American Express Wants Your Mortgage Payment

American Express(AXP Quote) is allowing customers to start charging their mortgage payments.

The financial services giant, which caters to the wealthy consumer and business elite, has inked a relationship with American Home Mortgage(AHM Quote) to allow the Melville, N.Y., lender to offer the Express Rewards Mortgage program to eligible borrowers.

The program applies to consumers taking out a new or refinancing an existing prime home loan through American Home Mortgage. Borrowers must pay a one-time fee of $395 to the lender at the time of closing.

American Express is also putting the final touches on a similar agreement with IndyMac Bancorp(IMB Quote). The program with IndyMac is expected to begin this summer, according to an American Express spokeswoman.

She would not name other lenders that American Express might be in talks with.

The New York company has had success with allowing card members to place luxury rental payments and condominium down payments on their credit cards and decided to expand the offerings, it says.

American Express is "trying to get into recurring payments" by encouraging card members to charge things such as gas bills and rent, says Sanjay Sakhrani, an analyst at Keefe Bruyette & Woods.

"That assists their spending volume and also provides rewards to consumers and makes their card product more attractive," says Sakhrani. "My sense is that over time these partnerships should expand and should go to other card lenders as well."

Yet the program comes at a time when housing prices have begun falling after a long run-up and credit quality has plunged in the subprime and Alt-A mortgage markets -- covering loans made to borrowers with less than perfect credit or without full documentation.

Both American Home and IndyMac, among others, cited unfavorable market conditions in the Alt-A sector as a contributor to poor earnings results last quarter.

Allowing customers to place mortgage payments on their credit card "certainly increases the credit risk or the severity risk, but remember they're [lending] to the affluent consumer," Sakhrani says. "This consumer has a pre-existing credit line already. It certainly is scary, but you have to trust that they're issuing cards to higher-quality consumers, which I do." He rates the stock outperform.

American Express says it has several protections in place. Besides offering the program to only existing card members and those with prime loans, American Express will also continue to monitor customers and re-authorize them each month on the ability to use the program, the spokeswoman says.

"These are highly responsible, highly creditworthy consumers who are driven by rewards and convenience," she says.

Shares rose 33 cents to $64.60.