Felix Beck, chairman of Margaretten Financial Corp., is a happy man these days. And small wonder.

No longer hostage to the quarterly earnings demands of a parent company, he is master of his own destiny and can run the mortgage banking company by his own lights.

So far, those lights have been shining brightly. Since being spun off by Primerica Corp. in February of last year after almost seven years as a subsidiary, Margaretten has grown rapidly. For 1992, it reported earnings of $25.8 million, up from $17.1 million in 1991 and $4.3 million in 1990.

High Hopes for June

Mortgage originations have grown from $3.1 billion in 1990 to $7.8 billion in 1992. And a big June is expected to put the company well ahead of its lending pace of last year.

"In this business, you can see dynamic changes taking place every minute. You don't have to wait a long time to start seeing the changes," he says. "We can watch the market grow and see our company growing by the minute."

To keep that growth on track for the long haul, Mr. Beck, 67, has been carefully grooming a successor, David A. Frank, 46, who is now president and chief operating officer.

Mr. Beck says of the Margaretten president: "He's a very good manager and a superb leader." He is also Mr. Beck's occasional doubles partner at tennis.

A major strategic change instituted by Mr. Beck is the retention of most servicing rights. Under Primerica, a large percentage of servicing had been sold. Now, Margaretten is building its portfolio not only through originations but also with purchases.

In September 1992, the company bought $7.6 billion of servicing rights from NationsBank. As of June 30, it had about $15 billion of mortgages under its wing, a level that could put it among the top 25 servicers in the midyear rankings.

Margaretten has been well up in the top 25 as an originator, but it had been a minor player in servicing because of its sales of the rights.

"The servicing portfolio is important to us because it makes us less vulnerable to interest rates and to the housing cycle," Mr. Beck explains.

Profits from servicing can vary widely according to the composition of the portfolio and prepayment experience. A $15 billion holding could, under favorable conditions, bring as much as $15 million a year to the bottom line, analysts suggest.

Mr. Beck isn't content merely building a long stream of profits from servicing. He wants Margaretten to become a bigger force. "In recent years, we had less than 1% of the originations market," he says. "Now we are headed toward about 1.25%, and I'd like to be at 2% by 1995."

That market share could mean $16 billion or more in originations in 1995, about double what Margaretten did last year and almost four times its 1991 score.

About the only negative for Margaretten these days is the price of its stock. The company went public in February 1992 at $20 a share but has traded as low as $13.50 this year.

Price Under Pressure

More recently, the stock, well-regarded by analysts, has been trading at about $17.50, about 10 times 1972 earnings. Uncertainties over the durability of the refinancing boom may be holding the price down.

Will the economy and interest rates cooperate with Mr. Beck's ambitions for Margaretten? He thinks so. And in fact, he thinks an end to the refinaincing wave could help the company.

"Things are good now. But we can see an even better cycle than we have now: a moderate rise in interest rates -- say 100 basis points -- because of economic gains," he says. "Purchase activity would be even stronger."

Should such a scenario come to pass in the next few years, the runoff from the servicing portfolio would also slow. And, Mr. Beck says, moderate appreciation in housing values would help people to trade up to costlier homes.

The only negative scenario, he says, would be a very rapid increase in rates in a short time -- say 200 basis points in nine months -- that would not give lenders time to adjust.

Mr. Beck is clearly giving David Frank plenty of time to adjust to the idea of running Margaretten one day.

Mr. Frank has been the company. president and chief operating officer since 1991. Before joining Margaretten in 1989, Mr. Frank was an executive with Primerica, and according to a company biography, was instrumental in restructuring American Can Co. into Primerica, a financial services company.

He will clearly play a leading role in Margaretten's future, but how soon he will take the helm is unclear. Mr. Beck appears to be having such a good time running the company that he has no immediate plans to retire in favor of Mr. Frank.

"When I was the younger guy working with one of the founders of Margaretten, I used to look on it as old elegance and new style," he says. "Now that the tables are turned, I look on it as seasoned elegance and new style."

His words seem to fit his working relationship with Mr. Frank. "David brings to the table strength in technology, in budgeting, in mergers and acquisitons, and in all aspects of cost control," he says.

Working on Relationships

For his part, Mr. Beck personally spends "a significant amount of time on relationships with all of our customers because I have known them over many years, and in secondary marketing and in M&A as well."

The NationsBank deal that Mr. Beck engineered is now looming large in the company's growth plans because it included a servicing operation in Richmond. That facility has increased Margaretten's servicing capacity and enabled it to cut costs by closing its Perth Amboy, N.J., servicing center.

The company is also building its wholesale business -- purchases from brokers -- which it started in 1990. The division expanded into Texas and Washington State last year. A correspondent division, which acquires mortgages through smaller banks and thrifts, was also begun last year.

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