The ability to tailor mortgages to customers will become the key to success in the business, the chief of Norwest Mortgage said at a conference here.

Mark Oman, chairman of and chief executive of the Des Moines-based unit of Wells Fargo & Co., said Norwest is considering such products as interest-only mortgages, portable mortgages, and seasonal mortgages as the industry shifts to "consumer-centric" from "investor-centric."

Mr. Oman, whose remarks echo those of other industry leaders, said the mortgage process of the future will involve "a lot of coaching and counseling."

In recent years mortgage lenders have tailored their products to Wall Street investors rather than to homebuyers, Mr Oman said. His company is switching to a consumer focus, he said, because the point of sale is the only place left to gain a competitive edge.

A mortgage is a "core relationship" that can be used to build other services, Mr. Oman said. The future of mortgage lending will be in "how you deliver the product," he said, citing the customer-friendly approach of and Domino's pizza.

Despite the new focus on the consumer, vestiges of the "investor- centric" model can still be found in lenders' use of jargon and investor acronyms such as ARM and COFI in consumer communications about loan products. "We might as well be speaking Martian to our customers," Mr. Oman said.

The secondary market has made the experience both sweet and sour for the consumer. Mortgage-backed securities lowered interest rates for customers, but consumers "paid a price in terms of inefficiency and cost," Mr. Oman said.

For mortgage banks, he said, "the key financial balance is the balance between servicing and production." Companies that exclusively originate or service loans are vulnerable when the market turns unfavorable for their line of business.

Though Norwest likes to keep a balance between retail and third-party loans, Mr. Oman said, pressure builds on margins as a company gets further away from the consumer. Norwest's retail originations, which accounted for $55.3 billion in 1998, were double the volume of every competitor except Bank of America, Mr. Oman said.

The point of sale is the "high ground," Mr. Oman said. In the long term, wholesalers' margins always get squeezed first, he said, adding that retail products provide the "best natural hedge for servicing."

Mr. Oman said his company's recently announced alliance with Freddie Mac-Norwest will be allowed to use its own underwriting system to select loans for sale to the government-sponsored enterprise-is a milestone.

The open-architecture arrangement "makes sense from the consumer standpoint," and the Freddie Mac deal was a "recognition of that," he said.

Others in the industry who have invested in their own automated underwriting systems want to make similar alliances, he added. "Every company that has a chunk of risk ought to use a tool they are comfortable with," Mr. Oman said.

Mr. Oman also expressed some frustrations with the industry's slowness in transforming itself. "The structure of the real estate finance industry impedes change" and has left the industry "decades behind other industries," Mr. Oman said.

Though Mr. Oman said he remains bullish about the potential of the Internet, he told that audience that "a mortgage loan is simply too complex to transact on the Internet.

"For now," he said, "the Internet is good as an e-mail and billboard system but the phone remains much faster for making mortgage loans."

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