Accredited Home Lenders Holding has upsized its extendible note asset-backed commercial paper conduit to $2.5 billion from $1 billion. The San Diego mortgage company will be able to diversify and achieve a cheaper cost of funding as result, said Charlie Ryan, securitization manager.

By funding mortgage origination through the expanded ABCP conduit instead of warehouse lines, the company can save 15-25 basis points in funding costs, Ryan estimated. Before the conduit was started last May, it relied on warehouse lines to finance mortgage origination. But with its own ABCP conduit, Accredited cuts out the warehouse lenders, who themselves are often funded by commercial paper.

Diversification is another reason behind the expansion, Ryan said. Should warehouse financing dry up, the company now has an alternate source of financing. He added he did not foresee this happening.

The added capacity should be enough to handle the increased origination volume from the acquisition of Los Angeles mortgage company Aames Investment. In May Accredited announced it would acquire Aames, making the merged entity the sixth largest retail originator and the ninth largest nonprime mortgage portfolio (SN, 6/5).