Andrew D. Woodward, president of NationsBanc Mortgage Corp., is already eyeing the next millennium as he prepares to assume the helm of one of the industry's largest mortgage companies.

"The fundamentals and demographics of our business are sound," he said at an industry conference last week. "But we are facing some formidable challenges."

Mr. Woodward, a veteran mortgage banker, was looking ahead to NationsBank Corp.'s acquisition of Boatmen's Bancshares, expected to close in January. The deal would create the nation's sixth-largest mortgage company, with $101.6 billion of servicing.

He warned that being among the biggest would not guarantee success.

Winners in the industry will be characterized by their low-cost structure, risk-management skills, marketing expertise, and access to capital, Mr. Woodward said at the eastern secondary market conference sponsored by the Community Bankers Association of North Carolina.

The industry's continued struggle to make money may have a positive effect by serving as a powerful catalyst for change, he said. "The lack of profitability has created a huge sense of urgency in our business."

To restore black ink, the industry will look at ways to increase volume and make their products more user-friendly. The mortgage product must be made "simpler and cheaper" by slimming down appraisal and other cumbersome processes, Mr. Woodward said.

Mortgage companies will also become a lot more selective about who they market to, he said. "There will be targeting and segmenting using computer models, as opposed to mass marketing."

To home in on their prime targets, lenders will use a battery of approaches, he said. "We must be prepared to meet customers face-to-face, by telephone, and through computers. It is the brave new world."

Mr. Woodward's approach sits well with analysts who are watching to see how the various units of NationsBank and Boatmen's will mesh.

George A. Bicher, a banking analyst with Alex. Brown & Sons, Baltimore, emphasized that NationsBank must have a handle on how to reasonably expand the mortgage units after melding them. He said he wanted "to see management armed with a better understanding of the economics of their business."

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