Electronic Data Systems is seriously looking at making a major entry into the mortgage subservicing market by purchasing one of the sector's largest companies, Wendover Funding Inc., sources said.
Wendover has been the subject of persistent acquisition rumors in the last few months. Michael A. Hyman, senior vice president of Wendover, said that questions about its sale would be addressed by its parent, State Street Boston Corp. A spokeswoman for State Street Boston would not comment.
An EDS spokesman did not shoot down the rumors. He said the company would comment when the time comes but had nothing to say now.
EDS has been beefing up its overall mortgage-related business in the last few years. Last year, EDS was awarded a contract to develop the technology required to operate the Mortgage Electronic Registration System, or Mers. And in 1995, EDS bought Lakewood Corp., a developer of origination software.
One investment banker said it wasn't surprising that EDS would want to purchase Wendover because the Plano, Tex., information technology giant has been showing an increased interest in mortgage servicing. Another banker said EDS has expressed a particular desire to expand into servicing loans for other companies.
Wendover, Greensboro, N.C., is regarded as one of the industry's top subservicers of specialty products such as nonconforming and reverse mortgages. Companies pay Wendover a fee to service the loans but continue to own the servicing rights themselves. According to Mr. Hyman, the company subserviced about $10.8 billion in mortgages in 1996.
But this figure includes about $2 billion in loans from Greenpoint Financial Corp. Greenpoint announced last week it was purchasing a servicing operation in Columbus, Ga., from Citizens Mortgage Corp. As a result, Greenpoint said it would now service the loans that it had previously farmed out to Wendover.
Investment bankers would not speculate about when EDS might make a bid or how much the company was willing to cough up for Wendover. But one said that Wendover's value might have decreased because of the loss of Greenpoint as a customer.
EDS has been looking at Wendover for the last few weeks, according to one investment banker. That banker added that First Union Bank Corp. and North American Mortgage Co. had also made some inquiries but decided not to make a bid.