Countrywide Credit Industries is planning a Web site that mortgage brokers could use to help their customers buy homeowners and home warranty insurance.
The Calabasas, Calif., lender hopes Directnetinsurance.com, to be launched in the coming weeks, will help it establish a beachhead in the insurance business.
The site will initially target mortgage brokers, banks, and savings and loan associations. Later it may aim at real estate brokers, builders, and financial planners, where Countrywide officials see tremendous opportunity.
Building the site is part of the companys broader strategy to expand its businesses and move away from the cyclical challenges of the mortgage industry. Countrywide also plans to re-launch its direct-to-consumer insurance site, www.cwinsurance.com, to expand its direct product offerings for consumers.
Traditionally, Countrywide has marketed insurance only to its loan customers, either when borrowers receive a mortgage or in bills through its servicing operation.
Stanford L. Kurland, president and chief executive officer of Countrywide, said the company has set itself up to be a prominent player in the insurance industry. Countrywide has mastered its delivery system in the mortgage arena, and now were using the same technologically advanced system to aggressively pursue the insurance marketplace.
Michael McMahon, an analyst with Sandler ONeill & Partners, said he applauded Countrywides efforts to broaden and diversify their revenue and earnings stream.
The company also is offering a new home warranty product, called HomeSafe, through a joint effort between Balboa Life and Casualty, which Countrywide bought last year from Associates First Capital Corp., and Sears Home Central, which is serving as the service provider.
Steve Phillips, president of Countrywide Insurance Services, said that the company can provide homeowners or warranty insurance coverage during a five- or seven-minute phone call.
We can offer that same type of service to the brokers through Directinsurancenet.com, he said. We can provide it quickly, and thats one less item that the mortgage broker needs to be worried about in terms of closing their loan transaction.
One source, however, expressed caution about the move, arguing that insurance can be just as cyclical as mortgages.
Capital moves into the insurance business when times are good, and in order to generate premiums, companies cut premiums to the point where they incur underwriting losses, the source said. But because it takes a long time for a claim to be filed and eventually paid out, the investment income from premiums more than offsets the underwriting loss and results in a net profit for the company, he said.
Its the same way in the mortgage banking business, in which mortgage bankers now routinely lose money on the origination of a mortgage, only to generate profits later from either the servicing fees or the sale of that servicing, he said.
The Web sites will operate as insurance marketplaces, with Countrywide acting as the agent for a variety of insurance companies. Balboa will be one of the companies underwriting coverage on certain products.