SAN FRANCISCO - No commercial bank thrives in home equity lending quite as BankAmerica Corp. does, and it seems no one else will anytime soon.

With its 1,950 retail branches, origination-by-phone capabilities in 10 states, aggressive marketing, and the resources of the nation's second- largest bank company, BankAmerica is the nation's No. 1 home equity lender among banks. And it continues to grow.

Most of BankAmerica's home equity originations come from its lead bank, Bank of America, rather than from a specialized subsidiary. The bank reports originating $4.6 billion of home equity loans and lines of credit in 1994, up 21% from its 1993 total.

The bank's portfolio of home equity loans and lines of credit stood at $9 billion at Dec. 31 - only 1% growth during the year.

"In western states, B of A is the big competitor," said Willem J. Nieuwkerk, manager of home equity operations at GMAC Mortgage Corp., Elkins Park, Pa., a General Motors subsidiary.

But during the home-loan refinancing boom from 1991 through 1993, Bank of America had seen its portfolio of home equity loans shrink. The bank's portfolio shrank 13%, to $8.9 billion, during 1993.

Home equity loans and lines of credit, in general, had become less useful to borrowers as interest rates plummeted in the early 1990s and refinancing became more attractive. Instead of taking out second mortgages to obtain cash or consolidate debt, for example, borrowers tended to refinance their first mortgages.

That tide has turned.

Home equity loans are again popular. And Bank of America is benefiting.

Some industry observers say Bank of America is not as dedicated to home equity lending as it was before its portfolio began shrinking in the early 1990s.

But Catherine Graeber, senior vice president, reaffirmed the bank's commitment to home equity lending and has begun adopting some of the novel origination methods and products other lenders are employing. And she is doing so at Bank of America's pace: deliberate and careful.

Under her stewardship, Bank of America has also stepped up its aggressive and innovative marketing of home equity loans.

"We don't see any less focus on the product internally," she said in an interview. "Home equity is definitely a core product for the bank."

Ms. Graeber represents a generation of home equity lender that is rapidly changing the industry. She is trying to position the product as a loan "for whatever," as she puts it, not just to pay for a new sun deck, for example.

"There are a lot of lessons to be learned from the way credit cards have built balances and built customer loyalty," she said.

Like credit card companies, Ms. Graeber is using marketing to fuel Bank of America's home equity lending engine. She prefers to launch campaigns both aggressively and often.

From November 1994 to March 1995, Bank of America conducted three new marketing drives. They offered:

* Home equity lines with a free $200 credit.

* Lines with guaranteed 12-day delivery.

* A refund of up to $500 based on daily balances on the line of credit during three months.

She said these campaigns have been more successful than expected. She declined to provide specific figures but said the campaigns "not only exceeded goals but showed month-over-month increases in (market) share for California."

Bank of America has also given out Christmas gifts such as compact disk players, cordless phones, and cameras and also awarded discounts to people who tap their lines of credit more often.

"It is so easy for competitors to pick off your customers, especially when you are a big target like we are," she said. "Our sense is that you also have to put your talent to see to it that you are keeping customers."

This month, the bank joined lenders like Shawmut National and began allowing homeowners to borrow against 100% of their home's value. The product will be rolled out to all 10 states on Bank of America's playing field by summer's end.

What distinguishes Bank of America's loans with high loan-to-value ratios is tiered pricing. Ms. Graeber said most banks in Bank of America's market charge the same interest rate for loans on more than 80% of a property's value. But Bank of America charges 100 basis points less on loans of from 80% to 90% of a home's value than on those from 90% to 100%.

Ms. Graeber said she hopes such product differentiation will prove fruitful for Bank of America. It now markets that edge internally. She said the bank may tell customers about it in an advertisement or marketing campaign soon.

While most of the bank's home equity loans come from its extensive branch system, it also has a referral program with a subsidiary acquired in its 1992 merger with Security Pacific Corp., a Los Angeles bank holding company.

Security Pacific Financial Services Inc., a finance company based in San Diego, is expanding its relationship with Bank of America, which sends borrowers with impaired credit to the subsidiary.

M. Faye Wilson, the finance company's chairman and president, said Security Pacific is now striving to originate more loans through Bank of America's giant branch system.

Ms. Graeber knows exactly what she wants to do to generate more home equity lending at BankAmerica.

"The growth in home equity lending is not going to be through the introduction of new products," she said. Rather, it will come through aggressive marketing, new technologies, and new methods of delivering the product, such as B of A's loan-by-phone system.

"My job is to stay 10 steps ahead," she said.

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