PHH US Mortgage Corp. has formed a mortgage training and originations program for Des Moines-based Better Homes and Gardens Real Estate Service, one of the largest real estate franchise organizations in the country.

The agreement will provide PHH US Mortgage. Cherry Hill, N.J., with what it hopes will be a direct line to mortgage originations in the 1,300 offices of Better Homes and Gardens franchisees. In entering into the agreement, PHH US has added its name to the growing roster of mortgage banks seeking to start or cement relationships with real estate firms.

They are hoping to bring in a greater volume of purchase mortgages when the refinancing boom finally halts.

Big Potential

Among the companies that have made similar moves in recent months are Norwest Mortgage Inc. of Des Moines; Countrywide Funding Corp.. Pasadena. Calif., and Hamilton Financial Corp., San Francisco.

None of the mortgage banks, however, has forged alliances that have the apparent potential of the Better Homes and Gardens deal.

"We have 2.5 million home-buying transactions a year," said Allen Sabbag, president of Better Homes and Gardens Real Estate, "and if this relationship captures 10% of that, it will be enormously successful."

Assuming an average mortgage of $100,000, a figure of 250,000 originations works out to $25 billion of volume, an astronomical and highly unlikely number. But Mr. Sabbag's statement dramatizes the importance of such deals.

Levels of Support

The relationship will allow the 700-odd franchise companies of Better Homes and Gardens to elect to access varying levels of business and support from PHH, according to Mr. Sabbag.

PHH will provide training and will go as far as to place a mortgage originator on-site at a real estate office. Many of the franchisees already operate mortgage brokerage businesses, and those may choose to use PHH simply as another provider of credit, or as an investor.

The method for dividing revenue generated by mortgage transactions will depend on the level of support required from PHH by the real estate agent. "The more the real estate branch does, the higher its fee will be," Mr. Sabbag said.

Rules May Change

"While we encourage our franchisees to use a variety of funding sources, we do not require it," said Mr. Sabbag.

Though allowed by law, this practice has come under criticism from consumer advocates. Indeed, according to industry insiders, some mortgage bankers who are hesitating to start such relationships are doing so because they believe that the rules of the game, under the Real Estate Settlement Practices Act, are likely to shift.

The Department of Housing and Urban Development is currently taking another stab at drafting rules to implement the law.

Better Homes and Gardens seems undaunted by this prospect. Real estate agents, said Mr. Sabbag, view mortgage services primarily as a means to increase the percentage of potential buyers who close real purchases.

Competition for the right to service the real estate chain was fierce, said Mr. Sabbag, and though he said he was not close to striking any new deals, he held open the possibility of reaching other, similar, agreements with additional mortgage banks to provide nationwide services.

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