Sovereign Bancorp is investing $10 million in ailing Mego Mortgage Corp. in a bid to capture the higher profits of nonbank lending.

Sovereign, in Wyomissing, Pa., will own 9% of Mego, Atlanta, a high- loan-to-value lender that has seen a rise in prepayments. Sovereign is making the investment through the purchase of Mego's Series A convertible preferred stock, which is convertible into Mego common stock after two years.

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