For Washington Mutual Inc. mortgage officials, being in the top five just isn’t enough — they want to be No. 1.

“We have put a stake in the ground to be the nation’s leading mortgage lender,” said Craig S. Davis, president of Washington Mutual Home Loans and Insurance Services Group, a unit of Washington Mutual. “We believe we are uniquely positioned in the marketplace.”

The Seattle thrift company ranked fifth in originations last year and fifth in servicing in this year’s first half. In both it trailed Chase Manhattan Mortgage of New York; Wells Fargo Home Mortgage of Des Moines; Countrywide Credit Industries Inc. of Calabasas, Calif.; and Bank of America Corp. of Charlotte, N.C.

To jump to first place it must double its numbers in both origination and servicing. And that’s just fine with Mr. Davis.

“We believe in this business you’re either in or you’re out,” he said — size and scale are everything.

“We not only like the business, we really love the business,” Mr. Davis said.

Five or 10 years from now the top five servicers may control as much as 75% of the share, up from 42% today, and that Washington Mutual intends to be one of those companies, he said.

To reach No. 1 it will continue a “buy-and-build” strategy of acquisitions and will intensify a branding campaign to make Washington Mutual synonymous with mortgages, Mr. Davis said.

Over the past several years the company has engaged in a shopping spree. After buying four California thrifts, including H.F. Amanson & Co., between 1996 and 1998, Wamu made several large mortgage acquisition deals.

In October 1999 it picked up the wholesale subprime lender Long Beach Mortgage, and in February it bought Alta Residential Mortgage Trust, a correspondent lender. Most recently, Washington Mutual entered into agreements to purchase Pittsburgh-based PNC Mortgage and Bank United Corp. of Houston.

In addition to broader geographic coverage, Mr. Davis said, the PNC and Bank United purchases will give his company a boost in the Midwest and the East Coast. “We’ll be No. 4 [nationwide], with over $300 billion in servicing, once we close the two pending transactions,” he said.

As part of its branding effort, Washington Mutual is running an aggressive advertising campaign that includes a three-dimensional billboard near New York’s Times Square featuring a cross-section of a furnished house. The company is also building more home loan centers — branches where it offers only mortgages and home equity loans.

Washington Mutual lends in all 50 states, but Mr. Davis said there are several mortgage markets where it needs to grow, particularly in the Midwest and on the East Coast, and he hopes branding will help penetrate those markets.

Two years ago no one in Illinois even knew the company’s name, Mr. Davis said, and today it is the state’s No. 1 lender.

Jonathan E. Gray, an analyst with Sanford C. Bernstein & Co., said that Washington Mutual’s bid to be king of the hill in mortgages “sounds quite reasonable to me.”

“They’re acquiring Bank United and PNC, and their own current production volume is quite substantial,” he observed.

Mr. Gray estimated that Washington Mutual and the units it has agreed to buy will chalk up more than $65 billion of home loan originations this year. This would give Wamu a market share of just over a 6%, perhaps edging out Countrywide. By creating a national presence and brand Washington Mutual may generate growth momentum, he said, and by reducing the number of players in a market, as it did with its California acquisitions, it can improve pricing there.

In addition, Mr. Gray said, creating a national brand would result in investors’ giving Washington Mutual higher valuations, which in turn would help the company continue its quest for acquisitions.

Wamu’s Mr. Davis said consolidation and technology are the most important drivers of the mortgage industry and will continue to be well into the future.

Most of all, Mr. Davis said, a mortgage lender must be big to be profitable. And Wamu has an edge in mortgage profitability, he said.


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