First Nationwide Mortgage, the nation's 10th-largest mortgage servicer, is taking a breather from its rapid expansion program, says president and chief executive officer Walter C. "Terry" Klein Jr.

After two years of acquisitions, he said, the time has come to digest the huge chunks of business added in the last few years. "Nineteen ninety- seven has been the building and reengineering of the infrastructure phase of the company," he said.

First Nationwide Mortgage has a $65 billion servicing portfolio. Most was bought from Lomas Mortgage USA or assumed from three banks-San Francisco Federal Bank, Standard Federal Bank in Gaithersburg, Md., and California Federal Bank-that First Nationwide Bank had acquired.

Mr. Klein joined First Nationwide last year from PNC Mortgage.

Consolidating all the servicing has been a challenge. Most of the loans in the original First Nationwide Bank portfolio were California adjustables that suffered in the early 1990s because of depreciation in home values, he said, and Lomas' servicing had not been up to par, because that company had gone through two bankruptcies before selling the business.

Mr. Klein's strategy has been to identify the worst loans and farm them out to a firm specializing in troubled loans. By the beginning of November the servicing consolidation will be complete, he said.

First Nationwide, which services about 900,000 loans at its Frederick, Md., servicing center, could handle 1.2 million to 1.5 million, he added. And Mr. Klein said First Nationwide would consider buying another platform if its portfolio grows larger than that.

"We are traditionally acquisitive, but we are more acquisitive of servicing than production," Mr. Klein said. But he noted that the company has been building its originations, too.

Mr. Klein estimated that First Nationwide Mortgage will originate about $8.5 billion this year, about 13% more than last year.

First Nationwide Mortgage originated $5.5 billion of mortgages last year and California Federal Bank $2 billion. First Nationwide Bank completed its acquisition of CalFed this year and renamed itself California Federal Bank.

Mr. Klein said the mortgage company has also looked at higher-margin businesses, such as originating B and C loans. It bid this year on Weyerhaeuser Mortgage, which has a large subprime division, but lost out to a partnership led by Leon Black's Apollo Partners.

First Nationwide did buy over $3 billion of conforming servicing from Weyerhaeuser, now known as WMC Mortgage.

CalFed entered the subprime lending arena this week by purchasing Auto One Acceptance, a Dallas automobile finance company. And the San Francisco thrift has been mentioned in rumors as a possible acquirer of Aames Financial, a subprime mortgage lender that recently announced it is for sale.

Mr. Klein said if that CalFed were to buy a subprime mortgage company it probably wouldn't be merged into First Nationwide Mortgage.

"Full integration is a formula for risk," he Klein said. "I think the two businesses are related, but there are a lot of differences in operation."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.