Merrill Lynch Closes ‘Model’ Mortgage Banking Subsidiary

A “model” mortgage banking firm in Tustin that had given parent company Merrill Lynch & Co. hope of becoming a dominant player nationwide is being shut down--even though the operation has been highly successful in its 19 months of operation.

In a terse statement issued late Friday in New York, the company said it was immediately “discontinuing the operations” of Merrill Lynch Huntoon Paige Inc., which had funded $254.4 million in loans and had a net income of $1.7 million by the end of June.

“In recognition of recent shifts in the residential mortgage market, we have decided to redeploy our resources into other areas of the mortgage business,” Bowers Espy, an executive with the parent company, said in a prepared statement.

He could not be reached to explain why the parent company was closing a profitable subsidiary.

Espy’s statement did acknowledge that Huntoon Paige has generated more than $300 million in residential mortgages since it opened for business in March, 1986. And, his statement said, the parent company will try to transfer some of Huntoon Paige’s 20 employees to other Merrill Lynch offices.

Matthew B. Burns, one of the two Newport Beach businessmen who devised the mortgage banking plan and headed the subsidiary, declined to comment. His partner, Joseph G. Schretzmann, could not be reached for comment.

For some time, however, there has been a growing split between Merrill Lynch management and Huntoon Paige’s operators over the direction the mortgage banking subsidiary should take. The differences began about six months ago, when a number of Merrill Lynch executives were replaced in the wake of the bond trading debacle in which the company lost $377 million in its mortgage capital division because of unauthorized bond trading during a rise in interest rates in the spring.

But Huntoon Paige had been a bright spot in the parent’s wide-ranging operations.

The subsidiary was a “model operation,” said Stephen P. Terry, a former Merrill Lynch executive who oversaw the initial business plan and start-up of Huntoon Paige. He credited Burns and Schretzmann with doing an “absolutely masterful job.”