Though most banks rely on conduits and other assistance to securitize the mortgages they originate, First Union Corp. is a maverick - and a successful one at that.

The Charlotte, N.C., banking company does its own legwork when it brings loans to market. First Union demonstrated the approach last week, when it successfully securitized $122.1 million of home equity loans.

The deal involved five First Union units in a show of teamwork that is unusual for banking institutions. "It's sometimes difficult to pull different groups together," said Wesley M. Jones, managing director of the mortgage finance group. "This has actually proven to be quite the opposite."

The journey to Wall Street began with First Union's home equity bank, which originated the loans through the 140 centers it operates throughout the U.S. The loans selected: so called B and C products that are offered to borrowers with tarnished credit histories.

The home equity bank passed servicing along to First Union Mortgage Corp., and the mortgage finance group pooled the loans in preparation for securitization.

At that point, First Union Capital Markets Group stepped in and, with Lehman Brothers, pounded the pavement on Wall Street. Forty salespeople with the Capital Markets Group and the home equity desk at Lehman placed the deal with institutional investors at a price that satisfied First Union.

"A lot of product came out at that time," causing increased competition, Mr. Jones said. "But we're satisfied with the spreads." By handling most of the securitization work in house, First Union was able to hold onto more income than by farming out some of the chores.

The help from Lehman cut into the banking company's return, but was deemed crucial to the success of the deal. "When you team up with a Wall Street firm, it just gives you broader distribution," Mr. Jones said.

The deal marked the second time First Union has used its own resources to place pools of home equity loans. Mr. Jones expects another offering in midsummer, as loan volume builds.


A pool of mortgage-backed securities has turned up some startling information about loan delinquencies.

The securities, as analyzed by Mortgage Research Group, showed that 1995 and 1994 originations are not faring as well as they should be. "Clearly, 1994 and 1995 originations are preforming worse, and performing worse sooner, than 1992 and 1993 originations," said Susan M. Kulakowski, a mortgage analyst with Duff & Phelps Credit Rating Co.

The reason for the slide: deteriorating credit standards that let too many borderline borrowers pass as prime credits. "Borrowers of lesser credit quality were entering purportedly A quality transactions," Ms. Kulakowski said.

The increased mortgage delinquency rate jibes with the recent jump in late credit card payments. The problem is especially acute for people who took out mortgages last year, she said. These borrowers "are more likely to have chargeoffs, reaffirming the belief that these borrowers are of lesser credit quality."

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