First Equity Mortgage is looking into securitization as the "next step" in its financing strategy as the home-equity lender's business grows.
The Baltimore-based lender has several types of collateral from which it could access the asset-backed market and is currently seeking advice from experts on how to do that most efficiently.
First Equity President Will Steneman said the collateral he is primarily interested in securitizing is subprime home equity debt, which accounts for 30% of the company's business. Recently, Steneman was put in contact with Prudential Securities and Stonehenge Financial Advisors, among others.
The lender is currently originating about 40 to 50 loans a month totaling approximately $3.5 million. While the deal size First Equity would be able to issue would be in the $50 million range, Steneman said that buyside demand could possibly play in his favor.
"One of the ideas I had was getting in touch with something like a credit union or an insurance company - someone who has a glut of money - and put forth some type of guidelines and say, Okay, here's the situation: We'll service this, we'll take care of it for you, but in essence we're going to give the paper to you.'
"They may not want a $100 million block," he said. "They may want only $4 million or $5 million a month."
The rest of First Equity's business is in conventional jumbo mortgages and government loans. Steneman said he will originate about $150 million in total loans this year. - SK