Home buyers line up for 'fast food' mortgages
Boston — They'll never call it ''McMortgage,'' but a franchised mortgage operation is starting to spread itself across the country anyway. Like the fast-food hamburger and French fries business, this one hopes to provide speed and convenience to people looking at its menu of home mortgages, second mortgages, construction loans, and home improvement loans. Much as McDonald's helped change Americans' eating habits, it may be one part of a similar transformation of the financial services business.
''The FTC [Federal Trade Commission] has told us we're the first mortgage banker to file an FTC document to franchise a program like this,'' said S. Vernon Rodriguez, president of Certified Capital Correspondent Inc. (CCC Inc.), a division of Capital Mortgage Holding Corporation of Las Vegas, Nev.
Right now, being the first also means being small - there are only 20 CCC offices in nine Western states - but that could soon change. Last month Mr. Rodriguez came to Massachusetts to sign an agreement with VR Business Brokers of Needham, a franchise chain of brokers selling small and medium-size businesses. There are some 350 VR offices nationwide, Mr. Rodriguez notes, and he hopes to have ''CCC Inc.'' painted on the doors of about half of them within two years.
To reach his goal of eventually having more than 500 CCC offices, Rodriguez plans to sell franchises to individuals, small businesses, or small banks that have been confined to the less lucrative home mortgage business. The franchise fee is $60,000, or $75,000 if a down payment of $12,500 is made and the rest is amortized over three years. For this fee, plus an annual royalty of $1,500 to pay for advertising and promotion, a franchisee will receive training, materials , and access to the CCC ''warehouse,'' containing tens of millions of dollars of mortgage money.
When a franchise is set up, Mr. Rodriguez hopes it will be looking for borrowers as hard as the borrowers are looking for money.
''We will depend on our storefront franchises to find the borrowers,'' he said. To do this, they will be advertising in local media and contacting real estate agents, and even bankers who have reached their lending limits.
For home buyers, according to Rodriguez, the primary advantage of getting a mortgage through a CCC office, instead of the local bank or thrift, is the same reason many people go to a fast-food outlet: speed and convenience.
''We will probably be lending money at market rates,'' he says. ''It's possible that at times we can be below market. But what we're really selling is service, the ability to respond to a buyer's request quickly.'' Preliminary approval and a guaranteed interest rate can be given within 48 hours after a mortgage application is filled out, he said. This can be important if interest rates are moving up rapidly.
Rodriguez says much of the firm's business will come from developers and builders looking for construction financing. The franchisees will often be competing with mortgage bankers. With new banking legislation, the mortgage field is much more open as savings-and-loan associations enjoy broadened lending powers. Developers are spending more time with lenders outside the banking and savings industry, such as insurance companies and pension funds, while mortgage bankers have been going after the business that once belonged almost exclusively to local banks and S&Ls.
''Deregulation has caused a great deal of capital to flow around in all directions,'' Mr. Rodriguez said. ''Now, banks and S&Ls really have to change their way of doing business. For instance, they are beginning to get more involved in the secondary market.'' This market is where mortgage lenders go after they have put together portfolios of recently issued mortgages. Then, so they can have more money to lend, they sell these portfolios on the secondary market - which can include pension funds, insurance companies, or agencies like the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association.