USAA said seeking to replace one of its lenders.

United Services Automobile Association, one of the home-mortgage industry's most prized loan sources, is looking to replace one of its affiliate lenders, sources said.

Lenders familiar with affinity lending say the 2.6 million-strong USAA is in talks with a handful of lenders to take over its loan originations.

San Antonio-based USAA has lending relationships with First Union Mortgage Co., Charlotte, N.C., and PHH US Mortgage Co., Mount Laurel, N.J.

Long-Term Contracts Cited

A spokesman for USAA emphasized that the financial services institution has "long-term contracts" with First Union and PHH.

The spokesman had no knowledge of any plans to switch affiliations. Nobody close to the USAA program was available for comment.

USAA has not sent out a formal request for bids on its lending business to the mortgage banking community.

But sources said USAA approached a select group of lenders at last October's Mortgage Bankers Association of America conference in Chicago.

It's unclear whether USAA expanded the search beyond that group.

"Everybody would be licking their chops just to have USAA," a source said.

Lenders want to do business with USAA because its members, mostly present and former military officers and their dependents, are notoriously loyal. They also use USAA services actively.

Last year, USAA's account yielded more than $2 billion in loans for the two lenders, according to USAA.

There have been no indications that USAA is dissatisfied with either First Union or PHH, sources said. In fact, one source said USAA has been "pretty happy" with the arrangements.

But rumors that USAA is looking to dump one or even both of the lenders have persisted for months.

Sources say First Union seems to be on shakier ground than PHH.

Last December, James A. Abbott, First Union's president and chief executive, announced that the company would expand its telemarketing operation dramatically.

At the time, Mr. Abbott said the move was part of an effort to maintain loan production as refinances tapered off.

But sources at the time speculated that First Union needed to expand its telemarketing ability to provide adequate service for USAA.

Mr. Abbott was not available for comment.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER