Abandoning a lengthy outside search, Chemical Banking Corp. has tapped its consumer lending chief, Thomas Jacob, to ride herd over the massive mortgage business that will result from the bank's merger with Chase Manhattan Corp.

As president of the combined unit, Mr. Jacob will have the task of putting together and then profitably managing one of the biggest and most diverse home lending businesses in the country.

Combined, the operation would have more than $130 billion in mortgage servicing rights, making it the No. 1 servicer in the country. Its mortgage originations this year could approach $30 billion, putting it in a neck- and-neck battle with Countrywide Credit Industries, Pasadena, Calif., for No. 1 lender.

While Chemical's choice of an insider was something of a surprise after its search, industry observers said Mr. Jacob, with his 21 years at Chemical, would be a strong leader.

"He is excellent," said Jonathan Gray, a mortgage analyst at Sanford C. Bernstein & Co., New York. "He is sharp analytically, and he's got a strong entrepreneurial sense."

These skills will be necessary because Mr. Jacob must deal with the complicated structures of the Chase and Chemical mortgage businesses, observers said. Both banks bring to the merger not only their own operations, but also those of independent mortgage businesses they have acquired over the past two years.

Mr. Jacob is no stranger to the mortgage business. He has been involved for years as executive vice president in charge of Chemical's consumer lending, an area that includes mortgages.

He stepped up his involvement with Chemical Residential Mortgage Corp. during the past few months, directing it on a day-to-day basis after the departure of its president, David Frank. Mr. Frank, who reported to Mr. Jacob, had come to the bank with its purchase of Margaretten Financial Corp.

While Mr. Jacob appears to be taking a step down on the organizational chart, industry observers see his appointment as a promotion, requiring him to meet much bigger challenges.

"He's going from a group vice president to president of one of the largest mortgage operations in the industry," said Warren Lasko, executive vice president of the Mortgage Bankers Association of America. "It's a step up he's qualified for."

The job, while certainly challenging, is also potentially overwhelming, analysts said. But industry observers say that Mr. Jacob has earned a reputation for successfully handling extremely difficult tasks.

"This guy has fixed more things and put more things together than a lot of other executives," said one source close to Chemical, who asked not to be identified.

Still, while industry observers applaud Mr. Jacob's appointment, they also wonder why Chemical shifted gears to appoint an insider after looking at outside candidates for months.

"The merger plans, which were announced after Chemical started the search, changed the dynamics of what the bank wanted," said Mark Springer, president of M.H. Springer Associates, Woodland Hills, Calif., which conducted the search.

"The challenge of integrating those two companies is extraordinary," Mr. Springer said. "It makes sense to choose someone with Tom's experience, reputation, and familiarity with senior management."

"I think it is a very good decision," said Brenda White, a managing director at UBS Securities, New York. "The job ahead is integration, and Tom has strong skills to lead the consolidation," she said.

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