In its first acquisition, Great American Financial Services, a newly formed minority-owned holding company, has purchased the Westchester, Ill.- based Federation of Financial Institutions Inc.

Federation, which fetched more than $1.5 million, services almost $500 million in residential first mortgage loans and had been controlled by the Resolution Trust Corp. since 1990.

Based in Atlanta, Great American was founded in April with the goal of purchasing Federation from the RTC.

"This company is an excellent foundation to build upon," said William Johnson, president of Great American and chairman and chief executive officer of Federation. "Servicing is the heart and soul of mortgage banking. We needed a solid servicing base."

With the purchase, Federation becomes one of what is now just a handful of minority-owned mortgage companies. Mr. Johnson said he expects to make additional acquisitions in the near future as his company expands in the mortgage and consumer lending businesses.

Great American is in discussions to acquire a national mortgage origination company as well as a regional wholesale correspondent business, he said. Mr. Johnson said he hopes to complete these purchases by the end of the first quarter of 1996.

"Nationwide, there is a critical lack of minority participation in the mortgage industry," Mr. Johnson said. "A minority-owned mortgage banking firm, complete with retail, wholesale, correspondent, and servicing operations, would provide a distinct window of opportunity to realtors, other mortgage bankers, mortgage brokers, and other lending and banking institutions that serve urban communities."

Federation plans to open regional offices in Atlanta and Princeton, N.J., before the end of this year. The company will focus on the Atlanta, Chicago, Washington, and northern New Jersey markets.

Great American hopes to increase Federation's service portfolio from $500 million to $3.5 billion by the end of 1997, Mr. Johnson said.

He said Federation, which now services 17,000 mortgages, has the capacity to administer up to 200,000 loans. It currently services loans backed by Ginnie Mae, Fannie Mae, Freddie Mac, and the Illinois Housing Development Authority.

Federation was formed in 1981 by five Illinois savings and loans, four of which were later taken over by the RTC. Edmund Frank, Federation's president since its founding, will stay on.

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