American Residential Mortgage Corp., La Jolla, Calif., has emerged as the winning bidder for Foster Mortgage Co., according to industry sources.

American Residential is now in final negotiations to buy the Fort Worth-based Foster, which services about $3.5 billion of loans. The deal is on track to close by the middle of next month, the sources said.

Foster, a unit of United Companies Financial of Baton Rouge, has been on the auction block since last spring, after being hit hard by prepayments tied to the refinancing boom.

Within Striking Distance

The purchase of Foster would increase American Residential's servicing portfolio by about one-third, to $13.8 billion. That would put it within striking distance of a position among the top 25 servicers in the country.

The mortpge bank, one of about a dozen to go public last year, has been increasing its servicing business steadily since 1990. At that time, it was servicing just $1 billion of loans.

Many mortgage bankers and analysts have come to view servicing as an essential line of business. Servicing fees, they say, can help offset declining origination revenues in periods of slack loan demand.

Price to Be Adjusted

The purchase price will be somewhere in the "mid $30 millions," one source said. But that number will be adjusted depending on prepayments in Foster's servicing portfolio between now and closing.

United bought Foster for $94 million in 1990 from the Resolution Trust Corp., only to see Foster's servicing portfolio almost cut in half by prepayments.

John Robbins, Chief Executive Officer of American Residential, declined comment. Calls to Foster Mortgage officials were not returned by press time.

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