Irvine Bank Agrees to Buy 80% of Hammond Co. : Expansion: If plan is OKd, the mortgage firm would be a subsidiary of Western Financial Savings.

IRVINE — Western Financial Savings Bank, one of the nation’s largest providers of auto loans, said Wednesday that it has tentatively agreed to buy an 80% stake in the Hammond Co. mortgage banking operation for $7 million to $10 million.

Hammond, a longtime presence in Newport Beach, would operate its regional business under the same name as a subsidiary of the savings and loan and would likely retain all of its 120 employees, said its founder, Thomas T. Hammond. He would serve as president of the subsidiary.

The transaction is subject to a final agreement, a review of Hammond’s operations, regulatory approval and the approval of Hammond shareholders, which number about 100.

The mortgage banking industry has been consolidating rapidly for a year as the interest rate hikes of 1994 killed the long-running boom in home loan refinancings and put many mortgage companies and mortgage bankers on the skids.

“It’s a business now that lends itself to larger financial institutions like banks,” Hammond said. “This will be a good partnership arrangement. We can reduce our costs and warehouse our loans [hold mortgages before sale] less expensively.”

Hammond was formed in 1975 and went public in 1983. It was a takeover target in 1989 when title insurer Fidelity National Financial Inc. in Irvine bought a 23.6% stake. But the founder balked, and Fidelity agreed to sell the shares back to the mortgage banker for $1.9 million, which was about what Fidelity had paid for the stock.

In 1992, Thomas Hammond headed a shareholder group that took the company private. That same year, the company was named the 1991 Lender of the Year in a survey of California home buyer satisfaction.

The Hammond Co. sells and services residential mortgages through 14 offices in California, Arizona, Nevada, Oregon and Hawaii. Most of its loans are on new homes and arranged through builders. For its fiscal year, which ended March 31, it funded $375 million in mortgages. It now services about $550 million in loans.

The acquisition will help Western Financial increase its mortgage loan production and servicing portfolio. The Irvine-based thrift, with 25 branches and $2.9 billion in loans and other assets, typically holds its mortgages in its own portfolio instead of selling them. It services $4.5 billion worth of mortgages.