Preferred Mortgage Corp. of Irvine, Calif., is still a guppy in a shark tank, but it has sharpened its teeth.

The privately owned company plans to grow into a shark itself, and hopes to dominate the western states' home equity market in the next few years.

Todd A. Rodriguez, chief executive, said that when the refinance boom in 1992 and 1993 subsided, Preferred focused its energy on home equity lending.

"A lot of companies went to B paper trying to find a niche," he said, but Preferred took a different tack: aiming to originate high-quality "A paper" loans.

Some 80% of Preferred's originations are home equity loans. The lender dabbled in such loans before the end of the refi boom, but has now pulled out the stops, Mr. Rodriguez said. It has been making equity loans at loan- to-value ration of up to 100%. In California's depressed real estate market, this option is attractive to many customers, he said.

"We are taking a different view, looking for someone with good, creditworthy character but with equity problems," he said. Because the customers have good credit, Mr. Rodriguez said, he is satisfied with the level of delinquencies, which a spokeswoman said was well below the industry average.

A mortgage industry analyst said this line of business is a good one, with chargeoffs of less than 20 basis points, while B and C home equity loans generally have chargeoffs of 115 to 120 basis points.

There is about $120 billion in available home equity lines of credit in the United States.

"The product in general has a low loss ratio, because people are putting up their home and livelihood," he said.

Preferred lends in Colorado and Nevada as well as California. Mr. Rodriguez said his goal was to move into other western states and eventually be the dominant presence there. He added that many competitors have gotten out of the California market.

Preferred grew 600% and hired 200 people in 1995, Mr. he said.

To compete against the large lenders in California, Mr. Rodriguez said his company would expand its product menu. The company started making mobile-home loans in 1995 and will begin offering credit card paper and automobile loans this year, he said, while reducing reliance on mortgage banking.

Mr. Rodriguez said he has been approached by Wall Street investment banking firms about bringing the company public, but he has no immediate plans to do so.

"We have enough cash to do what we want in 1996," he said.

Despite the company's exponential growth, Mr. Rodriguez said he made sure not to let it spin out of control last year.

"Bringing in key management to control the growth rate we've had is one of the biggest accomplishments in 1995," he said.

Mr. Rodriguez has high hopes for his company.

"I feel without a shadow of a doubt we will dominate in California," he said. "Then we will take the unique way we do these loans to other states to dominate there."

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