Great Western Financial Corp. wants to reclaim its position as a leading force in residential lending by doubling its mortgage volume. To get the job done, the California thrift is determined to shed a lot of excess pounds and become lean and mean again.

That's the rationale behind Great Western's plan, announced this week, to fire 800 employees and close as many as 70 loan offices, according to A. William Schenck, vice chairman.

The thrift says it is slashing costs so the growth can be profitable. It is also trying to strengthen the sales culture in its mortgage organization by culling weak producers.

"Our mortgage business is our fundamental business," Mr. Schenck said in an interview this week. "It's just that we have to do it as well as anybody. We have to be very, very good" at it.

A mixture of intense competition from mortgage bankers, ready funding from government-backed Fannie Mae and Freddie Mac, and new technology have combined to squeeze profits out of the mortgage business for thrifts - and put onetime leaders like Great Western at a disadvantage. This year, Great Western will make about $6 billion in home loans, half what it made in the late 1980s.

Mr. Schenck, a longtime commercial banker who was hired to help Great Western become more of a consumer bank, said the thrift needs to slash its mortgage origination costs from $4,000 a loan to $2,500.

Mr. Schenck said the roughly 400 layoffs already made - of poorly performing sales people, staff appraisers, and 65 sales managers - will take the thrift part way to that goal.

Next year's reductions in loan processors will take Great Western all the way by the fourth quarter, he said. The thrift, which now has 22 loan processing centers, plans to shed at least half of them as it installs new technology.

Great Western also needs to plunge deeper into the fixed-rate market and, like mortgage bankers, sell those loans to the secondary market, Mr. Schenck said.

Like many other large thrifts, Great Western now focuses on making adjustable-rate loans for its portfolio. Consumers favor those loans when rates are rising and fixed rate loans are expensive. But when rates are low and stable, as now, consumers go for fixed rate loans and thrift volumes plummet.

But Great Western needs those volumes in all rate environments to create economies of scale, Mr. Schenck said. "Going forward, we have to be both a mortgage banker and a portfolio lender," he said.

Finally, Great Western is shaking up its sales force and stepping up efforts to originate more home loans out of its 115 bank branches.

For the first time, its mortgage sales force in bank branches and freestanding home loan offices will be supervised by a single executive, senior vice president Dean W. Hatton.

Mr. Hatton, like Mr. Schenck a veteran of PNC Bank Corp., is charged with fashioning a "tightly managed and focused sales process," Mr. Schenck said.

Mr. Hatton will work closely with retail banking chief Jaynie Miller Studenmund to tap the mortgage potential of Great Western's branches, he said.

And, in a break from the past, salesmen who don't bring in enough business will be asked to leave, Mr. Schenck said.

"We are evolving into a company that is a product of its heritage. We are today, and will be two years from now, very much in the mortgage business," he said.

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