General Motors Corp., already the nation's No. 1 auto maker, is aggressively moving to promote its newest high-ranking title: the country's largest mortgage lender.
Yesterday, GM's credit subsidiary, General Motors Acceptance Corp., announced plans to market its package of home loans to its 8 million auto-loan customers. Test marketing -- with letters to some of GMAC's better credit customers -- is slated to begin this summer in Michigan.
With last year's acquisition of Norwest Mortgage Corp. and the mortgage companies of Colonial Group, GMAC is prepared to expand its presence in the increasingly competitive home-loan market.
The nation's leading retailer, Sears, Roebuck & Co., already has disclosed its plans to become a major player in the mortgage banking business. Last month it announced the creation of a subsidiary, Sears Mortgage Corp., to provide complete mortgage-loan services to consumers and the investment community.
One more diversification step for the 100-year-old company, "the mortgage chain offers another significant opportunity for growth in the years ahead," Sears Chairman Edward A. Brennan explained when he announced formation of the subsidiary. At its inception, it was already the nation's 18th-largest mortgage banker, providing about $6.5 billion loans.
GM, with its acquisitions, services about $21 billion of mortgages, making it the nation's leading mortgage banker even before it begins its aggressive marketing campaign.
The entrance of these two giants into the home-loan market is being watched closely not only by bankers but also by a number of other retailers, manufacturers and financial-service companies.
With falling interest rates pushing demand for home mortages to new highs, a number of other major corporations are eyeing the market. Ford Motor Co., for example, bought a California savings and loan last year and is now working on expansion plans, company spokesman said yesterday. Although Ford has no specific plans to announce at this date, the company is exploring the home mortgage market, a Ford spokesman said.
Meanwhile, K mart Corp. has installed "The Mortgage Place" in 13 stores, leasing the space to a private mortgage banking company that runs the program -- evaluating the creditworthiness of the application and granting the loan with its own source of funds. "We have a financial return that far exceeds what we would get from merchandising that space," said K mart's executive vice president, Robert E. Brewer.
The entrance of these nonbank companies into the mortgage market comes as banks also are trying to provide one-stop shopping by offering a wide variety of loans to consumers. The greater the number of transactions a bank has with an individual, the greater the profit, banking officials say.
For consumers, the stepped-up rivalry for the mortgage business should translate into highly competitive rates. GMAC, for instance, says its rates "are about as good as you can get." Yesterday, its 30-year, fixed-rate mortgage with a 20 percent down payment was set at 9.625 percent, plus three points -- a rate that was comparable to those being offered by Washington-area mortgage bankers.
The entrance of nonbank companies into the mortgage business only increases the bitterness between the banks and the nonbank concerns that have been fighting one another in Congress for years over the right to provide financial services. Banks argue that they are handicapped by federal and state laws that limit the services they can provide.
"The law allows nonbank companies to offer a variety of products outside of banking and still be in the banking system -- an enormous advantage we don't have," complained Mark Olson, president elect of the American Bankers Association.
GMAC officials said yesterday that its entrance into the mortgage market was a logical expansion. "We're in it because it's a natural area to build GMAC's traditional strengths," said Charles Newcomer, a GMAC spokesman. "It's an extension of what we've been doing successfully for the past 67 years. We've been looking at and evaluating loans, granting credit and servicing credit. While the product may be different, the process is very similar."
GMAC Mortgage Corp. has 70 offices around the country, and GMAC has 250 branches nationwide. The test planned for August is to determine how to organize the mortgage division -- whether, for instance, it should have offices separate from the auto-loan operations -- and how to make consumers more aware of GMAC's newest service.
Even a limited success -- such as winning mortgage business from 5 percent of GMAC's 8 million customers -- could double the company's mortgage business, Newcomer said. But GMAC is looking for even larger increases than 5 percent, he added.