For years, mortgage executives have predicted the marriage of a large lender and a network of real estate brokers that would revolutionize the way people shop for both homes and mortgages - and would produce substantial profits.
They're about to find out if it will really work.
Their eyes are fixed on the planned acquisition of PHH Corp. - a relocation firm that has made big inroads into mortgage lending - by HFS Inc., a diversified financial services firm that has been gobbling up giant realty agencies in the last year and a half.
The $1.7 billion deal, announced Monday, would create a nationwide organization that can both sell and finance homes.
While attempts to merge real estate brokerage firms and mortgage lending operations have not been especially successful in the past, industry experts said there was reason to believe that this merger could be different because of PHH's special strengths. As an "affinity lender," PHH has pioneered new ways of marketing mortgages to groups of like-minded customers.
"The fact that PHH has a unique franchise that has been very successful changes the dynamic," said Brian J. Chappelle, senior staff vice president for the Mortgage Bankers Association of America. "It's the first time we've seen anything on this scale."
PHH, which is on track to originate $9 billion of mortgages this year, would gain a powerful link to the realty agencies in HFS' stable: Coldwell Banker, Century 21, and Electronic Realty Associates.
Analysts say this could create a torrid stream of new business, swelling its mortgage origination volume by at least $10 billion and carrying PHH, which is based in Hunt Valley, Md., into the top five originators.
HFS, meanwhile, stands to capture at least 15% of its realty subsidiaries' home buying clients as mortgage customers, according to Mark Mutkoski, an analyst with BT Securities, New York.
That figure could be low. Chase Manhattan Mortgage Corp., Edison, N.J., began originating loans through Remax International, another large realty chain, in June. At that time, Weston Edwards, a consultant in Laguna Beach, Calif., said some firms were capturing 30% of transactions from affiliated brokers.
Beyond mortgages, the deal has other attractions for HFS. The Parsippany, N.J.-based company owns several hotel chains, including Days Inn and Ramada Inns; the Avis auto rental company; and a corporate relocation service. PHH would add a corporate relocation of its own and an vehicle leasing business.
"It's almost as if somebody created this company for HFS," said Barry Bryant, an analyst with Rodman & Renshaw/Abaco, New York.
Robert D. Kunisch, PHH's chairman and chief executive, said that mortgage originations, which had grown 150% from midyear 1995 figures, should continue to increase now that PHH will be combined with HFS' network of brokers and agents.
One casualty of the merger could be a joint venture whereby PNC Bank Corp. originates mortgages for HFS' Coldwell Banker offices. Analysts said HFS is likely to install PHH's origination capabilities in all its broker companies, including Century 21 and ERA.
It is also a turbulent time for PHH. Last month, the American Civil Liberties Union filed a complaint in Philadelphia against its mortgage subsidiary, PHH Mortgage Services, alleging it discriminated against blacks applying for mortgages in Philadelphia. PHH has denied the ACLU's charge, and Mr. Kunisch said that HFS was not concerned about the complaint.