Mark Oman has no use for fads.
In the late 1980s, when many mortgage companies were pulling back from the mortgage industry, Mr. Oman's Norwest Mortgage expanded aggressively.
Later, as most big lenders were stepping up their "wholesale" purchases of loans and shedding branches, Mr. Oman assembled the largest network of retail mortgage offices ever seen.
Now the 40-year-old chief executive is challenging one of the most hallowed assumptions about mortgage servicing: that big servicing centers are more efficient. Norwest has decided to handle its nearly $100 billion servicing portfolio with no fewer than seven facilities, three acquired in the past eight months.
"We've flown in the face of a lot of things in this business," says Mr. Oman. "I don't mind a bit."
Indeed, the unorthodox approaches have paid off handsomely for the mortgage company and its parent, Minneapolis-based Norwest Corp.
Reflecting rapid growth in both originations and servicing, Norwest Mortgage has posted a twelvefold increase in profits over five years, to $70.8 million for 1994. That represented nearly 10% of the parent company's net earnings.
The growth accelerated last year when the Des Moines-based unit made a series of acquisitions totaling more than $600 million.
The buying began last August, when Norwest put up a reported $125 million to buy the mortgage banking unit of Michigan National Bank, including the right to service $8.6 billion in home loans.
In December, Norwest brought out the big guns, buying privately held Directors Mortgage Loan Corp. and its $13 billion of servicing for a reported $275 million.
Finally, in February, Norwest ponied up $210 million for the $15 billion servicing portfolio of Barclays Bank. In all, the purchases have put Norwest at the forefront of what has been a booming merger-and-acquisition market for mortgage assets.
Servicing, the backbone of mortgage banking, entails funneling monthly payments from homeowners to holders of mortgage- backed securities. Servicing companies, which receive annual fees of about 25 basis points to 45 basis points on the loans handled, also administer escrow accounts for taxes and, when necessary, initiate foreclosures.
Most companies that go on acquisition binges like Norwest's look to perform all the servicing under just one or two roofs, thereby reducing costs per loan. The idea is that additional work can be taken on by existing staff, especially if technology is used wisely.
Countrywide Credit Industries, which leads the servicing field with a portfolio of $118 million, handles all the work at two sites.
Mr. Oman, however, says he's quite content operating seven centers. In addition to recent acquisitions, Norwest operates servicing facilities in Phoenix, Minneapolis, Des Moines, and Springfield, Ohio.
He says the operations are every bit as efficient as bigger facilities.
"I have four of these centers wired together into a single 'virtual servicing center,' " he says. "I can service any loan at any plant at any time. That means if I want to collect on the East Coast at dinner time I can have West Coast personnel handle the job without paying overtime."
Having multiple centers also sidesteps a number of management issues, Mr. Oman points out.
"Try to find 800 experienced servicers in Des Moines," he says. "Try to find a person anywhere who has experience running a $100 million servicing plant. You can't do it."
The decision to go with multiple sites is vintage Oman. An accountant by training, he approaches his job with hard-nosed analysis and a willingness to put his money where his mind is.
"He doesn't come at it as a traditional mortgage banker - he looks at everything a little differently," says William Dallas, chief executive of First Franklin Financial Corp., a California-based mortgage bank.
Mr. Oman began his career with the accounting firm of Deloitte, Haskins & Sells. He jumped to Norwest Corp. in 1979, first as manager of treasury and audit service for its finance company.
In 1985, he became chief financial officer of the mortgage company. He went on to run secondary marketing and part of retail originations. He became president in 1989 and CEO the next year.
Under Mr. Oman's direction, Norwest has been pushing into more and more areas of mortgage finance - and breaking with tradition along the way.
Its Title Option Plus title insurance product, for example, has potential to be a money-maker, but has drawn scrutiny from state insurance regulators. At issue: Is Norwest selling insurance without regulatory approval?
If Norwest wins, Title Option Plus could change the industry. If the company loses, it will have to write down the cost of developing the product or face long and expensive court battles in several states.
In some less-controversial but equally significant moves, Norwest has been venturing into the fields of credit information and technology for multiple listings of homes for sale.
These efforts are part of a concerted drive by Mr. Oman to reach further into the lives of real estate brokers and, consequently, snare borrowers early in the homebuying process.
Ten years ago, it would have been hard to imagine Norwest emerging as an industry leader. Back then, the company lay in a shambles, the result of a hedging debacle in 1984. The company was sold off in pieces and then, gradually, rebuilt from top to bottom.
In the first stage of the rebirth, the company operated as a mono-line business, originating mortgages through its branch network and selling both the loans and the servicing rights.
In 1989, the company made the jump back into mortgage servicing and expanded rapidly, hitting $8.6 billion by 1991 and $45.7 billion by 1993.
Despite the strong results, the expansion at Norwest Mortgage has yet to inspire the confidence of investors, analysts say.
In fact, Norwest's stock may have "lagged somewhat due to the emphasis on mortgages," said Dain Bosworth analyst Ben Crabtree, noting that recent turbulence in the industry may have thrown up a red flag for investors.
Steven Schroll of Piper Jaffray & Co. concurs. "Mortgage banking income is inherently unstable, and I think that generally leads to a lower valuation, even if performance is good," he said.
"Investors need to see proof that Norwest can get a competitive advantage that stands up over time," said Mr. Schroll. "There are not a lot of examples of that in mortgage banking."
Norwest and Mark Oman hope to be the first.