These days, it seems everyone wants to get into the
Builders are offering loans through internal mortgage
divisions. Real estate chains are referring customers to affiliated
lenders. And with banks petitioning the government to let them sell
real estate, the lines between home building, buying and financing
have blurred like never before.
But while this "convergence" makes borrowing
more convenient, consumers should remember that the most convenient
lender isn't necessarily the best. People who don't compare what
builders or agents are offering with what's available from outside
sources are just like car buyers who don't scrutinize dealer-financing
offers. Both can end up paying too much.
"It's typical cross-selling. It's smart business.
If you have one customer that wants to buy a house, that customer
is going to need a mortgage. If you already have that customer in
hand and you can provide two products for that customer -- a house
and a mortgage -- that's two pieces of business," says Henry
Savage, a Washington Times guest columnist and Virginia lender.
But as a customer, "You can burn yourself easily
if you don't know what you're doing and you don't know the mortgage
Companies that sell things and then finance the purchase
have been around for years. Department stores offer instant credit
to jewelry buyers. Car dealers offer loans to shoppers in their
showrooms. And home builders have been offering mortgages to home
buyers for more than two decades.
Ryland Group Inc. out of Calabasas, Calif., for one,
has operated Ryland Mortgage since 1978. The home builder says its
mortgage division handles financing for almost three-fourths of
the people who buy its homes in 21 markets in 15 states.
"It's about making it more convenient for your
customer," says Ryland spokeswoman Pam Krebs. "We want
them to buy the house and we're going to do everything we can to
make the process easier."
One-stop shopping on the rise
Because of recent initiatives, like those at Cendant Corp., even
more mortgage shoppers face the buy here/pay here choice.
Cendant franchises the Coldwell Banker, Century 21
and ERA real estate brokerage brands. It began offering home buyers
the option of obtaining loans from its Cendant Mortgage division
about five years ago.
Customers who visit ERA agents looking for homes are
now offered the chance to get prequalified for a loan through the
Mortgage Web site. Cendant Mortgage actually handles the processing,
approval and closing of the loan, though customers may never hear
the Cendant name because the mortgage company operates under the
brand name of whatever real estate division referred the customer
"Cendant Mortgage's business model is to provide
mortgage services to our business partners on a private-label basis,"
says Bob Andwood, senior vice president of sales and account management
at the Mount Laurel, N.J.,-based mortgage company.
"Because we're both part of the same family,
it made perfect sense to deliver those services to those branch
offices," he adds. "It's a very logical fit."
Conventional loans from affiliated lenders, in theory,
are the same as loans from anyone else. Mortgage banks, lenders
and brokers ultimately get most of their mortgage money from the
secondary market, so loan rates, points and fees shouldn't vary
all that much.