In an ambitious effort to become a dominant force in residential lending, Chase Manhattan Bank is acquiring American Residential Holding Corp., a leading mortgage bank based in La Jolla, Calif., for $348 million in cash, or $28.25 a share.

The deal, announced Wednesday, should boost Chase up two notches to the No. 4 spot in mortgage lending and one notch to No. 5 in loan servicing. It had been sixth in both categories.

The companies had combined loan production of $26.4 billion last year and $64.4 billion of servicing at yearend.

"The combination of American Residential with Chase's other mortgage origination entities will position us toward our goal of becoming a top-three mortgage lender by 1997," said Fred Koons, chairman of Chase Manhattan Mortgage Holdings, the bank's mortgage banking subsidiary.

Room to Grow

That appears to be a big order. The top three originators are Countrywide Funding Corp., Pasadena, Calif., with $49.5 billion last year; Prudential Home Mortgage, Clayton, Mo., with $43.2 billion; and Norwest Mortgage, with $33.7 billion. The new entity would have to displace one of them and also outgrow Chemical Bank. which has also mounted a push in mortgages.

Am Res, based in La Jolla, Calif., has some 100 branches in 32 states. The company ranked 17th in originations at the end of 1993 and serviced a loan portfolio of $18.2 billion.

On Wednesday, Am Res shares jumped $3 during the day, reaching $27.875 on very heavy trading, mostly in large blocks.

The merger is the latest in a wave of mortgage acquisitions by commercial banks. The recent buyout of Margaretten catapulted. Chemical Bank into fourth place in originations. But the Am Res deal would put. Chase just ahead of Chemical. based on yearend numbers.

"We really closed a big gap in a hurry," said Robert D. Hunter, executive vice president in charge of consumer financial services. He added that Chase had no plans for further acquisitions to accelerate its push. He said Chase Mortgage planned to sell most of the mortgages it originates rather than feeding the bank's investment portfolio. But he said the decision to sell or hold would likely be day to day.

In a handout given to analysts Wednesday, Chase officials said that Am Res should lose $19.9 million in this year's fourth quarter, but be profitable after that. The company estimates a net income of $200,000 in 1995, $9.1 million in 1996, and $22.8 million in 1997.

Savings of $25 Million

According to Mr. Hunter. the bank will be closing Am Res' California servicing facilities and merging them into Chase's servicing centers in Monroe, La., and Tampa, Fla. The consolidation should save the bank about $25 million, he said.

The shutdown, though, will be a blow to the large staff that now services the Am Res portfolio. Am Ros already sharply reduced its mortgage production staff in keeping with the nationwide originations slump, but the servicing staff was little affected.

Chase gave the first hint of a growing ambition in the mortgage arena when in July 1993 the bank bought Troy & Nichols, a mortgage origination and servicing company based in Monroe, La. The acquisition gave the banks a toehold in the FHA and VA loan market.

Hunt for a Buyer

And after a rough first half that caused Am Res to cut its staff back 12% and saw its wholesale business drop off 50%, the company put itself on the block last month, retaining Salomon Brothers to look for a hungry buyer.

Chase took the bait and. according to Mr. Hunter, the bank took little time to assess that the two companies were a good fit, providing a lot of conforming loans to complement Chase's big presence in jumbos.

"The merger gives us a leg up, and cuts years and years off of our development," he said.

Chase gets access to 25 new locations across the country and a stronger presence in the wholesale market.

"The acquisition of Am Res, a top-quality retail and wholesale mortgage originator, will strengthen Chase's presence in both channels." said Mr. Koons.

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