SAN FRANCISCO Schwab opens first bank with home mortgage deals

The brokerage guaranteed mortgages at least $100 lower than competitors.
SAN FRANCISCO (AP) -- Slumping stock broker Charles Schwab Corp. has expanded into the banking business and is setting the stage for a price war by guaranteeing the best deals on home mortgages.
The San Francisco-based company opened Charles Schwab Bank on Monday, just days after receiving the final approval that it needed from federal regulators.
Schwab is counting on the bank to drum up revenue as it struggles to recover from a devastating drop-off in stock market trades among its 8 million customers.
To herald its banking debut, Schwab guaranteed that the total costs of its mortgages will be at least $100 below those of other lenders -- or it will pay prospective borrowers $750 in California and $500 elsewhere in the country. Home equity loans aren't covered by the guarantee.
Other bargains
Schwab also said it would pay $250 if the bank doesn't make a loan decision within 24 hours of an application. And if a mortgage doesn't close by a predetermined date, Schwab plans to lower the interest rate by one-eighth of a point.
The promised bargains on mortgages signal Schwab's intention to shake things up in the banking industry, just as it did in the 1970s by offering discount commissions on stock trades.
"It will be banking the Schwab way," said Rich Kenny, a veteran banker who is overseeing Schwab's expansion.
Schwab may be buying trouble by daring other lenders in the fiercely competitive mortgage market to beat its prices, said analyst Justin Hughes of Jefferies & amp; Co.
"It's either a very bold move or a very dumb move on their part," Hughes said. "I don't see what kind of competitive advantage they have that will allow them to undercut everyone else."