Like the other large thrifts, Home Savings Bank, Irwindale, Calif., faces a dual challenge in this fixed-rate market. Usually an adjustable-rate lender, Home Savings has to work harder to originate loans in this market. It must also protect its portfolio of adjustable-rate loans from mortgage bankers, who see the large thrift portfolios as a rich source of refinance business. To cope with such markets, the nation's largest thrift has embarked on a new strategy. It has decided to supplement its portfolio lending with more fixed-rate loans that it can sell in the secondary market. This year the new strategy may have diluted Home Savings' aggressive stance in the market for ARMs priced on the 11th District cost-of-funds index. In the first quarter, Home Savings originated $1.8 billion of home loans, 27% less than a year earlier. By contrast, other large thrifts used the quarter to amass a hefty volume of ARMs for their portfolios. Recently, Frederic J. Forster, president and chief operating officer, spoke to American Banker.

Q.: How is Home Savings faring in this tough market?

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