Fleet Mortgage Group, the fifth-largest originator of home loans, is hoping to prove that lenders can make money simply by originating conventional mortgages.

More and more mortgage companies are entering the subprime mortgage market as a means to boost profits. Countrywide Credit Industries, the nation's No. 2 mortgage originator, announced in its latest earnings report that subprime and home equity lending totaled 7% of origination volume but accounted for more than a third of the company's loan production income.

But Fleet Mortgage's parent, Fleet Financial Group, sold off its subprime division, Option One Mortgage, to H&R Block earlier this year.

Fleet Mortgage's new executive vice president for loan production, Thomas C. Palmer, said the Columbia, S.C., lender has no plans to reenter the risky business of originating loans to the credit impaired.

"From my standpoint, there is an opportunity to improve the bottom line with the existing business," Mr. Palmer said.

Mr. Palmer joined the company earlier this month and has spent the last few weeks visiting Fleet's wholesale, correspondent, and telemarketing operations.

Fleet's mortgage-related technology has lagged that of other large mortgage lenders. This, analysts say, has been a reason why returns at its mortgage division have not been as high as the parent company would like.

Mr. Palmer said cutting costs in all of Fleet's delivery channels would be the key to improving profitability on the production side.

"One common theme will be using automation to make faster decisions and reduce costs," Mr. Palmer said.

Fleet has acknowledged that it needs to catch up on the technology front and is implementing new systems for both origination and servicing. "The parent company knows work needs to be done. I think they are attempting to fix the business," said Thomas Theurkauf, an analyst with Keefe, Bruyette & Woods Inc. "This is a tough business that demands an efficient low-cost structure."

George Bicher, an analyst with BT Alex. Brown & Sons, said it is too soon to tell whether or not Fleet's initiatives are working. The implementation of the new technology will be complete by the first quarter of 1998.

Fleet Mortgage has also taken steps to lower costs by scaling back its retail mortgage lending efforts. The company sold most of its retail mortgage offices outside of the Northeast and is now originating retail loans through its bank branches.

"At the end of the day Fleet wants to be a more efficient regional originator of loans," Mr. Theurkauf said.

A major emphasis will also be placed on the telemarketing division, Mr. Palmer said.

Most mortgage telemarketing divisions concentrate on capturing refinance business from existing customers, Mr. Palmer said.

But Fleet, which services approximately $120 billion in loans for about 1.4 million borrowers, will also try to find customers who are relocating and looking for new homes, Mr. Palmer said. Purchase mortgages are generally more profitable than refinances.

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