Banc One Mortgage Corp. has tapped its production chief to president and chief executive officer, prompting talk that the Columbus, Ohio, bank may soon move to expand its mortgage business.

Donald K. Erling, who was hired in February, has been an innovative production chief, expanding a service that lets borrowers choose among loans from Banc One and other major lenders.

Sources said Mr. Erling and Brad L. Conner, Banc One Mortgage's senior vice president for strategic services, are eager to expand its servicing portfolio as well.

Banc One Mortgage is the 28th-largest servicer, with a portfolio of about $21 billion in loans, but it has been unwilling to invest in servicing. By contrast, other large banking companies, such as Norwest Corp., Chase Manhattan Corp., Fleet Financial Group, and NationsBank Corp., all have servicing portfolios in excess of $100 billion.

"Increasingly, scale is going to be important. While mortgage banking could still be a profitable business for Banc One, longer term they'll need to be a bigger player," said Joseph Morford, an analyst with BT Alex. Brown.

Mr. Erling's promotion was one of several moves last week at the banking company.

Jeffrey P. Gaia, who had been the head of the mortgage unit, was placed in charge of Banc One Corp.'s retail business banking group, which lends to small businesses.

And Ronald C. Baldwin, who had led the small-business division, takes charge of retail delivery for Banc One Corp.

Banc One Mortgage, which had been a part of Banc One Retail Group, will now be part of Finance One Corp., a consumer finance unit of Banc One. Mr. Erling will report to Donald E. Winkler, chairman and CEO of Finance One.

Finance One has a subprime mortgage lending division, Banc One Financial Services, as well as auto lending and student lending divisions. Mr. Erling said the change was made to have all mortgage operations report to the same person.

Banc One Corp. is one of the 10 largest banks in the country, with assets of $113 billion as of Sept. 30. But its mortgage banking division is considered midsize. Industry observers said Banc One now needs to decide if it wants to grow the mortgage business, especially the portfolio of loans it services.

Before joining Banc One, Mr. Erling was the head of the Home Mortgage Network, a joint venture between Coldwell Banker and PNC Mortgage.

He also worked for Prudential Home Mortgage, which was sold to Norwest last year, for eight years.

Mr. Conner has been serving as acting chief financial officer since earlier this month, when William B. Naryka left to become chief financial officer at Fleet Mortgage Group.

Although many banks view large servicing portfolios as a means to cross- sell other products, Banc One has looked more to the originations side for these opportunities.

Banc One Mortgage has been one of the more innovative companies in the industry this year.

It introduced a service, the Mortgage Source, in all its bank branches that lets consumers choose a mortgage from a stable of competitors' products, such as Citicorp, Norwest, and Chase. Banc One earns fees for each loan originated through this service.

Banc One operates a Web site, Home By Net, which also features mortgages from other lenders.

"They are positioning themselves on the side of the consumer. It is a very interesting strategy," said Larry Swedroe, principal of Buckingham Asset Management, St. Louis. Mr. Swedroe was a vice chairman with Prudential Home Mortgage and worked with Mr. Erling.

Mr. Erling said that origination volume and loan size have increased as a result of the Mortgage Source strategy. Banc One Mortgage originated $1.3 billion of mortgages in the first half, making it the 50th-largest originator.

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