Countrywide Credit Industries, which took the mortgage industry by storm over the past two years, is now training its sights on mutual funds.
The Pasadena, Calic, mortgage bank plans to start selling funds early next year, underscoring the breadth of competition that banks face as they push into the investment products field.
Countrywide will start with a huge captive audience.
As the nation's largest processor of mortgage payments, it has monthly contact with some 650,000 homeowners.
It also has highly detailed financial information about those people.
The company is betting that at least 50,000 of those people will buy its funds.
The customers would make minimum initial investments of about $1,000 and possibly add more as part of their monthly mortgage payments.
"There is a good crop there to harvest," said Jerry Baker, Countrywide's head of production and marketing.
Though details of the plan are still being worked out, Countrywide expects to offer the mutual funds of three outside management firms.
While some bankers are playing down the Countrywide threat, the company's executive team, led by vice chairman Angelo Mozilo, has a solid record of following through on ambitious plans.
Last year, for instance, Mr. Mozilo announced plans to produce $30 billion of mortgages - nearly double the industry record.
Despite skepticism from rivals, Mr. Mozilo achieved the goal with room to spare and this year is headed for $50 billion in originations.
Seen as a Natural Move
Analysts said mutual funds are a natural adjunct for Countrywide.
"From a marketing point of view, it sounds like a no-brainer," said Sy Jacobs. a mortgage banking analyst with Alex. Brown & Sons. "It also sounds riskless."
Though no other mortgage banks are known to be selling mutual funds, Mr. Baker said he expects others to follow Countrywide.
Indeed, mortgage information is a prime tool for identifying prospects for mutual fund sales, said Brian Jacobs, senior vice president and national sales and marketing director for Eaton Vance Corp., a Boston-based mutual fund company.
Eaton Vance currently has no relationships with mortgage companies, but Mr. Jacobs said he thinks the companies could have a natural audience for mutual fund sales.
Doubts About Commitment
Some bankers, however, doubt that mortgage banks will make the commitment necessary to succeed in the mutual fund business.
An executive at a large bank that has battled Countrywide in mortgages likened the mutual funds push to Sears, Roebuck & Co.'s aborted push into banking.
In fact, this banker took some delight in Countrywide's move, saying that it could divert the company from the mortgage business.
Great Western Bank, which has lost mortgage business to Countrywide in the California mortgage market, said it is not worried either about competing with the company in mutual funds.
The thrift company thinks its branches are big draws for consumers, while Countrywide deals with consumers chiefly by telephone and mail.
"We deal with customers across a desk," said Brian F. Cerini, president of Great Western Investment Management.
Mr. Baker, for his part, said he fully expects mutual funds to be a thriving business for Countrywide.
While funds won't attract new mortgage customers, they should help retain customers, he said.
Every "value-added" service will help in keeping customers with the company, he said.