Mortgage bankers take up slack in home lending; Federal Reserve helps keep interest low, activity high.

With regulators keeping lending tight at banks and savings and loans, mortgage bankers are gaining in their share of the residential lending market in Los Angeles, California and nationwide.

Mortgage companies have surpassed banks and savings and loans as the No. 1 lender nationwide on residential lending, taking 40 percent of the market, according to the U.S. Department of Housing and Urban Development.

Banks had the second-highest lending volume with 29 percent of the market and savings and loans third with 25 percent of the market.

In California, mortgage bankers have continued to increase their market share in the residential lending market, according to the California Mortgage Bankers Association. Mortgage bankers originated 44.8 percent of new, first mortgages in 1990, up from 33 percent in 1987, according to the association.

Mortgage companies have also been moving up in the residential lending market in Los Angeles County, according to information provided by the Dataquick Information Network. Bank of America, Great Western Bank and Home Savings of America held the first, second and third positions in residential lending in Los Angeles County for the time period of January through August 1991 and the time period of January through August 1990.

But Sears Mortgage, a mortgage banker, moved from the twentieth position in 1990 to fourth in 1991. IMCO Realty Services moved from twelfth to ninth. Directors Mortgage moved from nineteenth to eleventh. And Countrywide Fund moved from seventeenth to twelfth.

One reason for the success of mortgage companies is banks and savings and loans have experienced so much financial difficulty of late and are under regulatory pressure, said Zan Beckstad, the executive vice president of the California Mortgage Bankers Association.

The mortgage banker typically uses money borrowed from a bank to make mortgage loans. The loans are then pooled together and sold to the secondary market, institutions such as the Federal National Mortgage Association ("Fannie Mae"), the Government National Mortgage Association ("Ginnie May") and the Federal Home Loan Mortgage Corp. ("Freddie Mac"). The mortgage banker then services the loans for a fee.

Mortgage bankers have also been gaining market share because of the Federal Reserve board's repeated slashing of interest rates, mortgage bankers said. Many banks and savings and loans do not offer fixed mortgage rates, while mortgage bankers do, said Sidney Lenz, executive vice president of Pasadena-based Countrywide Funding Corp., the nation's largest mortgage banker.

Countrywide last month was offering deals as low as an 8.75 percent fixed rate on a 30-year mortgage, Lenz said. Countrywide Credit Industries Inc., posted net earnings of $11.9 million dollars for the second fiscal quarter which ended Aug. 31 1991. The earnings were up 133 percent from the same quarter in 1990, according to company spokeswoman Laura Lippman.

Lenz said mortgage bankers can make money on originating loans, but servicing the loans is mortgage bankers bread and butter. Mortgage bankers' also may not make money on the origination of a loan, however, this year Countrywide did, mainly because of the Fed's cutting interest rates, Lenz said.

"In the past year we have been able to make more on originations," she said. "It just means the cost of money between the time we agree to make the loan to the customer and the time we make the loan has not risen dramatically," she said.

The "majority" of Countrywide's new loans were fixed-rate mortgages, despite the fact that Countrywide was also offering adjustable mortgages as low as a little over 5 percent, Lenz said.

"When you offer a good rate on adjustable and a good rate on fixed, most people take fixed rate, because people want to know what their future payment is going to be 10 years from now," Lenz said.

Robert Garman, senior vice president of Riverside-based Directors Mortgage Loan Corp., said mortgage bankers do about 90 percent of the Federal Housing Administration loans and much of the Veteran's Administration Loans. Banks and saving and loans "just don't offer these loans," Garman said, noting that these loans require more work to process. About 40 percent of the loans made by Directors Mortgage are FHA or VA loans and 60 percent are conventional loans, Garman said.

Directors does not do a lot of lending in Orange County and pricey areas of Los Angeles County because there is a limit of $124,000 on FHA loans and $184,000 on VA loans, and Los Angeles County housing prices are generally higher, Garman said.

Lenz said Countrywide is making a profit despite the fact Congress passed a law last year which increased the downpayment a borrower needs to close an FHA loan. The law has affected FHA activity, however, as 30 percent of this year's loans are FHA loans, as compared to 40 percent last year, Lenz said. About 10 percent of Countrywide's loans are VA loans, she said.