First Interstate Bank has hired a prominent mortgage banking executive to oversee loan production at its residential mortgage division.

The Los Angeles-based bank has signed Graham Williams, formerly president of ITT Residential Capital Corp., to be a senior vice president and national loan production manager. Mr. Williams, 41, resigned from ITT in August. He will report to Paul Mullings, president of the residential mortgage division.

The hiring signals a new commitment to home lending on the part of First Interstate. Despite having $19.5 billion of deposits, the bank originated only $577 million of home loans in the first half of 1994, placing it far below other banks of comparable size.

At First Interstate, Mr. Williams has the task of bringing originations up to the mark. He will manage originations through the bank's 13-state, 1,100-branch office network. He will also lead "the bank's efforts to dramatically increase its loan originations from realtors and builders," as well as a "major wholesale lending initiative targeting mortgage loan brokers," according to a bank spokesman.

Mr. Williams said he believes First Interstate "is extremely well positioned to move its mortgage loan production forward in a major way."

First Interstate is expanding into a viciously competitive market, especially in wholesale lending. Dropping volume has led lenders to slash rates to bring loans in the door.

Mr. Williams means to sidestep this competition by playing on the bank's strengths as a portfolio lender. "Our growth will be primarily driven by the adjustable-rate market. As an ARM lender we can be fundamentally advantaged."

Portfolio lenders have displayed a willingness this year to price adjustable-rate mortgages at levels well below those offered by the secondary market agencies or jumbo conduits.

The bank will use as its base a small wholesale unit it picked up with the purchase of Sacramento Savings Bank last May.

Before joining ITT Financial in 1992, Mr. Williams was briefly head of mortgage banking at Bank of America, where he also managed mortgage production and secondary marketing.

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