Hanover Moving to Buy Centrust's Originations Business
The merger of Chemical Banking Corp. and Manufacturers Hanover Corp. could produce a much bigger force in home mortgages than most rivals expect.
Hanover is quietly moving to buy the thriving mortgage originations business of Centrust Mortgage Co., a unit of the failed Centrust Savings Bank. The acquisition would increase the projected originations of the Hanover-Chemical combine by nearly 30%, to $6.7 billion, ranking it among the top 10 mortgage lenders in the nation.
The acquisition apparently was in the works well before plans for the Chemical-Hanover union were announced in June. The fact that Hanover has not aborted the deal suggests that the new Chemical wants to be active in mortgage banking, observers said.
A Hanover spokeswoman declined to comment, except to confirm that the Centrust acquisition is in the works.
In a recent filing with the Federal Reserve Bank of New York, Hanover said that it hopes to close the deal by the end of this month. No price was specified, but the type of filing is for acquisitions of less than $15 million.
With 39 offices in 15 states, Centrust Mortgage is originating about $1.5 billion of loans a year, a Centrust employee said. That could make Chemical, once it absorbs Hanover, the nation's eighth-largest or ninth-largest originator, according to SMR Research, Budd Lake, N.J.
Chemical is now No. 11; Hanover does not rank in the top 25. Hanover has generally laid low in the field since 1986, when it sold a large mortgage unit to Fireman's Fund Insurance Cos.
In its application, Hanover noted that it was the "only party willing to assume substantially all of the employees and offices" of Centrust Mortgage's origination business, so a Hanover takeover would save jobs and improve competition. One mortgage banker estimated that Centrust employs about 300 people in originations.
Under RTC Control
Centrust Mortgage was put under control of the Resolution Trust Corp. when the parent thrift failed, in June 1990.
In addition to originating loans, the Centrust unit services some $2.6 billion of loans for investors. But a buyer other than Hanover is picking up the servicing business; the buyer's identity could not be learned. A source said the RTC is actually selling all of Centrust Mortgage to one party, which will keep the servicing business and sell the origination part to Hanover.
Despite the well-publicized problems of Centrust Savings and its flamboyant chairman, David Paul, the mortgage company enjoys a solid reputation.
Originations were about $1.6 billion last year, the Centrust source said, and the pace has slowed only slightly this year.
PHOTO : Chemical Amasses Power Annual mortgage originations, in billions of dollars Source: American Banker, SMR Research