BankAmerica Corp. is pulling back from the subprime mortgage market in what industry analysts say may be the start of an exodus.

The San Francisco lender has quietly closed a unit that bought subprime loans from mortgage banks. The unit - the Home Loan Group - was part of BankAmerica's consumer finance division.

Although the move does not mark a complete retreat from subprime mortgages - the finance division still operates a program - industry observers say the step back, as the field becomes increasingly crowded, is significant.

"Maybe we're finding out that subprime lending and banks aren't compatible," said Cristine Clifford, an analyst with David Olson Research in Columbia, Md. "This may be pointing to a coming trend."

Indeed, industry analysts say the pullback could foreshadow an exodus by lenders that in recent years have rushed in, only to find the waters increasingly crowded.

Some lenders, like Barnett Banks, bought their own subprime lending units, while smaller institutions, like Poughkeepsie Savings Bank, set up in-house operations.

Certainly, lending to people with tarnished credit records requires a more flexible strategy than conventional bank loan programs. While developing their skills as subprime lenders, banks are finding they must scramble to compete.

"There's no question that the pie is not growing as fast as the number of lenders," Ms. Clifford said. Last year, lenders booked $100 billion of subprime loans. Despite the surge in entrants, that figure is expected to increase by just 10%, Ms. Clifford said. "And new lenders are entering the market every day."

The "risk factor" of dealing with subprime loans and their high default rate was a main reason for BankAmerica's decision to pull out, said a manager with the consumer finance division.

Subprime loans - which do not meet the lending criteria of Fannie Mae and Freddie Mac - offer much fatter margins than conventional loans. But the returns come at a cost, as these loans fail more often than conventional loans.

BankAmerica's subprime mortgage group employed as many as 20 people when it was acquired in 1992 as part of BankAmerica's purchase of Security Pacific Corp. BankAmerica had whittled the unit's staff to seven from 20 before shutting it last month. Maggie Hammett, the senior vice president in charge of the program, lost her job in the shakeup. Other staff members were offered jobs within BankAmerica, a spokeswoman said.

Callers trying to reach Ms. Hammett or members of the unit's staff hear the message: "The mortgage loan department is no longer in business."

A spokeswoman for the consumer finance group would not say whether the unit was losing money, although she did say volume had been dropping. She declined to disclose figures, saying volume was not broken out from the entire finance group.

She also said that given the bank's desire to focus on retail efforts, "it made sense to let the (subprime) unit go."

The retail program includes BankAmerica Mortgage, which originates conventional loans through 64 offices in 10 states. The unit does not have plans to add subprime loans, a spokeswoman said.

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