Boom times in mortgages have given new life to the lending units of home builders.

Big builders, which long have offered mortgages as a convenience to customers, have been rapidly expanding their product menus and reaching out to more borrowers. The upshot: huge increases in loan volume.

Meanwhile, a number of smaller builders are setting up loan shops for the first time.

The builders are seeking to take advantage of the low interest rates of the past year-and the consequent surge in homebuying. In the process, they are increasingly posing threats to banks and other mainstream lenders.

"We are very much expanding to traditional lending," said John Matthews, executive vice president of CTX Mortgage, a unit of Centex, a leading builder. Centex customers now account for just 20% of the unit's volume, he said. The rest comes through other builders and direct dealings with consumers.

"All large builders are getting into mortgage lending, because they are looking for ways to enhance revenue," Mr. Matthews said.

Seven of the top 10 builders have mortgage divisions, with many of them pulling in over $1 billion a year in loans. And Dallas-based CTX is the biggest-in fact, the company is the No. 30 mortgage originator in the country. It expects to close up to $9 billion of loans in the first quarter-or roughly double its volume for the entire first half of last year.

CTX has expanded its product menu to include a variety of adjustable- rate mortgages and buy-down loans. And the unit can react quickly to market shifts because it does not have "the bureaucracy of a big bank," Mr. Matthews said.

Mortgage volume at Pulte Home Corp., the nation's largest home builder, surged more than 30% last year, to $1.7 billion. And only 60% to 70% of the business came from buyers of Pulte homes; the rest came through representatives working with realty brokers.

"We sprouted out of convenience because it is better for the customer and the home builder if they can close the loans as close to the point of sale as possible," said Roger C. Pastore, chief executive officer of Pulte Mortgage Corp.

"We think the larger national banks are bigger competitors than other builder companies," he added.

Douglas Weld, the chief lending officer at Tokai Bank in Los Angeles, agreed that the lending units of builders compete more with banks and other mortgage companies than with other home builders.

"It is getting very competitive because these home builders are using their own lenders," he said.

"I don't need another competitor right now," he added.

A rivalry between the building and banking industries has existed for years, said Thomas M. Downs, chief executive the National Association of Home Builders.

"During the savings and loan crisis, decisions were made by financial institutions to protect their interests that hurt builders very badly, and they still carry that around as scar tissue," Mr. Downs said.

Nonetheless, a pragmatic relationship continues between bankers and builders.

"Builders realize the limits of banking relationships," Mr. Downs said. "Some felt that if they had been in good standing with a bank for 25 years, that would count. Now they realize it is just business."

Mr. Matthews of CTX said that builders can pick up an extra $500 to $1,000 on a home if they supply the loan for the sale. But, he added, builders "can also lose a whole lot of money if you hedge wrong."

Charles J. Ruma, president of the National Association of Home Builders, said builders must have a considerable volume of construction to justify opening a mortgage bank.

"Centex and Pulte control enough building that they can offer financing at less cost to the buyer-but those kinds of builders, the big guys, are less than 15% of the total market," Mr. Ruma said.

Large builder-lenders have begun affiliation programs to help smaller builders set up their own mortgage units. CTX, for example, has affiliations with about 15 such lenders, Mr. Matthews said.

Nonetheless, regular mortgage lenders still stand to gain business from home builders that do not have mortgage banks. These builders often have in-house mortgage brokers, who steer homebuyers to a lender.

"The real purpose of (these brokers) is to assist their builders in selling homes by getting borrowers approved quicker and to stay in control of the transaction," said Ralph Mozilo, executive vice president of the wholesale builder business development division at Countrywide Home Loans.

Mr. Mozilo said home builder brokers are responsible for much of the $1.5 billion of loans that his division originated since February of 1998.

"Homebuilder brokers are referring great quality business to us, and we have not found that builders are more loyal to builder bankers," Mr. Mozilo said.

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