New Faces at Top of Mortgage Market : Lending: Countrywide and Prudential Home rank No. 1 and 2 in originations in the first half of the year.

Two aggressive bank competitors have climbed to the top of the booming mortgage market.

Countrywide Credit Industries and Prudential Home Mortgage broke away from the bank pack in the first half of the year to take the No. 1 and No. 2 spots, respectively, in mortgage originations, according to an American Banker survey.

Each company has written more loans so far this year than in all of 1991. Pasadena-based Countrywide says it produced $12.2 billion of new mortgages, while Prudential Home reported $11 billion.

Norwest Corp., last year’s originations king, slipped to No. 3, while Fleet Financial Group dropped from No. 2 to No. 4.

The shifts came as a wave of refinancings lifted industrywide originations to an estimated $340 billion, 51% over last year’s six-month volume.

The market leaders, meanwhile, are decidedly bullish about the future. Recent declines in long-term interest rates are likely to encourage still more homeowners to refinance, they said.

Rates on 30-year conventional fixed mortgages dropped this week to about 8.2% from 8.4%. That is slightly below the level that ignited a refinancing frenzy early in the year.

“We’re going to get a summer kick in business,” said Robert Williams, a managing director at Prudential Home, a unit of Prudential Insurance Co. of America. “It won’t be of the intensity of January and February, but we should still have a strong summer.”

Both Prudential and Countrywide have been focused on growth for a few years. Countrywide vaulted into the top ranks last year as the fourth-largest originator after placing No. 12 in 1990, according to the newsletter Inside Mortgage Finance. Prudential rose last year to third place from seventh two years ago.

Some bankers view the two leaders as interlopers that enjoy advantages banks don’t have. They complain that Prudential and Countrywide are free of capital constraints and community lending requirements that bank regulators impose.

But many mortgage specialists hail the two enterprises as prototype lenders of the future. They praise them for their tight focus on residential lending, their low operating costs and their expertise in mortgage securement.

Like many big mortgage companies, Countrywide and Prudential not only snare consumers themselves but they also buy large amounts of new loans from other lenders. The rankings, in line with industry convention, include these “wholesale” purchases as originations.

Countrywide has predicted that it will originate $30 billion of mortgages in its current fiscal year, which ends in February. That would nearly double the industry record, set by Citicorp in 1986.

“We’re on our way,” Jerry Baker, Countrywide’s head of loan production, said this week. “Interest rates are moving in the right direction and we have the physical capacity out there to expand.”

To avoid the delinquencies that dogged Citicorp and other overzealous lenders of the past, Countrywide has beefed up its staff training and quality control department, Baker says.

But new loans must stand the test of time. Skeptical rivals point out that it often takes two or three years before new loans go bad.

Banks, to be sure, are still active lenders. Chemical Banking Corp., helped by its merger with Manufacturers Hanover Corp., climbed to the nation’s fifth-biggest originator after placing 10th for 1991. Chemical’s $6.1 billion of new mortgages in the first six months of 1992 compares to $2.9 billion at Chemical and Hanover in the year-earlier period.

Close behind Chemical are H. F. Ahmanson and the mortgage unit of Sears, Roebuck & Co., with $5.3 billion of originations apiece. BankAmerica Corp. and Citicorp are believed to have notched similar volume, though officials at the companies would not comment.

While most big lenders speak excitedly about lower interest rates boosting refinancings, not everyone will be a winner.

Homeowners looking to refinance are frequently willing to walk way from their existing lender if a rival institution is offering more attractive terms. As a result, less aggressive lenders, such as capital-short thrifts, often lose more business than they gain.

Another pickup in refinancings also could hurt banks that are big investors in mortgage-backed securities. That’s because early repayment of loans backing securities can rob investors of expected cash flows and force them to reinvest at lower interest rates.

“With market conditions now as favorable for refinancing as they were early this year, another significant surge in prepayments is likely,” analysts at Goldman, Sachs & Co. warned in a report earlier this week.