Chase Manhattan Mortgage Corp. is shutting 144 offices and laying off hundreds of employees to compete better in the volatile mortgage business.
Dramatic cost cuts are "the name of the game," Thomas Jacob, chief executive, told American Banker in his first public comments about the mortgage company's plans.
Mr. Jacob declined to say by how much its 7,000 head count would be reduced, but knowledgeable sources said the number was likely to reach 1,000.
Efforts to pare operations went into high gear April 1, when the merger between Chase Manhattan Corp. and Chemical Banking Corp. became official. The combination swelled the company's mortgage servicing to $128 billion, catapulting Chase to No. 3 among servicers, behind Countrywide Credit Industries and Norwest Mortgage Inc. It also jumped to No. 3 among originators.
The merger gave the mortgage operation a longer geographic reach, a broader product array, and access to some of the industry's top mortgage talent. But it also created a costly infrastructure that needs extensive pruning, Chase executives said.
The closings, though numerous, are necessary, one industry expert said.
"You don't need that much of a physical presence to deliver services," said Kenneth Mathis, partner in the banking practice at Coopers & Lybrand, New York. "Locations are expensive and this is a margin business."
Chase is better off deploying its lenders in the field, calling on builders and realty agents, Mr. Mathis said. "You want to build relationships, not stay in offices."
That's the task that has occupied Mr. Jacob since he was tapped for the top mortgage job in November. He went to the post from Chemical, where he oversaw mortgage and consumer finance operations. Richard A. Mirro, who ran Chase's mortgage company, was named second in command.
Other key managers were not spared in the mortgage company's drive to cut costs. Adolph Marzol, Chase's chief financial officer, and John Gleason, Chemical's senior vice president for underwriting, are among the executives no longer with the mortgage company.
Mr. Jacob declined to discuss individual departures, but he did say his remaining lieutenants were about equally split between Chase and Chemical executives.
The balance between the two banks' people was not planned, Mr. Jacob said. "We didn't start with a quota. Basically, the best people won out."
Overall, Chase has been successful at keeping the executives it wants to, Mr. Jacob said. "This is a time when all the competition is sensing an opportunity to recruit our better people. I doubt if we lost 5%."
But roughly 500 rank-and-file employees could lose their jobs when Chase closes one of three centers that service and process loans. Efforts to consolidate the centers, which handle loans for 1.5 million mortgageholders, are to begin this summer and conclude in 1997.
Mr. Jacob would not say which center - in Monroe, La., Tampa, or Worthington, Ohio - would close. Chase is still settling labor and other matters at the chosen site, he said.
Chase Mortgage is also shutting more than one-third of its retail lending offices. The mortgage company will not give up any key loan officers or territory by reducing the number of offices from 285 to 180, Mr. Jacob said. Wholesale operations are also being sliced, to 30 from 69.
Chase plans to continue fine-tuning the merged operation. "So far, we have executed according to plan," Mr. Jacob said. But, "the integration is by no means over."