Mortgage lenders absorbed the news of the largest thrift merger in history with reactions ranging from bravado to unabashed fear.

The $9.9 billion deal for H.F. Ahmanson & Co., unveiled Tuesday, would make Washington Mutual Inc. the nation's fourth-largest mortgage servicer. And it would vault to first place among originators in California, the country's largest and richest mortgage market, where BankAmerica Corp. currently leads the pack.

Angelo R. Mozilo, vice chairman and chief executive officer of Countrywide Credit Industries, Calabasas, Calif., said he saw nothing but opportunity for his company in the deal's wake.

"We love consolidation as long as we're not a part of it," Mr. Mozilo said Thursday. "Generally when things like that happen, one- plus-one equals one-and-a-half, not three."

Mr. Mozilo, who runs the nation's largest independent mortgage bank, cheerfully ticked off a list of about a half-dozen California thrift competitors that have been merged out of existence in recent years. "Now the air space is a lot clearer for us. It gives us a lot of room to maneuver," he said.

Others were not so sanguine. One Midwest thrift executive, borrowing imagery from the movie "Jurassic Park," said Washington Mutual chief executive officer Kerry K. Killinger "is like a velociraptor." Having devoured most of his prey on the West Coast, Mr. Killinger could soon be looking eastward for his next meal, said the executive, who requested anonymity.

Certainly, Washington Mutual faces some challenges. For one thing, the current low rate environment has caused adjustable rate mortgages-its stock in trade-to fall out of favor with many borrowers.

But once rates edge upward, Washington Mutual could be poised to benefit more than other lenders because borrowers will once again be attracted to ARMs, some observers said.

"Their origination growth rate will take off like a rocket when rates rise," said Jonathan Gray, an analyst with Sanford C. Bernstein, who noted that once the deal for Ahmanson closes, one in eight adjustable rate mortgages would be originated by Washington Mutual. The thrift originated $23 billion in mortgages last year, to Ahmanson's $4 billion.

Perhaps even more significantly to mortgage bankers, the pending merger will create a national servicing powerhouse. Combined, Washington Mutual and H.F. Ahmanson would have had a $154.3 billion servicing portfolio at the end of 1997, which would be the fourth largest in the country, behind only Chase Manhattan Corp., Countrywide, and Norwest Corp.

Servicing is known as a scale business, but mortgage bank executives said competing with a new giant did not worry them. For one thing, they said, it takes time to meld operations. And that task could be especially complicated for the new entity.

Indeed, some observers said Washington Mutual is likely to be so busy absorbing Ahmanson that it will not have much time to devote to expanding its mortgage business.

"Consolidation creates a certain level of impediments in your ability to grow. They've got some work to do before they do something else," said Stephen J. Rotella, executive vice president of national operations and technology with Chase Manhattan Mortgage.

Washington Mutual is still in the process of integrating Great Western Financial's operations, while Ahmanson has just started to absorb the units of Coast Savings Financial, which it bought in March.

Mr. Mozilo saw one direct benefit in the merger: "It frees up badly needed, skilled personnel," he said. Thanks to strong mortgage demand, Countrywide has been on a hiring binge lately, increasing its work force to 8,000 employees, from 5,600 a year ago.

But it remains to be seen whether Washington Mutual will become a more daunting competitor than the two thrifts are today. If Washington Mutual "doesn't achieve economies of scale, the merger will have failed," Mr. Mozilo said.

In time, "they'll be competition," he said, "but nothing that I fear."

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