American Express has hired Prudential Home Mortgage to market residential loans to its credit cardholders.
The deal is likely to be a landmark in the shift of financial services toward nonbanks.
Prudential, the nation's No. 2 residential lender, won the contract last week, according to lenders involved in affinity programs - the marketing of home loans to trade or professional groups.
They said Prudential, the nation's largest affinity lender, beat out GMAC Mortgage Co., Elkins Park, Pa., and Norwest Mortgage Co., Des Moines.
It is expected that Prudential will begin marketing to the 25.3 million customers of New York-based American Express Co. on April 1.
An American Express spokeswoman said the company was "in discussion" with Prudential. But she said the sensitivity of the matter prohibited her from providing more details.
She also said the discussions were part of Amex's plan to sell more financial products to its customers.
Pru's spokesman declined to elaborate on American Express' statement.
In October, it became known that deals with residential lenders were being sought for Amex and the Discover and GM cards. GMAC has since begun working with GM.
According to the Nilson Report, an industry newsletter, American Express was the nation's third-largest card company last year in terms of cards outstanding.
For their part, mortgage bankers have been itching to market home loans to credit cardholders. They see them as potentially lucrative, creditworthy, receptive borrowers. And because credit card companies have such detailed borrowing information about their clients, lenders say they will be able to better target their marketing campaigns.
American Express also has better name recognition than other credit cards, said Sherri Neasham, president of Bankers' Portfolio Lenders, a Phoenix consultancy, and a longtime proponent of linking home lending and credit cards.
"Amex has a certain reputation with their cardholders and I think their affinity is stronger than other banks might have with other cardholders," she said.
She estimates that Pru could originate $7 billion of loans per year should 1% of American Express' cardholders respond to the lender's marketing campaign.
The American Express agreement is Prudential's first major deal in nearly a year. Last March, the lender signed the National Education Association, one of the nation's largest professional groups, to an affinity lending deal.
Despite Pru's firm hold on the No. 1 position in affinity lending - it originated approximately $8 billion of loans through its corporate institutional channel in 1993 - the Clayton, Mo., mortgage bank has been jostled by turmoil in recent months.
In October, the head of its affinity lending and corporate relocation, John Lotty, was replaced. And just last month, Paul McCaffery left Pru, where he was a senior vice president, for a top job in GMAC's corporate relocation division.
For American Express, the deal means yet another customer service it can tout to card holders. Credit card companies are having a more difficult time maintaining cardholders' loyalties.
Ms. Neasham, the consultant, said that this deal may speed up other such deals.
"It will give them more confidence to make the decision," she said.
But K. Shelly Porges, chief executive officer of Porges/Hudson Marketing Inc., a San Francisco consulting firm that specializes in credit card marketing, said she does not think mortgage bank-credit card company alliances will be huge winners.
"It could be a successful niche business and not another IDS," she said, referring to the financial planning company bought recently by Amex that amounts for 15% to 20% of its income.
