Lenders are eager to tap what could be a profitable new fountain of originations: credit card holders.

Lenders and observers consider tapping the card market as an extension of affinity lending -- the originating of home loans on behalf of trade or professional groups. And they expect the marketing expenses to be lower, the returns better, and the credit quality higher.

Mortgage companies have already begun to develop marketing relationships with major card programs. As previously reported, the Discover card, the General Motors MasterCard, and American Express were lining up lenders to market home loans to cardholders.

General Motors officially announced its plans this week. (See article on page 16.) And Dean Witter, Discover & Co. is now said to have approached leading affinity lenders to market home loans to its cardholders and perhaps other customers.

Widespread mortgage marketing to cardholders "may be a few months or years away from [happening], but it could work well," said Carl H. Novotny, managing partner of Affinity Partners Inc., a Newton, Mass., credit card marketing consultancy.

Mr. Novotny said he has discussed the possibility of marketing home loans with some of Affinity's credit card clients. He said they were receptive to the idea.

"I think to look to my card issuer for another major benefit makes a lot of sense," he said.

He said a marketing program could run every month as an advertisement in the customer's credit card statements -- an inexpensive way to market a product.

Lenders generally get response rates of less than 5%, and they say marketing to credit card holders will not exceed that. But with monthly marketing drives to millions of cardholders -- Discover alone has 11 million cardholders -- the returns could be monumental.

Mr. Novotny said that affinity group members are not accustomed to buying into a financial product with a mortgage's magnitude through their trade or professional organization. But credit card customers are more comfortable with direct mail sales pitches for financial products.

Sherri Neasham, president of Banker's Portfolio Exchange Inc., a Tucson, Ariz., marketing concern, said it would be important for the credit card companies to segment their marketing.

Ms. Neasham said the credit card companies should align themselves with the mortgage lenders that have solid telemarketing capabilities. She said strong candidates are Prudential Home Mortgage Co., First Union Mortgage Corp., Lincoln Service Mortgage Corp., PHH US Mortgage Corp., and GMAC Mortgage Corp.

Many lenders are "looking at creative avenues to market mortgages, to originate loans, because they have had a dropoff" in loan production, Ms. Neasham said.

But she said lenders were cool to the idea when she mentioned it to them. She said they were unsure how credit card holders would react. They might ask, "What the heck is a card issuer [doing] offering me a mortgage? What do they know about mortgages?"

Easy Sellin'

Why mortgage companies think marketing home loans to cardholders will work well

* It's cheap

* Cardholders are accustomed to crosssold products

* Cardholders can be prequalified

* Loans can be marketed monthly in card statements

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