Banc One Corp.'s home mortgage unit, seeking to boost lending volume in an increasingly tough business, is turning to some of its biggest rivals for help.
Banc One Mortgage, Indianapolis, has begun supplementing its own mortgage menu with products from Citicorp, GE Capital, and other lenders. The program, which had been in a pilot stage until this week, is slated to be offered through the parent company's 1,500 bank branches in 12 states.
Dubbed the Mortgage Source, the program comes as more and more mortgage lenders nationwide are forming partnerships with old foes. In the most dramatic case, Wells Fargo & Co. farmed out its origination function to Norwest Mortgage in October 1995.
Mortgage lenders "have started to accept partnering as a reality," says Weston Edwards, a consultant based in Laguna Beach, Calif.
The reasons: Competition is squeezing profit margins industrywide, and consumer demand is expected to be flat this year.
A Banc One spokesman confirmed that Mortgage Source would be rolled out this year and that GE Capital Mortgage Services and Citicorp Mortgage Inc. have signed on.
Another source close to the situation said Chase Manhattan Mortgage Corp. also is participating.
And Mark Johnson, executive vice president of HomeSide Lending Inc., a nationwide lender based in Jacksonville, Fla., said his company is in the program, too. Mr. Johnson added that HomeSide's mortgage products will be offered in all of Banc One's branches once the Mortgage Source has been completely rolled out.
Similar partnerships have become more popular with large originators.
The Home Origination Network-previously a joint venture between HFS Inc.'s Coldwell Banker real estate brokerage firm and PNC Bank Corp- originated $1.1 billion in loans last year. PNC sold its stake in the Home Origination Network to HFS late last week.
Mr. Edwards said that while lenders were wary at first, the skepticism is fading. .
"Some lenders thought the Home Origination Network was bad and evil, but as it grew in size they signed up," Mr. Edwards said. Typically, small mortgage lenders sell loans to larger competitors, who then fund and service them. Mr. Johnson said it is rare for a lender of Banc One's size to act as a correspondent.
Albert V. Will, chief operating officer of Banc One Mortgage, said the intent is to make sure customers purchase the best product, even if that means choosing a competitor's loan. Still, Banc One will earn a fee for each loan originated, regardless of which lender the customer chooses.
The big hope, Mr. Will said, is that borrowers then would use the Banc One branch as a one-stop-shopping source for other financial products.
"This is being done in the context of a larger profit motive for Banc One's retail operations," Mr. Will said.
Mr. Johnson said that because HomeSide is primarily a mortgage bank, it isn't concerned about cross-selling by Banc One siphoning off customers. But that could become an issue for the commercial banks involved in the joint venture.
Banc One has been pushing into other retail businesses. The pending acquisition of First USA Inc. would make the Ohio bank the third-largest credit card issuer in the country.