WMC Mortgage Corp. is plotting a course designed to help make it a household name in the sub-prime lending market. Unable to compete in the prime mortgage lending market, Woodland Hills-based WMC has made the first of several moves to establish the company as a mortgage lender to those with tarnished credit histories, the target market for these sub-prime loans. WMC so far has opened 15 outlets, and by the end of 1999, it expects to have 70 to 80 units in operation nationwide, according to Carl Geuther, WMC’s chief financial officer. The strategy is similar to that of Sacramento-based The Money Store, the No. 2-ranked sub-prime lender in the industry. By late summer, WMC plans to have a new, similarly consumer-friendly name and a marketing plan to go along with its new stores. “Clearly, the name WMC Mortgage is not a household name,” said Geuther. “We’ll have to establish brand recognition & #341; la Money Store.” WMC is making the transition into the sub-prime market after selling its prime lending operations, which represented 60 percent of the loans it made, to Norwest Mortgage. The company decided to focus on the sub-prime market because, with interest rates the lowest they’ve been in decades, it is harder for small lenders to make conventional mortgage loans. “If you’re doing prime lending, margins are very thin because the risk is relatively low,” said Martin Wahl, director of product development for Mortgage Information Corp., a San Francisco-based consulting firm to the industry. “Lenders are attracted to the sub-prime market because the (interest) rates are higher.” The interest rates on sub-prime mortgages can range from 9 percent to 20 percent, depending on the borrower, whereas the interest on a prime mortgage is currently running from 7 percent to 8 percent. Prime loans are written based on a formula that reduces the risk to the lender, whereas sub-prime loans are more subjective and carry a greater risk that the loan may not be repaid. That means lenders can charge more for these loans. WMC said it had difficulty competing in the prime arena because it wasn’t large enough to compensate for the lower margins with increased volume. Though the company was able to cut costs to improve its ability to compete, “it became clear that this business is dominated by companies of significant size that can enjoy significant economies of scale,” Guether said. “We just weren’t going to get there.” As interest rates have fallen, more consumers are refinancing their mortgages, and with the lower rates, credit requirements have become more stringent for conventional mortgages. That has expanded the market for sub-prime loans, too. Guether estimates that 15 percent to 20 percent of mortgage loans now made are in the sub-prime category. But the sub-prime market also has its risks. “In general, because you’re dealing with a relatively credit-impaired segment of the population, if there’s a downturn in the economy, then the sub-prime lenders will probably experience delinquencies at a greater rate than prime lenders,” said Wahl. WMC opened its first retail outlets in seven California cities including Woodland Hills, as well as Portland, Ore., Albuquerque, N.M. and the states of Washington, Idaho, Illinois and Nevada.