Great Western Financial Corp., the nation's second-largest thrift, has hired the chief executive officer of Knutson Mortgage Corp. to head its residential mortgage operations.

Ray W. Sims will join the Chatsworth, Calif.-based company next week as an executive vice president.

His hiring ended Great Western's seven-month search for a mortgage chief. It also came on the heels of the thrift's recent decision to revamp operations.

Earlier this month, Great Western announced that it was laying off 800 employees and closing over 100 loan offices to slash costs. Most of the cuts affected the mortgage division.

Mr. Sims said his priority will be to "put all the pieces back together again."

This will be no small task. Though production volume has risen sharply at most mortgage banks this year, Great Western's has fallen - to $4.4 billion in the first nine months, from $5.8 billion in the year-earlier period.

Mr. Sims said his main challenge will be to increase profitability, to help Great Western Financial Corp. meet its chief executive's goals. CEO John F. Maher's is aiming for an overall return on equity of at least 15% by the end of 1997.

Great Western Financial vice chairman William Schenck said cutting costs will be the key - not only to enhance profitability, but also to fuel expansion plans for the mortgage unit.

"The more we drive down our costs, the more likely it will be that we will be making acquisitions of servicing," he said.

Mr. Sims said his goal is to cut more costs on the originations side by equipping loan officers with more modern underwriting technologies by the second quarter.

Great Western will also step up its cross-selling efforts. Mr. Sims said the company will package a home-equity loan with a credit card, for example.

In addition, he said that before the end of the second quarter Great Western's conduit will begin issuing to the secondary market securities backed by jumbo and fixed-rate mortgages.

Mr. Sims has 15 years' experience in the mortgage banking business but has had mixed results at his last two jobs.

He joined Minneapolis-based Knutson as president and chief operating officer in April 1995 and was promoted to CEO in this July. While he was at Knutson, originations increased over 200%.

But before his stint at Knutson, Mr. Sims worked for GE Capital Mortgage Services Inc., where he oversaw the creation of its retail production unit. Mr. Sims left for Knutson a few months before losses prompted GE to close the unit.

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