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Although real estate agents and new-home salespeople have lost some control over their clients because of the Internet, they're still king when it comes to choosing the lender, according to the latest study by Weston Edwards and Associates.

In what is called the study's major finding, nearly three out of every four buyers followed the recommendation of their sales rep in picking a lender, which is why Edwards says the inroads builders and brokers have made into mortgage pie is "much greater than generally thought to be the case."

And the study, the "fourth and best" by the well-known industry observer and consultant, suggests that "several factors over the next few years will combine to drive (builder and realty firm) mortgage capture rates significantly higher."

The 300-page study, which is backed by 1,300 supporting tables and was released to the public last week, was sponsored by a group of 30 of the nation's largest real estate and mortgage industry players.

Edwards would not reveal their identities, saying only that they include realty firms, major lenders, trade groups, title companies, software companies and even the government sponsored enterprises. "They cover the field and are fully recognizable," he said.

The study found that builders have done the best job at corralling their buyers. The top 10 average an 80 percent capture rate, including a 50 percent capture rate among their minority and recent immigrant buyers.

Typically, minorities and immigrants don't trust in-house lenders. But builders have done a good job -- and a "far better" one than realty firms -- in providing a product, delivery system and marketing approach tailored to their special needs, the report found.

"Builders are adding a lot of minorities and recent immigrants to their new-home sales staffs in neighborhoods where they are reaching out to these customer groups," the study found.

"Many builders have found that hiring second and third generation immigrants who still look the part and speak the language but understand and have accepted the way we do business has been the best way to staff these operations."

While the capture rate among the realty firms covered in the study has remained at about the same level it was five years ago, those who are grabbing the most buyers have actually improved, according to Edwards.

Going forward, the consultant expects larger brokerages to obtain the mortgage business of about one in three buyers on average. But he says there is a "growing consensus" among the leaders of the real estate industry that they can achieve a one-in-two capture rate.

He also expects realty firms to continue making inroads in the title insurance and closing service businesses, and eventually offer homeowners and other types of personal insurance as a "fourth major core service."

Insurance "is a logical and financially attractive addition to one-stop shopping home services," the report says.

In the five years since Edwards' last survey, realty broker participation in title insurance, escrow and other closing services has risen from 45 percent to 65 percent.

But "within (the next) five years, we expect 70 percent-80 percent of leading realty firms will be providing either of both title insurance and closing services," he predicted, adding that the percentage would be even higher if offering such services was not outlawed in some states or attorneys have been able to keep others out of what until now has been their heavily guarded turf.

By contrast, nearly 9 out of every 10 big brokers offer mortgage services, according to the report.

Builders and brokers who have made the greatest inroads into the mortgage business haven't gained ground on their own. Rather, they have done it with the help of lenders.

"A major part of the tug-of-war for the home buyers has turned into a partnership," Edwards said.

"Just about all the growth in the past five years in realty and builder-affiliated mortgage companies, which has been substantial, has been in the form of joint ventures or marketing fee arrangements, principally with major lenders."

In 1999, all of the top 10 builders had mortgage operations, and they were nailing seven out of 10 of their buyers. Five years ago, though, just 59 percent of the next tier -- the 11th through 150th largest -- participated in the mortgage side of the business, capturing only two-thirds of their buyers.

In the intervening five years, the top 10 builders have boosted their collective capture rate to four out of five. But even more startling, the next 140 largest builders have increased their activity in the mortgage arena as well as their capture rate.

Now, 76 percent are into mortgages -- almost entirely through joint ventures with lenders, according to Edwards -- and their capture rate is up to 73 percent.

Realty firms, which collectively sell five times as many houses as builders over the course of a year, haven't done nearly as well -- no matter how the mortgage operation is structured.

Wholly owned operations capture only 26 percent of all buy-side transactions; joint ventures, just 23 percent, according to the study.

Edwards says the main reason for the poor showing is that most of the growth over the last five years has been in joint ventures, which are still "in the start-up phase." But another factor is that many realty agents tend to view on-site loan officers "as retail originators more conveniently located" as opposed to dedicated team players.

Only those firms which have created "a strong bond between in house originators and agents" are capturing a high rate of buyers. And in only one firm Edwards visited did every agent recommend -- and recommend enthusiastically -- the in-house lender.

Still, the consultant predicted the capture rate among realty firms will grow "significantly" over the next five years to roughly the 30 percent-35 percent range on average.

Despite the documented successes of builders and brokers, and Edwards' forecasts that they will do even better in the future, some told the researcher they have misgivings that they won't get the time and attention from their lenders partners that they think they deserve.

Or more importantly, whether major lenders will offer their full packages to the joint ventures or give preference to their own retail operations.

"Most realty and builder joint venture partners assume that they will get the full benefit of their lenders' packages, but others are doubtful and concerned that (their own) in-house mortgage activity will be diminished," the consultant said.

One broker who operates a wholly-owned mortgage subsidiary said he was concerned that large lenders could undercut an alliance with deeply discounted loan products. The head of a major builder's mortgage operation echoed that sentiment, saying he wasn't sure what it would take to remain competitive in the face of volume discounts.

Another major worry is with lenders who are dead-set on making the buyer a customer for life. "Who the buyer was going to turn to first in their next home buying transaction was our paramount concern," Edwards said.

"We heard concerns expressed by realty firms that their lender joint venture partner was working so hard to have that customer be the lender's customer for life that the realty firm doubted if this was a wise long-term relationship."

The consultant said the manner in which lenders handle these issues is likely to determine the strength of the broker/builder partnerships going forward.

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