Lenders are rapidly turning to the mail and telephone as low-cost ways of marketing all kinds of mortgages-prime, subprime, and home equity loans.

Direct marketing is hardly new in the mainstream mortgage business. Lenders have long been pitching refinancings to their existing customers by these routes in an effort to avoid the runoff of loans from their portfolios. In this specialty, new techniques are helping them better identify those most likely to refinance.

And affinity-group marketing is another area of mortgages in which telephone and mail sales are well established.

So direct marketing has been a ripple in the mortgage pond. But now it may be the wave of the future. Conventional originations have become unprofitable over the last decade, and many lenders have turned to home equity and subprime lending to beef up profits. They have also been pulling out all the stops to reduce their marketing costs for conventional loans.

And their new efforts have created a niche for specialized marketing companies that help lenders target customers with a high likelihood of responding to the sales pitch.

One such company is Sterling Direct Inc., St. Louis., which does almost half of its business with financial services companies, primarily supporting the marketing of home equity loans.

Debbie Dopp, a marketing executive with Sterling, says mailings for home equity loans are more effective when people receive promotions tailored to their probable use of the loan-such as debt consolidation, college tuition, or home improvements.

Determining how a borrower is likely to use the funds requires detailed research on a continuing basis. Households may be targeted, for example, on the basis of responses to earlier mailings.

"With each mailing, your list gets smarter," Ms. Dopp said.

Some programs include telephone follow-up of the mailings, which Ms. Dopp says will significantly improve the response rate.

Another vendor supporting telemarketing is Strategic Marketing and Research Technology, San Francisco. The company specializes in generating leads for subprime loans. It says it is generating 5,000 leads a day.

Fair, Isaac & Co., San Rafael, Calif., a leader in credit scoring, is involved in response modeling for lenders seeking to optimize their marketing efforts. It mostly uses traditional credit bureau scores.

The national credit bureaus themselves are also involved in helping lenders direct their marketing efforts. Equifax Inc., Atlanta, says it compiles prospect lists in an effort that Jeffrey Dodge, senior vice president for marketing, characterizes as a traditional data base approach. Households are selected on the basis of information available in Equifax data bases. But Mr. Dodge adds that home equity lenders often want more- detailed information than is available in credit-bureau files.

Because a pre-appoval must include a firm offer of credit, the device can't be used for regular mortgages. For home equity loans, a guarantee of a minimal loan is made. This is similar to the practice for offers of credit cards.

One of the big appeals of direct marketing is that lists can be tested on a small scale. If they prove effective, the selection principles can be rolled out on a large-scale national basis with reasonable confidence that satisfactory results are achievable.

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