Md. Firm to Handle First Interstate Mortgage Lending : Banking: The joint venture with PHH Corp. is part of an industry trend toward consolidation.

In a move to cut costs while continuing to provide a popular product, First Interstate Bancorp on Thursday announced a joint venture with a Maryland-based financial services firm to originate and market home mortgage loans.

First Interstate, which writes about $1 billion worth of mortgages a year throughout its 13-state territory, will transfer nearly all of that business to the new enterprise, to be called First Interstate Residential Mortgage, or FIRM. First Interstate’s partner is PHH Corp. of Hunt Valley, Md., a $5.2-billion-asset company whose PHH Mortgage Services unit originates and services mortgages nationwide.

First Interstate’s move is part of a trend of consolidation in the mortgage lending industry that has gained momentum recently. The idea is to get big or get out. For instance, Wells Fargo & Co. struck a deal last spring to turn over its mortgage origination business to a joint venture with Norwest Mortgage Co.

Some of the 450 people in First Interstate’s mortgage operations will be offered jobs elsewhere within the bank or with FIRM or PHH, and an undetermined number will be laid off, First Interstate spokeswoman Shirley T. Hosoi said. The move will save First Interstate about $20 million a year in costs associated with underwriting and processing its own mortgages, she said.

The joint venture will originate mortgages by telephone from offices in Denver and Mt. Laurel, N.J. Customers who inquire about mortgages in First Interstate’s branches will be referred to FIRM and given its toll-free number.

First Interstate will continue to originate only a small number of mortgages, mainly to its wealthy private banking customers and to certain low-to-moderate-income customers, Hosoi said.

“The days of having a loan representative come to your home are going away,” said Paul Johnson, a consultant with Towers Perrin in Los Angeles.

The wave of mortgage refinancings in the last couple of years has produced a better-educated group of consumers who demand low-fee mortgages, such as those provided by big thrift institutions, mortgage bankers and other high-volume home-loan specialists.

“On the origination side, it’s tough to make money unless you’re huge,” Johnson said.