to continue to grow rapidly. "I think we can get more than our share of the growth in the Title I industry," he said.

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