Mortgage brokers scramble for piece of shrinking market.

Fred Arnold, president of the Southern California division of American Family Funding, has been spending a lot of time alerting his clients to credit card scams, providing information on setting up trusts and giving other helpful financial advice.

The Santa Clarita-based mortgage broker has always been very involved in the community, but his efforts have been stepped up notch lately, as have those of most of his competitors.

With the dramatic downturn in the refinance market and increased competition, mortgage brokers and bankers have all turned up the volume, hoping to get a bigger share of a smaller mortgage market.

For smaller companies like Arnold's, the focus is on building one-on-one relationships with clients. Larger players are hard at work hoping to cement large referral networks that will guarantee a steady flow of business.

Among the most dramatic of the recent moves, Countrywide Financial Corp. has struck a deal to acquire the mortgage subsidiary of KB Home, and set up a joint venture to provide mortgage loans to KB customers.

Another local mortgage company, Sherman Oaks-based Metrocities Mortgage, is hoping for similar results with the recent appointment of John W. Stewart in the role of president of strategic initiatives.

Stewart, a co-founder of Metrocities who left to set up a similar unit in Countrywide, will be charged with developing a referral network among homebuilders, real estate brokers, faith-based organizations and others with close ties to consumers as well as identifying acquisition opportunities.

"There are a number of different ways a mortgage company can expand its market share," said Stewart. "Some go out and do consumer-direct advertising. Some decide they'll hire a lot of retail loan officers to sell. Metrocities has decided it will form strategic partnerships with companies that are in turn close to the consumer like real estate brokers and homebuilders."

Companies like Calabasas-based Country wide and Metrocities have long been well entrenched in the purchase mortgage market offering loans to home buyers. But over the past few years, record low interest rates and a skyrocketing refinance market have brought many new players into the fray.

Now, as refinancing loans have dropped to about 42 percent of the market at the close of last year, from a high of 74 percent of total mortgage originations at the close of 2002, brokers and bankers have all turned their attention to home purchasers.

"There are a lot of brokers who popped up to take advantage of the refinance market," Stewart said.