A joint venture selling mortgages in California was supposed to herald an era of cooperation in the industry.

It didn't work.

Wells Fargo and Norwest Mortgage this week ended their two-year alliance to originate home loans in California-demonstrating both a flaw in Wells' supermarket branching strategy and the difficulty such joint ventures face in a tight-margin business like mortgages.

Bank officials denied it was a big problem, but analyst Ben Crabtree of Dain Bosworth said the program conflicted with Norwest's hopes of selling other consumer loans to its mortgage customers in the state.

"You haven't seen a lot of these types of joint ventures work. A lot of it has to do with banks being understandably very, very uneasy about sharing their customers with somebody else," Mr. Crabtree said.

Julie Piepho, a senior vice president and division manager of Norwest Mortgage, said that Wells Fargo's nontraditional branches were not the best channel for mortgage lending.

Wells Fargo customers have been doing more of their banking in branches located in supermarkets and other stores, which accounted for 543 of Wells' 1,054 branches in California at the end of June.

"It's hard to do a mortgage transaction when you're standing next to the frozen food aisle," Ms. Piepho said.

Officials from Wells Fargo and Norwest did not disclose what their volume expectations were. But analysts argued that the banks must have hoped to at least match the $2.7 billion of mortgages Wells produced the year before the joint venture.

Wells exited the mortgage origination business to form the alliance with Norwest in 1995, citing thinning margins from increased competition.

Wells will continue to have a third party originate loans in California, but it will be a nonbank. PHH Mortgage Services, which had been originating loans for Wells Fargo outside of California, will do so now in the Golden State as well.

One investment banker said PHH, a subsidiary of HFS Inc., would have a greater chance of increasing loan volume than Norwest simply because it is not a competing bank.

A Wells spokeswoman said that PHH, which also has a relocation business and a vehicle-leasing business, would originate the mortgages through its telemarketing division only. Norwest originated loans through officers working in Wells' branches as well as through telemarketing.

The PHH-Wells joint venture, if successful, could add billions in loan volume to PHH, the nation's 13th largest lender, analysts said. California is the largest housing market in the country and Wells Fargo is the second- largest bank in that state.

Earlier this week, HFS Inc. formed a joint venture with Apollo Management LP to buy real estate brokerage firms. The firms that are acquired will offer PHH mortgages exclusively.

Another mortgage joint venture between two banks, HomeSide Inc., was formed last year between Barnett Banks and BankBoston, and is still running strong. But in contrast to the Wells-Norwest joint venture, both banks have ownership stakes in HomeSide, which is a separate public company.

BankBoston's entire mortgage unit is now a part of HomeSide. Barnett continues to originate loans on a retail basis and farms them to HomeSide to service.

Another joint venture, pairing PNC Bank Corp. and Coldwell Banker, also fell by the wayside earlier this year. PNC sold its stake to Coldwell Banker's parent, HFS, which had acquired PHH to originate loans.

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