Mortgage companies have long contended with competitors from outside their own industry, like Realtor-owned mortgage divisions. Homebuilders also have become a source of competition for the mortgage industry in recent years as larger developers create internal mortgage entities to entice consumers. Nationally, this phenomenon has caused an outcry from consumer groups who fear a monopoly will be created, but Bay State lenders seem unfazed, in part because there is less builder-owned mortgage activity in Massachusetts. Traditional lenders also say the competition is simply a normal part of the business.

Area lenders offer one primary reason for why there hasn’t been an influx of builder-owned mortgage companies in Massachusetts.

“We don’t have large tracts of land to develop,” said Dean Caso, president of Homevest Mortgage in Needham. “The land is not as readily available [in Massachusetts].”

Caso said it is true that many of the national homebuilders have in-house mortgage companies, but national developers can’t be as active in the Bay State as they are elsewhere.

“The real reason homebuilders are creating mortgage entities Â… it’s for revenue,” Caso said.

But their presence hasn’t negatively affected his business over the years, Caso said.

“We don’t run into it much,” Caso said. “We don’t lose any deals that I know of to builder-owned mortgage entities.”

In fact, Homevest has actually scored deals by working with national home builders. Caso said when Toll Bros., a luxury home builder based in Pennsylvania, has worked on smaller projects in the Bay State, Homevest has partnered with the company to offer loans to consumers.

Although Toll Bros. develops in Massachusetts, their mortgage subsidiary, TBI Mortgage, does not currently operate here.

Just as lenders often depend on Realtors for some referrals, mortgage professionals also look to builders for their business. At Homevest, loan officers partner with smaller local builders to offer loans to buyers in a development. Caso said his staff goes on-site to open houses offering their loan products and services. Admitting that builder-owned mortgage entities do make it difficult to reach consumers, Caso said it is up to his loan officers to go directly to the consumer to seek out business.

In recent weeks, the National Mortgage Complaint Center has voiced its opposition to a “mortgage monopoly” the group says is being created by homebuilders.

“Millions of new-home purchasers have been overcharged after they felt like they were forced into using the mortgage product of a regional or national homebuilder,” said Thomas Martin, president of the National Mortgage Complaint Center. “By offering such incentives such as bonus construction features, or a portion of the closing costs to be paid, the homebuilder lures the unsuspecting new homeowner into a trap, where the home purchaser ends up with an interest rate/monthly payment that could be higher than the best possible interest rate/mortgage payment available for their credit. Or the potential new homeowner might get stuck with junk mortgage fees that even the most crooked mortgage lender would think twice about ever charging a consumer.”

James F. Flynn, president of Hopkinton-based Marathon Mortgage, which also works with smaller homebuilders, agrees with the critics of large builder-owned companies, calling it “another frustration” in the industry.

“The big guys aren’t always the best,” Flynn said.

He recalls receiving a phone call from an unhappy former borrower who had financed a home with a builder-owned mortgage company.

“They’re not dealing with local people,” Flynn said. “We reiterate to everybody that we’re here [in the local area].”

Caso does point out that the builder-owned mortgage entities won’t be successful by simply offering financing to consumers. They must offer competitive rates and good products.

“They still have to do a good job,” Caso said.

‘Pressure Is On’

While the large homebuilder entities are creating some frustration for local mortgage companies, the competition could still be fiercer and actually is in other parts of the country.

Boston-based Sherwood Mortgage has an office in Palm Beach County in Florida, where large homebuilders with in-house mortgage companies are much more prevalent. Ida Englert, branch manager and vice president, said because the homebuilders give such large discounts consumers tend to finance through the internal builder mortgage firm. The builder will usually pay a large percent of the recording fees if a consumer agrees to finance their home through the homebuilder’s mortgage company. This can save a consumer approximately $2,500 at times, Englert said.

While the independent mortgage companies will miss out on much of the business when a new development is built, Englert said her office tends to get some of the runoff when the builder-owned mortgage company can’t fit a consumer into one of their products. However, most of the time companies like Sherwood Mortgage lose out on new-home purchase mortgages when the developer involved offers lending services.

“The pressure is on internally [at builder-owned mortgage arms] to close these loans on time,” said Englert.

Englert said revenue, control and timing are the three main reasons builders promote internal financing. While it may take four to six days for a typical lender to complete the final appraisal photos of a new home, because of the close working relationship the builder and its mortgage company can complete it in two.

“We just can’t circumvent [the timing],” Englert said.

Similar to Massachusetts lenders tactics, Sherwood Mortgage loan officers in Florida will try to partner with smaller builders in order to score business. The drawback is there are few single parcels of land in Palm Beach County and large-scale developments and national builders are the norm.

“[Small builders] are a dying breed,” she said.

Echoing Caso’s sentiments, Englert said these struggles are “just another part of doing business,” but said it may not benefit consumers.

“It doesn’t allow consumers to make a choice,” Englert said.

Martin said national homebuilders will control the entire home-buying transaction, creating “little or no safety nets for the consumer, because the builder will typically say ‘take it or leave it’ or ‘if you don’t use our mortgage product the house costs $10,000 more.'”

One national homebuilding firm based in Michigan disagrees, avowing that consumers do have a choice.

“Pulte Homes homebuyers have the choice of using Pulte Mortgage for their loan origination, but are under no obligation to use this service,” said a Pulte Home spokesman in an issued statement.

According to Pulte’s spokesman, the application process often is easier for the consumer if they finance through the builder.

“One of the benefits to a Pulte homebuyer of originating a loan with Pulte Mortgage is that it streamlines the loan and home completion processes, especially during the critical closing stage,” the statement said. “Pulte has learned through its own internal research, as well as through the annual J.D. Power and Assoc. national survey of new homebuyers, that completing and delivering the home when promised is one of the leading drivers of a customer’s level of satisfaction with their homebuilder.”

Although she is concerned that consumers buying homes from national lenders may have fewer choices, Englert said the one-stop shopping is not always necessarily bad.

“If a Wells Fargo became the financing vehicle for XYZ Development, they have probably locked in Â… a pretty special program for the right candidate,” Englert said.

Depending on the circumstance, she said, an applicant could actually get a better rate than usual.