Subprime Loan Market Insulates Mortgage Lender From Rate Hikes.(THE IBD 100)

Byline: NANCY GONDO

Mortgage lenders tend to fixate on what happens with long-term interest rates, but it's not a primary focus for Accredited Home Lenders.

"Long-term rates don't directly impact our cost of money," said Ray McKewon, executive vice president, secretary and co-founder of Accredited. "The average life of our loans is really in the two- to four-year range."

The 10-year Treasury note is the bellwether for lenders that offer 30-year and other long-term loans. Accredited tracks shorter-term gauges such as the London InterBank Offered Rate, used as a base index to set rates on adjustable rate loans, and the expected cost of money in the next two to four years.

About 45% of the San Diego-based firm's business comes from dealing subprime mortgage loans to customers with less-than-pristine credit. Another 50% is made up of folks seeking to cash out some equity in their homes to consolidate debt. The remaining 5% look to refinance their mortgage loans for a better rate.

Accredited hasn't gotten a big boost from the past few years' refinancing boom of long-term loans. But there have been plenty of consumers who want to pay off credit cards with interest rates of 18% or more, as well as those who need a loan to buy their first home.

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