Citicorp may be eyeing a big buildup in home loans.

Investment bankers and others say they have heard that the New York banking company is conducting due diligence on GE Capital's massive mortgage unit for a possible deal.

Acquiring GE Capital Mortgage Services, which services about $100 billion, would put Citicorp into the top five mortgage servicers and top 10 originators, and would be in keeping with its domestic strategy.

"They are generally looking to expand their consumer businesses," said an investment banker, noting Citicorp's deal last month for AT&T's $15 billion credit card portfolio.

Investment bankers said that GE's mortgage unit could fetch about $1.25 billion. A GE Capital spokesman, however, denied the unit is for sale, and a Citicorp spokeswoman declined to comment.

Analysts said that the low interest rate environment makes this an appropriate time to increase mortgage lending capabilities.

"We are about to enter one of the biggest refinance booms in history," said Richard X. Bove, an analyst at Raymond James & Associates. "It makes sense for Citicorp to enter the mortgage business in a more dramatic fashion."

Citicorp Mortgage is predominantly a retail originator, and GE Capital Mortgage Services is mainly a wholesale originator. There would be little overlap between the companies' production networks, observers said.

On the servicing side, Citicorp would have a portfolio of more than $140 billion if it bought the unit, which would rank it behind only Norwest Mortgage, Countrywide Credit Industries, and Chase Manhattan Mortgage.

Former executives of Prudential Home Mortgage said Richard Thornberry, chief executive officer of Citicorp Mortgage, is familiar with the GE mortgage unit because GE and Prudential held merger talks in 1995. Mr. Thornberry was a managing director at Prudential at the time.

Citicorp has not been as active in the mortgage business as other large banks. For most of the 1980s, Citicorp was the largest servicer and originator, but by the end of the decade the company suffered substantial credit losses from soured loans.

The company stayed on the sidelines in the 1990s while other banks such as Norwest Corp., Chase Manhattan Corp., and NationsBank Corp. built gargantuan mortgage companies.

Mr. Thornberry was hired in 1996, prompting speculation that Citicorp was about to move up the ranks again. Last year, Citicorp bought a portion of a jumbo loan portfolio that Prudential owned, leading to talk that the bank would soon make more servicing acquisitions.

Still, some doubt Citicorp will make a huge investment in mortgage banking. "My sense of their strategy is that they are far more committed to the card business," said Raphael Soifer, an analyst at Brown Brothers, Harriman & Co. "John Reed has gone on record as saying he doesn't like the mortgage business," he said, referring to Citicorp's CEO.

In the last few years, GE Capital Mortgage has shut down its retail operations, which never were a large part of the business and has not increased its servicing portfolio as much as other large servicers have. GE was the only servicer in the top 10 to report a decline in the size of its servicing portfolio in the first half of 1997.

GE Capital Mortgage Services is undergoing managerial changes. Jenne K. Britell, who had been president and general manager, has been named senior vice president, global consumer finance, for GE Capital's finance division in Central Europe.

Ms. Britell will relocate to Vienna and will oversee consumer finance operations in Austria, Switzerland, Poland, Hungary, and the Czech Republic. u

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