After 20 years as a regional player in the Northeast, Champion Mortgage is making a move to become a national home equity lender by building on its year-old West Coast presence.
In its first foray west of Philadelphia, Champion, the subprime home lending unit of KeyCorp, entered San Francisco early last year with a barrage of advertising and marketing.
The Parsippany, N.J., company hit San Francisco hard with its name and message - running television and radio ads, mailing direct-marketing solicitations, and splashing Champion banners on city buses and the Bay Area Rapid Transit train.
And next week the company will announce that it will start lending in at least two other western cities this year, officials said Wednesday.
Executives realized that to "really grow" it had to enter new markets, said Mark E. Benson, its chief marketing officer, in an interview last month. It is looking westward to increase its funded-loan volume and build brand awareness, he said.
Champion markets intensively in New York, New Jersey, Boston, Providence, R.I., Hartford, Conn., and Philadelphia, as well as San Francisco. Though it lends in 21 other states, it does so only through strategic alliances with companies such as LendingTree Inc., the online lending exchange based in Charlotte, N.C.
Last year Champion originated just over $1.4 billion, up from around $1 billion in 2000, Mr. Benson said. By contrast Citigroup Inc.'s subprime lending units originated close to $12.5 billion in just the first half of 2001, and Household Financial Services originated $11.4 billion in that period.
Yet Champion officials say their company fills a void in the subprime mortgage and home equity markets. The only similar national mortgage company, Mr. Benson said, was Money Store, which First Union Corp. (now Wachovia Corp.) bought in 1998 and shut down just two years later.
"Right now Champion does not have any national competitors," Mr. Benson said. Its competitors are regional, mainly mortgage brokers, he said.
In addition to lending, Champion presents itself as a trusted adviser and supporter to borrowers experiencing financial challenges.
Its approach is to provide customers with flexible product options as well as "the information they need to make the best decision for themselves and their family," said Marjorie Trautman, its director of service quality. The company is seeking to build a relationship with its customers to help them solve their financial problems, she said, not just offer cookie-cutter loans.
"The message that we're bringing to people is that we are flexible and relationship-oriented - and that we can actually follow through on it," Ms. Trautman said. "That's something that's setting us apart in our industry."
Mr. Benson noted that many essentially sound customers suffer reverses, such as illness or losing their jobs, that can harm their credit standing or borrowing strength.
"We're saying to all of America, 'Depending upon what's going on in your life, there is a time when Champion Mortgage is available to solve your financial problems,' " he said. "Champion Mortgage is probably the best-kept secret in town in terms of how a home equity lender could help."
Champion's expansion will not include opening branches. The company began as a call-center-based lender, and though it became a branch operation, it later returned to its call-center roots.
"We found that the customers were more concerned with having a person they could speak with on the telephone, rather than actually going into a brick-and-mortar location," Mr. Benson said.
Borrowers in the new western markets will call 1-800-CHAMPION and speak with a loan officer at the corporate headquarters in New Jersey, as San Francisco borrowers do now. Toward the final stages of the process, borrowers meet with local vendors with which Champion has strategic alliances.
In a landscape littered with overextended borrowers and layoffs, Champion sees fertile ground.
"There's huge opportunity," Mr. Benson said. "We believe there is a huge portion of the market that does not realize what they could use a home equity loan for."
To tap that market, the ad campaign tells consumers that Champion wants to help solve their problems, Mr. Benson said.
To be sure, though the economy may create more customers for Champion, it may also spell danger should the recession last long. Subprime borrowers are often the first and hardest hit when consumer debt starts to go bad; that has been the case in the current economic downturn. Substantial deterioration of mortgage loans to fringe borrowers began in the third quarter, but conforming loans had held up well until recently.
Furthermore, Champion holds on to the loans it originates, and thereby retains more risk than if it sold the loans on the secondary market.
Moreover, the comparison to Money Store is a reminder of the dangers of subprime lending. First Union Corp., which paid $2.1 billion for it, wrote off $1.7 billion when closing it; many observers have called the foray a disaster.
Champion officials, however, point to two decades in the business as proof that they can navigate any economic storms.
Mr. Benson said that in its new markets Champion will use the branding and marketing program developed for its expansion to San Francisco.
"We're in broadcast media, newspapers and magazines, direct mail, as well as yellow pages and Internet," he said. "It's not a pure direct marketing program, nor is it a pure branding program, but rather a hybrid."
In choosing its new markets, Champion looked at economics, demographics, culture, and likely profitability. The median home price in the San Francisco Bay area, about $450,000, spoke to profitability, Mr. Benson said.
In addition, he said, the company has found that service is a huge issue for consumers, who appreciate that it does not sell off its loans.
"That's not in our consumer's best interests," Mr. Benson said. "That's not how you build relationships."
