Mountain of a task: merging Sears, PNC units.

Nobody said it was going to be easy to meld Sears Mortgage Corp. into PNC Bank Corp.

Not James E. Rohr, president of Pittsburgh-based PNC, who cut the deal to acquire Sears. Not Walter C. Klein Jr., the seasoned chairman of Sears Mortgage.

And certainly not Saiyid T. Naqvi, who was named president of Vernon Hills, Ill.-based Sears Mortgage a week after the merger announcement in May.

The 44-year-old Pakistan native, formerly Sears' secondary-market chief, is now overseeing the complex and sometimes thorny operational aspects of the largest mortgage banking combination in history.

When the $328 million deal closes -- sometime before yearend -- Mr. Klein and Mr. Naqvi will head a company that blends the giant Sears Mortgage with the smaller but still substantial mortgage operations of PNC.

Name to Be Determined

The new company, whose name has yet to be determined, should rank among the nation's top five originators and top 10 servicers. Mr. Klein's job right now "is to deal with a whole host of issues that are more external," Mr. Naqvi said in an interview.

"He is involved in a big legislative agenda" that includes fair housing. "My job deals more with running the company on a day-to-day basis."

It is the scope of these day-to-day businesses that makes the integration task formidable. The deal will bring together Sears' $27 billion servicing portfolio with PNC's roughly $9 billion portfolio.

To complicate matters, the two companies use different software systems to perform the servicing chores.

PNC also will get Sears' chain of 117 retail offices in 3 3 states, to add to its own much more compact 550-office branch system in five states. And PNC's original plan to simplify the consolidation by selling Sears' western offices to a management group fell through when a price could not be agreed upon.

It is up to Mr. Naqvi to make all this work. He says he has established four broad goals.

"We are trying to get the highest customer satisfaction level. We are going to reduce costs so that we can be competitive. We have to create greater shareholder value so that what we are doing is going to add to the bottom line," he said.

"And finally, the fourth thing, we really need to make sure we create a work environment that is good for our employees and allows them to bring out their creativity."

Mr. Naqvi is counting on technology to help.

Systems Choice Ahead

One cost reduction will certainly come from consolidating servicing operations. Sears uses a system from the Lomas Information Services unit of Lomas Financial Corp., Dallas. PNC's is from Computer Power Inc., Jacksonville, Fla.

CPI is the industry leader, but Lomas has a newer system that incorporates popular features. Mr. Naqvi likes the Lomas system, and observers believe Lomas will get the contract.

Mr. Naqvi is also looking to expand the use of technology in originations. And he expects not only to cut costs but also to bolster his organization's sales culture in doing so.

"We are going to be looking at how to get our costs down," he said, "but not necessarily by cutting salaries.

"If you want your producers to have high productivity, you have to pay what the market is paying. I think our issue is: Can we get our loan-officer productivity 15% to 25% higher through the application of better technology?"

Sales and Service

Mr. Naqvi sees technology as a route to imbuing his organization with a sales culture. "A sales culture is sort of a fuzzy term," said Mr. Naqvi. For a lot of people, a big rah-rah speech -- a go get |em!' sort of thing -- is a sales culture. But for us, a sales culture is that we need to be able to separate the sales function from the delivery of the service.

"Right now, a loan officer goes out and not only calls on the realtor, but then he takes the application literally follows the application through closing. And really, that is part of the delivery of the service."

Mr. Naqvi's preference for systems improvement over cheerleading is a clear reflection of his personal style.

A soft-spoken man with chemistry degree from the University of Missouri, he appeared relaxed during an interview at Sears Mortgage's offices.

The thrust, he said, is to free up the salespeople to do more of what they do best, selling. But he also says the quality of delivery service will improve.

The Coldwell Factor

One open question is whether the new company will lose much of the business that came to it through Coldwell Banker, the Sears Roebuck & Co. unit of which it has been part.

It is believed that as much as 30% of Sears' originations came through Coldwell Banker, and a large portion of the captive business could be lost, some industry sources say.

But Mr. Naqvi says the Coldwell Banker business was not handed to the mortgage company on a silver platter. He suggests that the flow of loans from Coldwell may be durable despite the severance of corporate ties, because the Sears loan officers worked hard to build one-to-one relationships with the realty offices, and he expects those links to be maintained.

Could a sharp contraction in nationwide loan originations throw a monkey wrench into the works just as the new company is getting ready to unleash its monster mortgage machine?

Mr. Naqvi doesn't think so. "For the last couple of years, we have limited the amount of refis that we will do," he said, "because we have a strategy to make sure we have the processing capacity and appropriate coverage of realtors that we have been doing business with. So we are one of the few companies that I am aware of that limited the amount of refis that our loan officers could take."

As a result, he said, Sears has a much lower percentage of refinancing volume than the 60% to 70% that has been the norm elsewhere. "After the refi boom is over and we go back to our realtors for business, they will know we have been there all along."

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