First Nationwide Mortgage, a subsidiary of California Federal Bank, is nearing entry to the $100 billion club.
The Frederick, Md., mortgage company would have a servicing portfolio of about $94 billion once CalFed completed its merger with Golden State Bancorp, the parent company of Glendale Federal Bank. That deal was announced last week.
First Nationwide has grown dramatically since 1995, mainly through acquisitions by its parent company, owned by financier Ronald O. Perelman and banker Gerald J. Ford.
California Federal, which had been called First Nationwide Bank until it bought CalFed and adopted its name last year, acquired Standard Federal Bank, of Gaithersburg, Md., in 1995 and San Francisco Federal Bank in 1996.
First Nationwide also bought large portions of the servicing from Lomas Mortgage USA, the erstwhile mortgage king that has gone through two bankruptcy reorganizations, in 1995 and 1996.
Before the CalFed-Glenfed merger deal there had been rumors in the mortgage banking community that First Nationwide Mortgage was going to sell a large block of servicing. Some investment bankers speculated that the entire company could be sold.
Walter C. "Terry" Klein Jr., president and chief executive of First Nationwide Mortgage, said the division did not have a large servicing package on the block. CalFed's merger with Glenfed should put these rumors to rest, he said.
First Nationwide has about $61.5 billion in servicing. Glendale Federal has about $33 billion, having acquired $12 billion of jumbo mortgages from Prudential Mortgage last year.
Jumbo loans are mortgages that exceed $227,150. Fannie Mae and Freddie Mac cannot buy loans larger than this amount.
Lawrence P. Washington, executive vice president and chief financial officer of First Nationwide, said the addition of these loans would benefit First Nationwide because on average, they are younger and have lower delinquency rates than those already in First Nationwide's portfolio.
First Nationwide services most of the 900,000 loans in its portfolio in its Gaithersburg, Md., center. Servicing brokers said they expect First Nationwide to eventually service Glenfed's loans from the Maryland center as well.
But Mr. Klein said it is too soon to say what will happen to Glenfed's servicing site in San Diego, which employs about 135 people. He pointed out that First Nationwide also has a small site in Montana.
Some observers wondered whether the combined company would be able to originate enough loans to replace runoff. Thrifts have been especially susceptible to low interest rates because of the high number of adjustable rate mortgages in their portfolios.
First Nationwide originated about $8.5 billion in 1997. Glendale originates mortgages through its branches in California. Mr. Klein said the combined companies could originate $12.5 billion this year.
The mortgage company is primarily a wholesale lender, except in California. Mr. Klein said First Nationwide would now have a larger retail presence in California. The merged thrift would have about 370 branches once overlapping ones are closed.
Still, Mr. Klein did not downplay the issue of runoff.
"It is a fact of life. It is a reality that there is some runoff, particularly ARMs, but we think we can make up some of that with high quality new product," he said.
