the $100-billion-asset Prudential Insurance Co. -- is about to plunge into the home mortgage market. Its aggressive rate quotes, plentiful cash, and sophisticated telephone loan application and approval system could change the way thousands of Americans finance their real estate.
Formal announcement of Prudential's plans isn't expected until Thursday, but senior officials at the company confirmed the outlines of their plans. A new Prudential affiliate with headquarters in Gaithersburg will begin originating home loans the second week of June. Prudential's nationwide network of 25,000 insurance agents will help generate a significant percentage of the new mortgage business through referrals from their 50 million policyholders. Loan volume generated by the fledgling enterprise could be substantial: $1 billion to $2 billion in new mortgages originated in the first 12 to 18 months alone.
* The firm will offer five versions of fixed- and adjustable-rate mortgages for new purchasers, refinancings, vacation homes and small-scale investment properties, without dollar limitations. Fixed-rate 30-year and 15-year loans will be the best-priced mortgages initially, and should be at least slightly below typical quotes available in local markets around the country. Quotes will be set every weekday and made available via the firm's toll-free number.
* Telecommunications will be at the heart of the new mortgage firm. Prudential says computer technology developed for airlines reservations systems has been adapted to create the first national home loan source able to take complete applications and provide a conditional commitment of funds, terms and interest rates to buyers in one phone call.
"For the vast majority of callers, getting a loan will be handled entirely by telephone, rather than having to leave work or home to sit down with a lender," said J. Donald Klink, chief executive officer of Prudential Home Mortgage.
The only point at which the borrowers normally will need to go anywhere will be to collect their money at settlement or escrow closing.
* The new, high-tech mortgage service will be introduced in early June in Ohio, North Carolina and Virginia. Shortly thereafter, Maryland, the District of Columbia and the southeastern states will be added. Following that, Prudential will expand the service sequentially through the Sun Belt, the western, Rocky Mountain, north central and northeastern states. The entire country is likely to be hooked into the phone-loan system by the end of the year or early 1986.
Prudential's decision to plunge into the home mortgage market in this form is significant for consumers and the real estate financing industry. The insurance firm's vast capital resources will enable it to underprice segments of the market when it chooses, and thus exert healthy downward pressure on home mortgage rates paid by individual borrowers. Prudential, for instance, might well offer fixed-rate loans at 12 to 12.14 percent when the bulk of the market is at 12.12 to 12.34 percent, to fill its huge appetite for fixed-rate investments.
The new firm is designed to cut overhead and maximize volume by emphasizing the latest technologies and eliminating the need for a costly network of local offices. Technological advances of the past five years, in fact, were among the critical factors that convinced Prudential "that we could enter the market with significant advantages" over local and national mortgage competitors that have been in business for decades, according to Richard B. Stearns Jr., chairman of Prudential's Mortgage Capital group.
Prudential, it should be noted, used to be one of those traditional, paper-oriented lenders. In the 1950s and early 1960s, it was one of the largest originators of housing loans, putting more than one of five of its investment dollars into residential mortgages. It withdrew in the late 1960s to pursue other investments, Stearns noted, "but now we sense that the moment is right to come back."