Smaller lenders are not about to go quietly as the mortgage industry consolidates.

Eighteen small and midsize home lenders are expected to announce Monday that they have formed a cooperative in hopes of getting the same sweetheart deals as industry giants for selling loans in the secondary market and buying services from vendors.

Members of America's Mortgage Cooperative, which is scheduled to hold its first official meeting Monday in Chicago, project that together they will make more than 100,000 single-family mortgages this year, with a value exceeding $10 billion, which would place the group among the top 20 mortgage originators. New members are expected to catapult the group into the top 10 within months, organizers said.

Members are "private companies of similar size that are geographically diverse, that want to look at how we can use our marketing and volume to lower our costs - and lower the cost of homeownership," said Ron J. McCord, a former president of the Mortgage Bankers Association who is leading the cooperative.

In 1999, a wave of strategic alliances swept the mortgage industry, as many of the top-10 lenders moved to align with Fannie Mae or Freddie Mac - the biggest buyers of home loans - to lock in better pricing and to share technological innovations. The new group is an attempt by small and midsize lenders to surf the same wave.

America's Mortgage Cooperative is modeled on an agricultural cooperative. It hopes to use economies of scale to negotiate with Fannie and Freddie, the government-sponsored enterprises, or GSEs, and with vendors of everything from flood insurance to postage, said Mr. McCord, who is chairman of Holliday American Mortgage in Oklahoma City.

In addition to Mr. McCord, the cooperative's leaders include John B. Johnson, president of MortgageAmerica, Birmingham, Ala., as chairman of the cooperative's secondary market committee; Regina M. Lowrie, president and chief executive officer of Gateway Funding Diversified Mortgage Services, Fort Washington, Pa., as chairwoman of the vendor services committee; and James W. Kunzler, president of Trustcorp Mortgage, South Bend, Ind., as chairman of the operating agreement committee.

The cooperative is to be a limited liability company, with each member having a vote. A board of directors is expected to be elected Monday. The cooperative will not be a seller/servicer but a "managing company to look at opportunities that exist in the marketplace with the volume that the group together can bring," Mr. McCord said.

One requirement for membership is that lenders have annual origination volumes of $250 million to $1 billion, he said, explaining that the cooperative wants to establish a group of companies with similar production, volume, and needs. Members will pay a fee to cover start-up and management expenses, but Mr. McCord said the cooperative's benefits would outweigh these costs.

"The higher-volume producer simply enjoys more favorable terms," said Mr. Johnson, "not just in pricing but across the board with the relationship with the GSEs. The larger the customer, the more meaningful the relationship is."

Ms. Lowrie said aggregation would help the group "create a level playing field in the marketplace."

She added, "Everything is on the table as it relates to settlement services, business operations, and every opportunity where we can create synergies."

Mr. McCord said it is a "possibility" that the cooperative would sell its members' loans exclusively to one company, as several of the largest lenders arranged to do last year.

Both Fannie Mae and Freddie Mac said they are open to discussions with the new group. Small and midsize lenders have been "a critical part of our customer base," a spokeswoman for Freddie Mac said, adding that Freddie is "continuing to look at ways that we can serve them better."

A spokesman for Fannie Mae said, "The survival of small and medium-sized lenders in the marketplace is crucial to consumers. We support any efforts to help serve consumers better."

Paul S. Reid, executive vice president of the Mortgage Bankers Association, said his group would not take sides between small and big lenders but acknowledged that "small to mid-sized companies are finding that there are some price differentials when they go do their arrangements" with Fannie, Freddie, and others.

All 18 cooperative members are in the MBA, said Ms. Lowrie, adding that the new group would look to the MBA for "lobbying efforts and for representation of our industry."

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