Mellon Mortgage is converting its servicing portfolio to Alltel Information's mortgage servicing system.
The company, one of the nation's top 10 servicers, has been aggressively building its portfolio in recent years. The portfolio has more than tripled since 1993 and is now about $65 billion.
Observers said Mellon's commitment to one servicing system could be a sign that large servicing acquisitions may be in the works.
"It would seem to be a growth indicator. The company wouldn't convert over to a system like this and not be planning to grow," said Gerry Risi, managing director of Mortgage Marketing Services, a Fort Lauderdale, Fla., servicing brokerage.
Michael J. Kula, senior vice president and chief operating officer of Houston-based Mellon Mortgage, said the company could double its portfolio without having any systems problems.
And there is talk that Mellon Mortgage's parent, Pittsburgh-based Mellon Bank Corp., needs to make an acquisition or risk being acquired itself.
Mellon Bank tried to take over CoreStates Financial Corp. last year but was rebuffed. CoreStates eventually agreed to be bought by First Union Corp.
Mellon Mortgage had been using Fiserv's Data Link servicing system as well as Alltel's Mortgage Servicing Package. Alltel and Fiserv are the leading vendors of mortgage servicing software. Mellon inherited the Alltel servicing system when it acquired Metropolitan Life Insurance Co.'s mortgage unit, Metmor Financial, in 1995.
"We needed to be in a position to optimize future opportunities. Having two systems made this somewhat cumbersome," Mr. Kula said. Mellon has two servicing centers, one in Houston and the other in Denver.
Mr. Kula said Mellon looked at Alltel's system and Fiserv's Data Link in addition to Excelis MLS, a servicing system owned by First American Financial Corp.
"At the end of the day, we felt very comfortable that Alltel could provide reliable, consistent performance," Mr. Kula said.
Mr. Kula said Mellon expects to convert its entire portfolio to Alltel's system by the end of 1998. By then, the company should have about 900,000 loans totaling $72.5 billion. This estimate is based on projected 1998 origination volume and any bulk purchases of servicing, Mr. Kula said. Mellon originated $4.2 billion of mortgages last year. The estimate also factors in expected servicing runoff.
Mellon signed a five-year contract with Alltel to use all its mortgage servicing products. Mellon Mortgage is the second-largest servicer of commercial mortgages, but this agreement is for the residential loan portfolio only.
