Big players change the rules of the mortgage game. Looking to diversify, major thrifts, companies move into prime markets

A couple of months ago, a homeowner near Boston was notified that he should no longer send his monthly mortgage payments to the local mortgage company. A relationship that had lasted less than two years was already over. The homeowner is now sending his payments to a savings-and-loan in New Jersey. The homeowner may have felt like a piece of used office furniture up for sale, but he was just one part of a national restructuring of the mortgage market.

Getting a home loan used to be a local business, where all home buyers took out mortgages with hometown lenders and kept the relationship with that lender until they moved or the loan was paid off. Today, a buyer in Massachusetts may get his mortgage from a lender based in California, and send his monthly payments to a company in New York.

Spurred by the need to diversify loan portfolios, and a desire for a bigger share of one of the most profitable parts of the financial services business, a few savings-and-loans, banks, manufacturers, and financial service companies have spread into the prime real estate markets around the United States. They've opened new offices, bought failing savings-and-loans and turned them into moneymaking mortgage operations, and bought profitable mortgage divisions from banks that wanted to concentrate on other areas.

As a result, about two dozen companies now control almost a quarter of the $300 billion- to $400 billion-a-year mortgage market. While no one company owns more than 2 or 3 percent of it, the influence these few businesses have on the interest rates, terms, and types of mortgages far outweighs their shares.

In the next 10 years, the number of major players is expected to shrink to fewer than a dozen, but they could control more than half the mortgage business.

A few years ago, names like H.F. Ahmanson, Great Western, Lomas & Nettleton, First Nationwide, and Goldome were almost unknown outside their home territories. Today, they have offices competing with local lenders - and each other - in Boston, New York, Washington, Miami, Chicago, Atlanta, San Francisco, and Los Angeles.

Then there are companies like General Motors, Ford, Primerica (formerly American Can), and Citicorp, all of which have large mortgage divisions.

``It's a clear trend,'' says Roger Blood, senior consultant, at Temple, Barker & Sloane Inc., a Lexington, Mass., consulting firm. ``It's been under way for two or three years, but it's just as strong now, if not accelerating.''

For now, some of these companies are growing by specializing. Some specialize in ``originating'' loans; that is, they take the application, approve the loan, and lend the money. Others (like the savings-and-loan in New Jersey) focus on ``servicing'' the loan. For a fee, they receive the monthly payments, hold money in escrow until they pay property taxes and insurance, and send the homeowner an annual statement.

(The fees for servicing each loan are fairly small, ranging from $2,500 to $5,000 for a $100,000 mortgage, but some companies service several hundred thousand of them.)

Other companies - especially the largest ones - both originate and service loans, as well as loans bought from other lenders. The large companies then use the servicing income to help maintain competitive mortgage rates - and to buy new offices.

In most cases, Mr. Blood and others say, dealing with a large multibillion-dollar lender with its home base 3,000 miles away has been a plus for consumers. Precisely because these companies are competing with local lenders who know their markets, real estate agents, and many of their customers, the larger players have put more emphasis on service, starting with the loan application process and continuing through the monthly payments.

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