Fewer than eight months after HFS Inc. bought PHH Mortgage Services, the mortgage company is aggressively expanding its staff.
PHH has been adding 80 to 100 employees per month, bringing its payroll close to 1,900. In October it said its staff eventually will swell to 3,100. And construction of a new headquarters is to begin in the next two to three months.
"We're adding now to meet the business volume that we have," said Kenneth E. Harthausen, senior vice president for sales and account management for the Mount Laurel, N.J., company.
For competitors, PHH's buildup-underscored when New Jersey Gov. Christine Whitman made a campaign stop when the company announced its new headquarters - might have an ominous feel about it.
PHH's merger with HFS of Parsippany, N.J., in April promises to extend PHH's reach through a huge network of real estate brokers and other affiliates.
Through Century 21, Coldwell Banker, and ERA, HFS has a network of nearly 12,500 offices with more than 180,000 brokers in the United States and overseas.
"Even if PHH is only modestly successful in penetrating these three real estate brokerage companies," said Stuart A. Feldstein, president of SMR Research Corp., Hackettstown, N.J., "PHH could still become a huge mortgage originator merely because the three brokerage companies are so large."
In addition, the family of HFS companies also includes the third-largest corporate relocation service in the world, HFS Mobility Services.
A result of the merger of Coldwell Banker's relocation service and PHH Corp.'s relocation unit, HFS Mobility has a 52% market share, Mr. Harthausen said. About 1.2% of all mortgages in the United States come through PHH Mortgage Services, but "we have just scratched the surface of taking advantage of HFS' advantages," he said.
Nationally, 80% of mortgage operations affiliated with real estate brokerages have been profitable this year, said Weston E. Edwards, president of Weston Edwards and Associates in Laguna Beach, Calif. Most are earning more on each mortgage than on the related home sale, he added.
This contrasts with 1995, when 58% of mortgage operations tied to real estate agents were losing money, Mr. Edwards said.
Real estate agencies owned by or affiliated with HFS are not required to use PHH Mortgage Services, Mr. Harthausen said, but PHH has an edge.
HFS and PHH are working to change the outlook of homebuyers. "They're trying to see if they can cause the customer to look to the firm as opposed to the sales agent as the source of their benefit," Mr. Edwards said. "They're trying to do it by putting together a package of attractive services."
PHH originated nearly $4.3 billion of residential mortgages in the first half of 1997, according to a ranking of the top 100 originators of residential mortgages published by American Banker.
Mr. Harthausen said PHH was recently ranked in the publication Inside Mortgage Finance as the 10th-largest originator of loans and that it had originated slightly more than $7.8 billion through September. PHH administers a $28 billion portfolio of mortgage loans.
Another merger that is expected to close by yearend-HFS' merger with CUC International Inc., to form Cendant Corp.-could also create opportunities to expand the mortgage business. But analysts said the engine for mortgage growth was put in place by the earlier deal.
"I think it's gone exceptionally well," said Mark R. Miller, equity research analyst at Merrill Lynch & Co. "The mortgage business is one of the fastest-growing parts of the business right now.
"All of HFS has huge cross-selling opportunities, and those show up in all the businesses. And PHH is one that probably sees some of the strongest cross-selling opportunities, Mr. Miller said. "Their growth has been phenomenal and will continue for the foreseeable future."
Walter C. Klein Jr., president and CEO of First Nationwide Mortgage Corp., said, "It's not easy to do, but it's one of the more strategic relationships, to affiliate the home seller and a major mortgage provider.
"We worked years at it to make it successful, and I always thought it was worth the effort," said Mr. Klein, who as chief executive of Sears Mortgage Corp. fostered a relationship with Coldwell Banker. "That strategic alliance is one of the great competitive advantages for the 21st century."