Salomon Brothers' mortgage unit, which traces its roots to the early 1980s when the brash innovator Lewis S. Ranieri pioneered the mortgage- backed securities business, will apparently survive the firm's merger into Travelers Corp.

In some instances where the two firms overlap, people at Smith Barney, a unit of Travelers, have been the ones to keep their jobs. But Salomon's reputation as a bond powerhouse and the mortgage desk's strong performance recently have positioned the trading unit to ride out the consolidation.

Most of the traders on Smith Barney's mortgage unit will lose their jobs on Dec. 10, about two weeks after the merger is scheduled to close, sources said, and many are already seeking new jobs.

While Salomon Brothers has significantly restructured its organization since Mr. Ranieri's regime, when industry lore says cigar smoking and phone throwing were common on the trading floor, the firm maintains a reputation as a strong competitor.

Mr. Ranieri left Salomon, where he rose to vice chairman during a nearly 20-year tenure, in 1986 to pursue other business interests, including the turnaround of a failed savings and loan company in Houston, now known as United Bancorp of Texas.

Today the top man at Salomon's mortgage operation is Tom Maheras, who oversees a team of research analysts, traders, and strategists as the global head of fixed income. Jeff Perlowitz and Mark Tsesarsky are co-heads of the mortgage trading operation.

Salomon was again the No. 1 mortgage-backed manager in the third quarter, up from No. 5 in the same period last year.

It managed issues totaling $11.5 billion of proceeds-a 22.5% market share-according to Securities Data Co.

Smith Barney was 11th in the quarter, managing $1.2 billion.

Freddie Mac did business with both firms this year.

Salomon has distributed $7 billion of Remics in 11 transactions so far this year. Smith Barney handled $600 million for Freddie Mac in two issues.

Salomon Brothers also was No. 1 with Fannie Mae, managing 13 deals for more than $16 billion. Smith Barney is ranked No. 12 and has done five deals for nearly $1.7 billion.

Internally, Smith Barney's mortgage-backed securities department was viewed as one of the top three departments in the taxable fixed-income floor, sources said. The firm employed nearly 20 junior and senior institutional traders for the mortgage market, said one source familiar with Smith Barney's operation.

The final details of the terms of their departure from Smith Barney will not be known for a few weeks.

Late last week sources said that Smith Barney mortgage-backed securities traders were busy interviewing or taking a day off in between jobs.

During the third quarter, mortgage-backed securities issuance more than doubled, compared with the third quarter of 1996.

"Interest rates have come down substantially," said Peter Rubinstein, senior vice president at PaineWebber. "There are fantastic interest rates out there right now."

Mr. Rubinstein added that the 10-year rate is approaching 5.90%, the point where most industry observers say refinancing begins.

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