First-half data confirm that the merger of Chemical Banking Corp. and Chase Manhattan Corp. will create the nation's largest mortgage servicer, bumping Countrywide Credit Industries into second place.
As of June 30, Chase serviced $78 billion in home loans, and Chemical serviced $54.7 billion. Together the new entity would have a portfolio of about $133 billion, against $123 billion at Countrywide.
Reached at his office in Pasadena, Calif., Angelo Mozilo, vice chairman of Countrywide, played down the impact of the new megalender on Countrywide, which has led the industry for the last few years and remains the No. 1 originator of mortgages.
He acknowledged that the new entity would be "certainly a greater threat as a competitor." But on any day of the week, Mr. Mozilo added, Countrywide faces strong competition from the top 10 or 15 companies in the business.
At North American Mortgage Corp. of Santa Rosa, Calif., the only other large independent mortgage banker still around, Michael Conway, executive vice president, assessed the deal a bit differently.
With $300 billion in assets, the combined bank will be hungry to make loans, including home loans, Mr. Conway said. That is bound to put the heat on mortgage bankers, he said.
When banks go after loans for their portfolios, mortgage bankers step out of the way, Mr. Conway said. That's because banks can offer terms that are more favorable to consumers than those demanded by Wall Street investors, he added.
The first pressing question for the megalender is who will lead it.
The mortgage units at both Chase and Chemical have lost seasoned chief executives in the past two months.
David Frank, who was chief executive of Chemical Residential Mortgage, left his post in June, reportedly because he couldn't adjust to the bank's deliberative culture. He had joined Chemical when the bank acquired Margaretten & Co., Perth Amboy, N.J., where he had been the second-ranked executive.
For now, the unit is overseen by Tom Jacob, executive vice president of national consumer banking at Chemical. On Monday, Chemical Bank said it was continuing its search to replace Mr. Frank.
Fred B. Koons, who spent several years at the head of Chase Manhattan Mortgage Corp., left in July. He was replaced by Richard A. Mirro, a senior executive at the mortgage unit.
One hot contender for the Chemical job is said to be John Robbins, a mortgage banker with Chase ties of his own.
Mr. Robbins was chairman of American Residential Mortgage Corp., La Jolla, Calif., which sold itself to Chase last year for $348 million. Mr. Robbins reportedly made several million dollars in that deal and has spent the past year taking a break from the business on his boat in California.
Though he is widely respected, mortgage bankers wonder how his highly independent entrepreneurial style would fare in a big-bank culture.
Mr. Mozilo of Countrywide said if he were looking for a CEO at the new lender, he would look for an executive with a strong accounting background and a marketing vision.
The new lender will face enormous hedging issues, Mr. Mozilo said, and will have to be constantly aware of the economic value of the loans it originates.
"Market share does not necessarily translate into profits," Mr. Mozilo said.
Chemical Residential Mortgage has more than 100 offices, mostly on the East Coast. Twenty-five of them are on the home turf of Chase's mortgage unit in the Southeast.
Chase has about 150 offices in 38 states. Chemical services its loans in Worthington, Ohio, and Chase in Tampa and Monroe, La. It is not clear yet how the consolidation will affect the operations.
Mortgage bankers say that the two companies are a good fit in another way. Chase has long specialized in jumbo loans - those above the $203,150 ceiling on loans bought by Fannie Mae and Freddie Mac. The mortgage unit has originated these loans both for Chase's portfolio and for sale to Wall Street investors through its own conduit.
Through its acquisition of Margaretten, Chemical has acquired a specialty in making government-insured mortgages to first-time homebuyers.
