North American Mortgage Co. had a strong year in earnings despite stiff price competition from big banks in its service area, the company's top executives said last week.

North American originated $2.4 billion of home loans in the fourth quarter, a rise of 64% from originations in the period a year earlier, said Terrance G. Hodel, president of the Santa Rosa, Calif., company. For the year, however, originations slipped 8%.

Mr. Hodel said in comments to securities analysts that "pricing competition is stiff, particularly on the wholesale side."

He and chairman John F. Farrell said large commercial banks, whose mortgage units lend all over the country are leading the pricing war.

"You get a couple of big lenders and it can bring down the market," Mr. Farrell said.

Experts said the industry was indeed being affected by a handful of lenders out to buy market share.

"Things continue to be tough, as you have banks that are absolutely fiercely competitive," said Gary Gordon, mortgage company analyst at PaineWebber Inc., New York.

Nonetheless, Mr. Gordon characterized North American's fourth quarter and yearend earnings as solid.

The company reported $40.5 million of income for 1995, including $12.6 million in the fourth quarter.

North American posted $8.2 million of earnings in 1994, including $1.1 million in the fourth quarter. The annual figures are not comparable because of an accounting change adopted last year that cannot be applied retroactively to 1994 results.

Mr. Farrell expects more solid growth in 1996, though he also acknowledged that delinquencies were creeping up. "If the interest rate environment stays the way it is we will have a very good year," he said.

The year is certainly starting out well, said Mr. Hodel, with application volume continuing to be strong.

"First-quarter origination levels are definitely going to pick up," he said.

Refinancings are spurring much of the growth. Mr. Hodel said refinancings accounted for 58% of applications in January, continuing a trend that began last year.

In the fourth quarter, for instance, refinancing activity increased 234% over a year earlier. In addition to refinancings, new-home purchases rose 22% in the quarter.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.