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Your Mortgage : Century 21 Pulls Out of Mortgage Lending : Financing: Real estate giant learns that selling and lending for 'one-stop' service do not necessarily mix.


In what some experts say is another sign that mortgage lending and real estate sales just don't mix, sales giant Century 21 Real Estate Corp. has quietly decided to fold its mortgage operations.

The nation's biggest real estate network started the Century 21 Mortgage Corp. in the mid-1980s, hoping to bolster profits by making loans to consumers who purchased homes through the company's 600,000-plus real estate agents.

It was, company officials said at the time, the "ultimate in one-stop shopping"--you would buy a house from a C-21 agent and also get a loan from its mortgage company.

Century 21's executives also hoped that you would purchase your insurance and other financial products from its parent company, Metropolitan Life Insurance Co.

But Century 21 now knows what some other big companies with similar plans have found out before: A good real estate agent doesn't always make a good loan officer.

"There's still some merit to the one-stop concept, but we've decided to concentrate on our core business," said Bob Hutchinson, Century 21's executive vice president.

Century 21 Mortgage quit accepting loan applications a few months ago, Hutchinson said. Applications that were taken before the cutoff will be processed and the money will be loaned to avoid disrupting transactions, he said.

Century 21 isn't the first company to find out that running a good real estate company isn't the same as operating a successful lending organization--and vice versa.

In the mid-'80s, financial services giant Guild Mortgage bought the 400-outlet Red Carpet Real Estate Services in an effort to bolster its loan production.

But just a few years later, Guild admitted that the hoped-for "synergy" between its lending and sales operations never materialized and sold Red Carpet to another company.

Even retailing giant Sears, Roebuck & Co. hasn't had too much success in executing the one-stop shopping concept. It has bought a variety of finance- and real estate-related companies, but not many buyers who use the Sears-owned Coldwell Banker brokerage firm get their loans from its Sears Mortgage Corp., buy insurance from its Allstate subsidiary or purchase stock through its Dean Witter Reynolds offices.

To some extent, the failure of companies such as Century 21 and Guild Mortgage to pull off a successful marriage of lending and sales has been caused by the growing savvy of today's borrowers.

"Consumers are a lot more educated than they used to be," said Barbara Pivnicka of the Roulac Group, the real estate consulting division of accounting giant Deloitte & Touche.

"If a realtor can offer a buyer the best rate on the best terms, than the buyer will take the loan. But if that buyer can get a better rate or better terms somewhere else, he throws that one-stop shopping concept out the window."

It's not uncommon for a realtor to suggest that a buyer visit a particular lender when the buyer is looking for a loan. But if the lender then pays the realtor for sending your business his way, is it an illegal kickback or merely a "referral fee"?

The question has had realtors and many lenders squabbling with each other for more than a year.

But the debate recently heated up when Ronnie Wynn--president of the powerful Mortgage Bankers Assn. of America--told a congressional panel that the fees are encouraging realtors to "steer" borrowers to lenders who offer the biggest payoffs even if the borrower could save money by going someplace else.

"Real estate brokers and agents are in a unique position, with considerable influence over the home buyer's decision," Wynn told the House Subcommittee on Housing and Community Development.

"Their recommendations should be based on the best combination of interest rate, terms and services. . . . Allowing referral fees to be paid increases the possibility that referrals will be made based on who pays the highest fee to the broker or agent."

Most of the 2,600 financial institutions that belong to Wynn's group do not offer referral fees to realtors, but members of competing trade groups do. Both Congress and the U.S. Department of Housing and Urban Development are considering tightening regulations that govern referrals.

Realtors say they don't steer business to any lender just to pick up an extra few hundred dollars.

"But if the realtor discloses that he's collecting a fee and provides the seller with a legitimate service, he's entitled to collect a fee if one is offered," said Leslie Appleton-Young, an official with the California Assn. of Realtors.

Both Wynn's group and realtor officials will air their views in front of a Senate panel later this month. The debate could be decided within a few months if HUD decides to get involved, or it could take more than a year if legislative action is taken.

All the trouble in the Persian Gulf might be pushing up the price you pay for gas, but it might also soon push down the rate you pay on your mortgage.

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