Large home building companies have had in-house mortgage banks for years, but regional and local builders with smaller volumes want in on the action as well, according to a company that outsources such a service.

"Builders are in a significant profit crunch, and having an in-house mortgage company can be a very profitable venture," said Thomas H. Meyer, president of HomeBuilders Financial Network Inc. of Miami Lakes, Fla.

"The automobile industry is a pretty good analogy," he said. "You can walk in, choose a model, and purchase or lease it on the spot through financing right in the showroom. Traditional homebuying and financing has never been that convenient."

Mr. Meyer said builders using his network are increasing their bottom line by 23%.

HomeBuilders consolidates the home sales of its 13 builder members and secures financing from large wholesale lenders such as Chase Manhattan Mortgage, Edison, N.J.; Norwest Mortgage, Des Moines; HomeSide Lending Inc., Jacksonville, Fla.; or Standard Federal, Troy, Mich.

HomeBuilders Financial gets a volume discount and is able to pass along the savings to the home builders. The wholesale lenders are the end purchasers of the loans the builders originate.

HomeBuilders, which has been operating since January 1995, arranged $1 billion of mortgage loans last year, and said its affiliated builders will sell $2.5 billion worth of new homes this year.

"Builders like Centex and Pulte have had in-house mortgage operations for years ... because they have enough volume on their own to support stand-alone operations," Mr. Meyer said. "We have gone after the next level down: regional builders that sell about 400 homes a year, averaging about $60 million in sales annually."

Mr. Meyer said builders the size of Pulte and Centex average $2 billion of new-home sales annually. Smaller builders can expect to invest $100,000 to $150,000 in the HomeBuilders lending network before it becomes profitable, he said.

HomeBuilders creates a separate legal company for each builder, and the builders operate under their own names. HomeBuilders acts as a managing partner for the mortgage companies.

"Participating builders are generating profits of from $1,300 to $2,500 per loan, and the national average is around $1,800 per loan," Mr. Meyer said. "We just took a page out of the Wal-Mart playbook and said, 'If you buy enough stuff, you can influence the market.'"

Mr. Meyer said the very small home builders that construct 20 to 100 homes a year have yet to cash in on the mortgage bonanza. But he said that within 60 days, HomeBuilders expects to team up with a financial services company to create a buying group that would fit building companies of that size. He did not name the partner.

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