Norwest Mortgage's acquisition of Prudential Home Mortgage followed Prudential Insurance Company of America's decision to get out of the mortgage business and concentrate on insurance.
The move also signaled the end of Marvin I. Moskowitz' tenure as chairman and chief executive of the Prudential unit and its parent, Residential Services Corporation of America.
On the day the deal was sealed, Mr. Moskowitz, 54, talked to American Banker, reminiscing about his 10 years at the helm of the one of the largest mortgage companies in the country and talking about what he plans to do next. He also offered his opinions on the industry's future.
What do you plan to do now?
MOSKOWITZ: My plans right now are to kick back, reenergize, and learn.
For the last 27 years, I was involved with business and financial activities. But I have other interests.
I think there is tremendous pressure on senior people. I believe every senior person should take a sabbatical at some point.
Did you burn out?
MOSKOWITZ: I hate the term "burned out." It implies that you lost control. But I would say that the stress is so great that you really don't have the time or energy to think broadly. I was most effective at RSCA in my first 18 months. That was the creative period.
Looking back, would you do anything differently?
MOSKOWITZ: Yes. We had considered giving certain levels of people six months off after five or six years. If I were doing it again, I would create a personnel policy with a sabbatical.
Prudential's mortgage executives were scattered across the country. It was very decentralized. Did that work for you?
MOSKOWITZ: Yes, but I might have modified it. We wanted the best people. Where they lived was secondary. We wanted the brightest people with integrity beyond question. Intellectual integrity. Nobody held back from telling me how they would do things.
It was based on the old Citibank philosophy, where I spent my developing years. We added another element to that - team play.
Were you sad to see the company go?
MOSKOWITZ: You have to be very philosophical in today's business world. Things change. Companies are bought, sold, grown, broken apart.
Prudential gave us a fabulous opportunity, which very few get. They did what they had to do. There are no feelings that they did us wrong.
We weren't interested in being the largest. Volume does not mean profitability or value. People will rationalize volume at a loss. If you continue generating volume at a loss, you'll always be at a loss. Many institutions eventually fail because of it. We didn't do that.
Did this keep you away from certain lines of business?
MOSKOWITZ: To create maximum value, there were a few things we would not do. We were not going to have branches. They are inefficient.
We asked how business will be conducted in the year 2000. With rapid changes in technology, we thought direct-to-consumer and technology-based originations were going to supplant inefficient branches.
Commercial banks are back in mortgages in a big way. Are they to be taken seriously?
MOSKOWITZ: You have to take them seriously. Some have defined strategies. Some toy with mortgages because it's a consumer product. Others have assumed risk through acquisitions, where I wonder if mortgages weren't an afterthought.
A handful understand the risk, and hire the talent to deal with it.
There are others who I think understand mortgages are vital to the consumer business, but I'm not sure they understand the financial and risk implications.
Others don't understand it at all. They talk about synergy without knowing how to create synergy. They talk about the mortgage as another consumer product when it's not.
Then there are those who intelligently decide they either don't understand it, or understand they don't like it, so they get out. I give them more credit than categories two and three.
Do you think we're seeing the end of independent mortgage companies?
MOSKOWITZ: There are very few independent mortgage companies left - Countrywide, Namco (North American Mortgage Co.). And Namco was up for sale. I think Namco got lucky with the rate turnaround. But with interest rates up again, they've got to be very, very good just to survive.
I have a lot of respect for Countrywide and what they've done, especially with no strong parentage. You have to wonder how long they can continue, especially if some of these banks get their acts together. Angelo (Mozilo) has to get national brand identification. He's had radio and television ads, but they're expensive. What is the return on this investment? Citicorp, Chase and BofA already have national recognition.
Countrywide has around 5% or 6% origination share. How do you sustain that?
What do you see as the future of mortgage banking?
MOSKOWITZ: I still believe technology will drive this industry. That is how to get to consumers directly, like with telemarketing. Now that margins are squeezed out of the more traditional approach, retail branch networks may be justified. Branches can be distribution points, but not processing points. With technology, people in branches make the contact and either phone in or shoot the application over hardware to be processed.
