Merrill Lynch & Co.'s financial advisers have not always had an easy time talking with clients about their stock holdings during the past few years.
But clients have expressed enthusiasm about mortgage products, so the advisers have been able to get "on-the-job training" in home loan sales, said Merrill Lynch Credit Corp. president Larry Washington.
"We have a lot of financial advisers out there that have learned a lot about this over the past two years," Mr. Washington said in an interview Wednesday. "It's been something that's been very easy for our financial advisers to talk to our clients about."
The advisers' growing familiarity with mortgages, and the fact that Merrill has a wide range of products to help manage the "liability side of people's balance sheets," he said, are among the things that position the unit well for the end of the refinancing boom.
He expects borrowers to turn increasingly to familiar names.
"As we go through the next cycle, brand is going to be of the utmost importance," said Mr. Washington, who came to Merrill's Jacksonville, Fla., mortgage subsidiary in April from Citigroup Inc.'s CitiMortgage. Last year Citigroup bought First Nationwide Mortgage Corp., where he had been the senior executive vice president of production and finance.
This year Merrill has been diversifying its retail revenue sources. In January it introduced Beyond Banking, a cash management account insured by the Federal Deposit Insurance Corp. This week it announced a marketing alliance with MBNA Corp.'s MBNA America Bank, which will issue credit cards to Merrill's customers.
Merrill, which has offered mortgages since 1979, originated $21 billion last year and $6 billion in the second quarter, a spokesman said. They are a crucial part of Total Merrill, an initiative aimed at getting customers to manage all their finances through the company.
But its mortgage business has kept a low profile. The parent has never "really highly advertised we're in the mortgage business," Mr. Washington acknowledged. "We're the stealth mortgage company."
Jeffery Harte, an analyst in the Chicago office of Sandler O'Neill & Partners LP, said profits are not Merrill's main goal in mortgages.
"I think their focus in the mortgage business is to strengthen client relationships, rather than to just be a big originator," he said.
With refinancing plunging industrywide, it may be hard for Merrill's mortgage business to avoid shrinking. Finding ways to originate more home-purchase loans will be a key, Mr. Washington said.
"I think our challenge is going to be getting to the point of sale" on home purchases, he said. Making sure advisers do not stop pitching mortgages to clients will also help.
About 85% of Merrill's originations come from its retail channel, Mr. Washington said. (Most of the rest comes from the wholesale channel, and Merrill is "thinking about and evaluating increasing that business," he said.)
Mr. Washington said his company is equipped to meet a variety of "unique needs," especially those of high-net-worth individuals. He cited its experience in pledged-asset loans, which use securities as collateral in lieu of a down payment; interest-only loans; and adjustable-rate mortgages, which he said Merrill has focused on more than fixed-rate loans. Mr. Harte said Merrill's desire to use the business to retain customers is the main reason it offers such a diverse range of mortgages.
In the interview, Mr. Washington said Merrill plans to introduce by yearend a mortgage product that is "really going to be a huge hit" because it is "consistent with the investment strategies that we give to clients." He would not provide details but said it is "well through product development."
One thing it likely is not: a product for corporate 401(k) customers that want to offer mortgages to employees. Such a product, which Merrill executives have said they have considered offering, would allow the workers to use the retirement-plan assets as collateral.
"I know that it's been done, but it's very difficult to do," Mr. Washington said. "We have looked at that, but it's not really No. 1 on the new product-development list right now."
