Many of the companies that are high on the list of Ginnie Mae lenders or had big increases in Ginnie Mae volume last year say it's because they have stuck steadfastly to a niche of the mortgage business that other lenders have shunned.

Some even say their large increases in volume have come out of necessity: It is the only area of lending they can compete in effectively in a down market.

Market Street Mortgage Corp., Clearwater, Fla., increased its Ginnie Mae volume by more than $117 million from 1993 to 1994, giving it the 15th- largest gain. Donnell Smith, executive vice president, said that when other lenders were concentrating on ARMs, Market Street worked on increasing its government lending programs.

"We did not compete with all the portfolio lenders in America doing all this kamikaze pricing," Mr. Smith said. Instead, Market Street concentrated on the more profitable government loans.

"The cost to originate is higher, but we think in the long run it is worth it. While the portfolio lenders were doing ARM products, we did what we are good at and got the business," he said. "It worked."

Prudential Home Mortgage Co., a big Ginnie Mae wholesaler, began to buy the government-backed loans beginning in 1988, when prices had fallen and purchasing became more profitable, said Larry Swedroe, vice chairman at Residential Services Corporation of America.

The company was the second-largest Ginnie Mae lender last year and also had the second-largest gain.

Originators "are willing to give up some pricing because they can get good service," Mr. Swedroe said. Prudential is committed to giving good service for these loans, he said, to keep existing customers and lure new ones.

Chase Home Mortgage Corp., Tampa, decided to improve its mass market position in 1992. With this in mind, two mortgage companies with a strong FHA/VA lending practice were acquired, said Jim Ferriter, senior vice president. Troy and Nichols, Monroe, La., was acquired in 1993, and American Residential Mortgage, La Jolla, Calif., in the fall of 1994. It ranked No. 35 last year in volume, but had the fifth- biggest gain, $566 million.

"We made the decision to invest heavily in the mass market and FHA/VA loans are a big part of that, along with a national fair lending plan," he said. Previously, Chase concentrated on jumbo retail and wholesale loans, and this effort continues.

"FHA/VA loans will be a core product as we move into 1995," he said, and expects the business to continue strongly.

MCA Mortgage Corp., Southfield, Mich., also expects to continue to do well with government loans, said Thomas P. Cronin, chairman and president. He said MCA, No. 71 in volume, does well because others do not want the business. It was No. 13 on the basis of volume increase for the year, about $136 million.

"We know how to do them," he said, while many mortgage banks and thrifts stick with more traditional loans.

"We feel we have an expertise in doing them" and hire loan officers and managers with backgrounds in FHA/VA loans, he said. "It's a part of the market we can call our own," he said. "When times are tough, guys who don't do government loans don't have anything to do. We do."

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