SANTA ROSA, Calif. - North American Mortgage Co. reported second- quarter net income of $10 million, up from $128,000 a year earlier.

Revenue for the quarter was down slightly.

The sharp increase in net income was a result of implementing FAS 122, a new accounting rule that puts servicing rights on loans originated by North American on the books.

Total revenue for the quarter was down 2%, to $67.3 million. North American cited a slide in loan administration fees, because of a shrinking servicing portfolio; a $1.25 million charge for the impairment of excess servicing rights; a decline in loan origination fees because of a decrease in volume; and less servicing sold.

"We are pleased with the continued improvement in our earnings picture, which is being driven by higher origination levels and lower per-loan origination costs," said John F. Farrell Jr., chairman and chief executive of North American, in a prepared statement.

Loan production for the quarter was down 33% to $1.7 billion. Expenses fell 25% to $51.3 million, mainly from staff reductions and office closings.

But loan applications were up in the second quarter, increasing 45% to $3.2 billion from the level in the first quarter. Applications for refinancings accounted for 31% of all applications in the second quarter.

"We feel we are entering the third quarter ideally structured to take advantage of the increases in home purchase and refinancing activities which are expected to result from the favorable mortgage interest rate environment," said Terrance G. Hodel, president and chief operating officer of North American, in a prepared statement.

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TULLAHOMA, Tenn. - Trans Financial Mortgage Co., a unit of Trans Financial Inc., acquired a $1 billion mortgage servicing portfolio from Pan American Mortgage Corp., a subsidiary of Intercontinental Bank.

The terms were not disclosed. The company said the portfolio will be consolidated into Trans Financial Mortgage's servicing center here.

The deal will increase Trans Financial Mortgage's portfolio by 77% to $2.3 billion.

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