By breaking its loan production unit in three, Fleet Mortgage Group is embarking on another new course in terms of philosophy, culture, and staff.

The Columbia, S.C., unit of FleetBoston Financial went through a series of managerial changes in the 1990s that raised questions in the mortgage industry about the banking company's commitment to the business. The changes announced Tuesday- in which three executives were been promoted to succeed a departing head of loan production - were presented as a response to a cyclical change in the home loan business.

"Refinancing has gone away, and this is a purchase market," said A. William Schenck, chairman and chief executive officer of Fleet Mortgage. "We've been working for some time now on a design for a changed production organization that will make us much more responsive in a purchase environment and to our customers."

Originations at Fleet Mortgage fell 11% in 1999 to $31.8 billion, from $35.9 billion in 1998.

The unit has divided its production division into three parts, creating separate third-party and retail loan production units and aligning its consumer-direct channel with its loan servicing division.

In times of robust refinancing, which represents a large part of Fleet's volume, "business basically comes in the door," Mr. Schenck said. "You become more of an order taker than a sales organization, because the phone just rings off the hook." But when times change, "it's much more of a sales-driven ball game. You have to be very close to your customer and with your sales force and manage in a different way."

Fleet Mortgage has placed third-party origination, including correspondent and wholesale, under the control of James F. Jandrisevits, a senior vice president. John F. Frazza, promoted to senior vice president, steers the retail division. Howard Ackerman, another senior vice president, heads up Fleet's consumer direct lending business from the servicing division, which is overseen by Robert A. Rosen, executive vice president for loan servicing.

Mr. Jandrisevits and Mr. Frazza report to Michael J. Torke, Fleet Mortgage president and chief operating officer.

Mr. Schenck said that correspondent is the most successful business within Fleet Mortgage, accounting for 65% of its volume, and he hopes wholesale can improve under Mr. Jandrisevits. "Wholesale is a fine business," he said, "but it's not nearly the scale or the scope of correspondent business, and we want it to be."

More important, the service division, by absorbing the consumer direct business - telesales and the Internet - will lead Fleet Mortgage's customer retention effort, which Mr. Schenck said is crucial to success during high interest rates and scant refinancing. He said the goal is to make the servicing division a total business unit, or a one-stop shop, with everything under one roof.

"We have 1.6 million customers in our servicing portfolio," Mr. Schenck said. "We want to retain them."

He said the servicing division will be given more responsibility and additional resources to retain its customers. Many of them did not choose Fleet as their mortgage lender, coming via the secondary market into its $150 billion servicing portfolio.

"The challenge is to take this person who didn't necessarily choose us and convince them that we're the place where they ought to get their next mortgage," Mr. Schenck said.

In addition, he said that all three executives will have input on Fleet Mortgage's executive management committee, which will give the company more efficiency and access to information.

Jeffrey M. Levine, director of investment banking at Bayview Financial in Miami, applauded Fleet Mortgage's changes.

"We've been emphasizing to our clients that in an up-interest rate environment, no one is thinking about refinances," he said. "This is the time to build the infrastructure, retool, and streamline retention programs so that when the next refinancing cycle does hit, you're ready."

Fleet Mortgage has a history of staff turnover, especially at the senior levels, and even internal officials use the term "revolving door" to describe the situation in the 1990s. Though the staff appears to have stabilized under Mr. Schenck, the current change entails another raft of departures.

In addition to Thomas C. Palmer, whose departure as executive vice president of loan production was announced, several managers and senior officials have also left, according to one source.

Mr. Schenck acknowledged some staff turnover but added that the changes are "about structure, not about people." He noted that Mr. Jandrisevits and Mr. Frazza have each been with Fleet for more than 10 years.

Mr. Palmer, reached at his home, refused to say why he was leaving Fleet or why the production division was being split in three. The company said he left "to pursue other opportunities."

Some observers meanwhile took issue with the strategic course Fleet has taken.

Tom Murray, of TJ Murray Co., noted that Resource Bancshares Mortgage Corp., also of Columbia, S.C., adopted the same approach a few years ago, but recently changed back to one production unit, saying it did not work.

"I think it would be a mistake to break [production] up," he said. "A loan is a loan, no matter where it comes from; once it's in the door you have to process and service it in the same way."

Mr. Murray said it could be expensive to create three separate divisions to process.

Steven F. Herbert, chief financial officer for Resource Bancshares, said his company is shifting from a divisional production approach to a consolidated, single platform process and is seeking to eliminate duplication and drive down costs. "Having internal divisions, separate corporate structures, and the corporate politics that are involved in the divisional process creates additional friction in terms of getting things done," he said.

Fleet officials, however, said they feel strongly about the change.

"This is a shift in culture in servicing with regard to how we think about the customer," said Mr. Schenck. "The closer that we can get to our customers and our employees here at the top of the house in Columbia, the more effective we can be as a company."

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