All mortgage markets are local markets.

That's the standard wisdom, and it's the reason why even today's megalenders have only a small share of the national market for residential loans. No. 1 Norwest Mortgage Inc., for example, has a bit less than 10%.

With many of the largest lenders now pushing retail expansion to build market share, the emphasis is on identifying and establishing a presence in the most promising regional markets.

In some cases, the effort to build share also involves the development of a better understanding of markets in which a lender is already involved.

"Selecting markets is often accidental, not deliberate," said Nancy Boles, senior vice president for marketing and communications at Fleet Mortgage Group, Columbia, S.C. "You may have inherited offices through a merger." Ms. Boles was a panel speaker during the Mortgage Bankers Association of America's recent conference in San Francisco.

Another possibility, she said, was that a highly productive loan officer falls in love with an area while on vacation and doesn't want to come back, so the company adds an office as an accommodation.

To rationalize one's expansion program, she said, a great deal of research is required. The first step is to determine whether a particular market fits in with the company's broad strategy. "Fleet withdrew from about 20 markets, not because they weren't hot but because they did not fit in with Fleet's plans," she said.

She proposed some questions for lenders to ask:

Is the market supported by a single employer? This would obviously be a danger sign.

Are people moving into or out of the area?

Are home prices in line with regional incomes?

Are property values rising or falling, and how long do homes typically stay on the market?

Ms. Boles pointed out that the average home price in a market affects the viability of a lender's moving into the region. "If the average price is $140,000 and your average loan is $70,000, you might have trouble," she said.

But demographic information has limitations, Ms. Boles said. It tends to be as much as six months old, the numbers don't provide the story behind the data, and it's hard to determine a good fit with the statistics.

As a result, she said, "street research" was necessary. She said differences in the ways in which business is conducted in each market can be a deterrent to entry because changes in corporate procedures are costly. A six-page commitment letter that was standard in New York was too complicated for the Iowa market, where two pages was the norm, she said.

The marketing specialist also noted that an evaluation of the local labor pool was important. "Will loan officers be comfortable with the volume you're likely to generate?" she asked. She also said labor costs can vary greatly from market to market, even for staff such as loan processors - with a range of perhaps $20,000 to $35,000 a year.

Analysis of the competition is also vital, she said. "Can you offer a niche product that is not price-sensitive?" she said. And do you have any name recognition in an area you want to target?

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