First Union Mortgage Co., which dramatically expanded its telephone marketing operation a year ago, is now cutting it back sharply because of unfavorable interest rates.

The nation's 16th-largest mortgage servicer has closed its Columbia, S.C., telemarketing center - one of two such facilities the company has operated. The other one, in Wilmington, Del., will remain open.

Telemarketing is effective in originating home-loan refinances via toll- free numbers, executives and analysts say. One of its main appeals is that it can be opened and closed easily.

In 1993, First Union's telemarketing operation originated slightly less than $500 million of loans.

About a year ago, First Union said it would hire 250 telemarketing staffers and double its originations from that line of business. The idea was to recapture some of the runoff from its servicing portfolio caused by refinancings.

But James Maynor, who became president of First Union Mortgage in July, said that the current poor lending market has made it unnecessary for First Union to operate two telemarketing centers.

"All it is is positioning for the market," he said. "We have sort of taken it in stride."

Some analysts were critical of First Union's move to expand its telemarketing operations at the end of 1993. They said at the time that First Union was bucking lenders' and analysts' conventional wisdom on the impending end of the refinancing boom.

About 50 employees will lose their jobs over the next couple of weeks as a result of the center's closing. At its height, the Columbia operation employed 130.

Most of its operations are being transferred to the Wilmington center.

This is one of Mr. Maynor's first major moves since he assumed Mr. Abbott's duties last fall.

First Union moved to Columbia, in part, because of incentives offered by the city and the State of South Carolina. Mr. Maynor said the lender's retreat from Columbia was greeted with understanding by city and state officials.

"There is no ill will," he said.

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