Retail offices are the wrong way to go for mortgage bankers, because they are too costly to maintain when business slows down.

Retail offices are the right way to go, because they permit close relationships with real estate brokers and builders and will continue to bring in business when refinancings disappear.

These are two opposing views of how to run a mortgage business, and Norwest Mortgage Corp. has come down solidly on the side of expanding its retail outlets.

The company announced recently that it has become the only mortgage lender with retail sales offices in all 50 states. Since 1990, it has expanded its branches by an average of 30% a year. It now has more than 600 locations.

"Our extensive retail franchise, supported by 2,300 local sales representatives, clearly differentiates us from our competitors," said Mark Oman, president of Norwest Mortgage.

"By building a local presence and maintaining direct customer contact at the point of sale, we can ensure the quality of our lending products, and offer diverse services to realtors and builders."

Mr. Oman added that, while many lenders were centralizing their businesses in the late 1980s, Norwest Mortgage continued to broaden its base of local branches.

Will Norwest be overbuilt if refinancings slump? "We feel very good about our ability to run a mortgage business in any interest rate environment," Mr. Oman said.

"We have been expanding our franchise for a lot of years. We were successful before the refinancing boom and we will be afterward."

Dallas-based Lomas Financial Corp. has been struggling to establish itself as a profitable mortgage servicer since its emergence from bankruptcy in 1991.

Last week, it suffered a new setback. The company said it had established a $50 million provision against future devaluation of its servicing portfolio.

The hit means the company will report a substantial loss for the quarter ended Sept. 30. In the quarter a year ago, Lomas had net income of $4.4 million, or 22 cents a share.

Sy Jacobs, an analyst with Alex. Brown & Sons, incurred the company's wrath recently when he said the company's servicing might be underamortized.

|Prudent Decision'

In a retort on Oct. 1 to the Jacobs report, Lomas said: "Under the company's accounting policy of disaggregating its investment in its servicing portfolio for impairment testing, no impairment of the company's investment in its servicing portfolio existed at June 30, 1993. Furthermore, under current conditions, no such impairment is expected in the future."

But conditions apparently changed fast. In the latest announcement, Michael Patrick, Lomas' chief financial officer, said the value of the company's portfolio still hasn't been impaired, but the company is taking the hit as "a prudent decision" reflecting "unprecedented prepayments" in October.

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