Countrywide Credit Industries has turned down a chance to originate home loans to Pricecostco Inc.'s customers.

The Pasadena, Calif., lender said it had been working "night and day" with the nationwide mega-retailer to try to hammer out a lending agreement. But last week the on-again, off-again deal collapsed for good. Pricecostco was courting other lenders at the same time, and Countrywide didn't like it.

The collapse of the deal, and the bad feelings it generated, underscored the growing toughness of negotiations over affinity programs and lender concerns over profitability.

"We are not going to be put into a cast of thousands," said Laura Snow, a Countrywide spokeswoman. "It is just a shame this won't come to fruition."

Ms. Snow said Countrywide had been working on the deal since October. She said Countrywide spent a considerable amount of money during the negotiation process, though she would not say how much.

"We were prepared to pay quite a bit of money to get in with them," she said. "But the fact that they were shopping this deal to other lenders made it unacceptable to us."

She said Prudential Home Mortgage Co., GMAC Mortgage Corp., and GE Capital Mortgage Co. were among those lenders Countrywide understood to have been approached by Pricecostco.

Pricecostco did not return phone calls.

People familiar with the situation said Countrywide would have paid a large upfront fee - perhaps $1 million - for the right to make loans to Pricecostco's 18 million members nationwide.

"It's crazy. It's a nonsensical amount of money," said a prominent lender to trade and professional groups about the potential upfront fee.

Ms. Snow declined to talk about prices but said the deal "looked like it could be real boon for our business," she said.

Lenders hotly competed for the Pricecostco contract. Word got out in mid-March that GMAC Mortgage Corp., Elkins Park, Pa., and Countrywide had been bidding on the contract.

But sources close to the bidding said Pricecostco, based in Kirkland, Wash., wanted too much money. It was also making high estimates of originations volume without supporting data, the sources said.

In the past, mortgage banks signed contracts with service-oriented affinity groups without careful consideration of profitability, some experts said. But those days ended when lenders turned their backs on profit-hungry Pricecostco.

"It seemed to me to be very expensive," said a Midwest affinity lender who has seen Pricecostco's proposal. "I didn't believe they could deliver what they claimed. And if they are going to go after that kind of price, they have to show some information to back it up."

Pricecostco was more interested in price than service - novel for an affinity group. The mortgage banker said he was not about to get his company wrapped up in price competition for a service product like affinity lending.

Some lenders say the tougher conditions that many affinity groups began to demand about a year ago - when bidding was hottest and the lending market was strongest - have not been matched by strong originations. Industry insiders have begun to grumble about contracts and have contemplated dumping some affinity groups.

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