After scrapping its conventional mortgage business, WMC Mortgage Corp. - recast as an internet-only lender - is set to tap the asset-backed market next quarter with a $300 million to $400 million deal backed by online-originated, subprime home-equity loans.
"Being an online lender is going to cut our cost so much that securitization all of a sudden becomes a much more attractive alternative to us," said Scott McAfee, president of WMC.
Though the pending transaction is still in the preliminary stages, WMC is currently talking with Bear, Stearns & Co. as a potential manager, McAfee said.
McAfee argues that loans originated through the WMC's online system are better quality than those originated through traditional methods.
"There's so much less room for human error," McAfee said. "With our automated underwriting system, we underwrite each and every loan, so we know exactly what we've got credit-wise. There are no exceptions. And we have a much, much higher degree of precision over the level of product we're creating."
Also part of the new system, WMC has entered into a joint venture with Fairbanks, where Fairbanks will act as the servicer for the loans. McAfee says the venture will further help the quality of the portfolio.
WMC first began structuring its online business in 1998, and in the past nine months, has originated more than $1 billion in loans electronically.
"We're not sitting here telling the world we've got a business plan, and that we're going to get rich," he said. "We've signed almost 3,500 brokers on already, and we've taken loans in from 2,500 brokers already - so this is working, and we're the first company that's actually changing the way that the whole [business-to -business] mortgage business is being done."
