When a company is taken over, its top executives often end up out of work, though they are usually well compensated for the inconvenience.

But when Margaretten Financial Corp. was taken over by Chemical Banking Corp., David Frank ended up with the best of everything.

As president of Margaretten, he had been the designated successor to chairman Felix Beck even before Margaretten went public in February 1992. Now Mr. Frank, 47, has collected about $8 million for his Margaretten stock and options and will be running the combined mortgage operations of Margaretten and Chemical, a business more than twice the size of Margaretten. Mr. Beck, Mr. Frank's longtime mentor, will stay on as a nonexecutive chairman.

The merger produced a mortgage operation with a servicing portfolio of more than $50 billion, pushing Chemical into the top 10 in the industry.

Chemical Mortgage, based in Worthington, Ohio, was No. 13 and Margaretten No. 29. Together, they rank No. 6 but will have to grow stoutly to stay there.

Chase Manhattan's acquisition of American Residential Mortgage Corp., La Jolla, Calif., will push Chemical down a notch, and a takeover of North American Mortgage Co., Santa Rosa, Calif., by a big bank such as Citicorp could drop it another notch.

So Mr. Frank comes to Chemical at a critical juncture. The company is making a major commitment to the mortgage business at the same time as other top banks, assuring brisk competition.

Meanwhile, mortgage originations are in free fall, with volume 40% to 50% below last year's heady levels. The order of the day seems two-faced: to downsize while growing.

Mr. Frank, though, is unconcerned. He sees the merger as an unusually good fit that should result in a stronger company as well as a larger one.

"Everyone knew the refis would end one day. NOw there's pressure everywhere in the business," he said.

"The strength and stability of a bigger organization are pluses at a time like this. A troubled market is a good time for a strong player to pick up market share."

He noted that Chemical's retail business is relatively small, while Margaretten's is large.

Margaretten's wholesale business will be folded into Chemical's.

"Neither company had a really high concentration in refis, and now that's become an advantage," he said.

Mr. Frank has already had a bit of good luck in the task of melding the two organizations. It was clear early on that Margaretten's loan servicing facility in Richmond, Va., would be redundant.

And it happened that Bank of America had considered buying Margaretten and been attracted to the Richmond operation, which uses a CPI processing system, as does the San Francisco bank.

When the Chemical deal was sealed, Mr. Frank quickly arranged to sell the Richmond facility to B of A. The deal was closed two days ago and B of A offered all 260 employees jobs.

But Mr. Frank has still had to deal with staff cuts, something the usually cheerful and upbeat executive clearly did not relish. "You just don't need two sets of executives," he said. Margaretten's chief financial officer, Bruce Schnelwar, was one of those whose job was eliminated. "He's already gotten another job with an asset management company," said Mr. Frank. Glen Mouridy, the Chemical Mortgage CFO who will continue with the new company, recommended Mr. Schnelwar for his new job, Mr. Frank said.

The planning stages of integrating the two operations have been completed, Mr. Frank noted, and now the execution is under way.

On the originations side, he said, the combined organization can now offer a much broader line of mortgage choices than either could do by itself. "Margaretten has historically been the place for the top producers to be, and we intend to keep it that way," he said. "We have the products to serve people's needs, and we're providing a high level of support."

The toughest part of the transition, Mr. Frank said, will be the tighter regulation. He said he has already had meetings with the Office of the Comptroller of the Currency.

Mr. Frank, spending his last days in Margaretten's headquarters in Perth Amboy, N.J., pointed to a map of the United States with pins representing Chemical and Margaretten offices.

"You can see where we're strong," he said. Most of the pins were clustered in the eastern half of the United States and, to a lesser extent, the West Coast.

"We definitely have ambitions to fill in the map," he said.

The new company, Chemical Residential Mortgage Corp., will handle all the mortgage business of Chemical Bank's New York branches and is now making arrangements to do the home loan business for Chemical Bank New Jersey as well.

Texas Commerce Bank, a unit of Chemical Banking, will run its own mortgage business but will cooperate. The unit is also developing its relationship with Chemical Residential.

Chemical expected that the acquisition would provide cross-selling opportunities, something that analysts have been skeptical about in other mergers. Mr. Frank, though, is enthusiastic.

"The first product is other mortgages," he said. "Home equity loans are a natural extension of our business." He also believes credit cards could go over well, though not quite as well as equity loans.

"Hybrid products also have a lot of potential," he added. "Mortgages with an annuity attached make a lot of sense. Chemical already knows how to run a trust business. And mutual funds are also a possibility."

That's a big menu, and Mr. Frank will have his work cut out to make it nourishing. He participated in restructuring American Can Co. into Primerica Inc., which bought and later spun off Margaretten. Earlier, he earned an undergraduate degree at the Massachusetts Institute of Technology, a law degree from Harvard, and an MBA from Boston University.

Mr. Frank says he is looking forward to moving his office out of industrial Perth Amboy's weary downtown and into new quarters in Metropark a dozen or so miles to the west.

"I have to leave a large part of the past behind," he said. "I may see a lot of the same faces, but I have to tell myself, this is a whole new job. Then I'm going to be fine."

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