Mellon Bank Corp.'s just-completed purchase of mortgage lender Metmor Financial is yet another example of a widespread trend in banking: a push to build fee income.

With the acquisition, Mellon adds $13 billion of residential and commercial loans to its servicing portfolio.

The Pittsburgh banking company will receive fee income for collecting and processing monthly mortgage payments.

The purchase cost Mellon $165 million, or a bit less than 125 basis points on the servicing portfolio, a fairly typical price in recent transactions.

"Mortgages are one of the three or four key businesses they want to focus on," said Anthony R. Davis, a bank analyst at Dean Witter Reynolds, New York.

And Metmor Financial's servicing operation "is a nice tie-in to their fee area," Mr. Davis said.

Mellon does indeed plan to "take advantage of the servicing" that Metmor has traditionally done, said Richard L. Solheim, president of Mellon Mortgage Co., Houston.

Mellon is not disclosing fees that the Metmor's portfolio supplies, but the bank stands to make millions of dollars by servicing the existing loans and adding to the portfolio. Servicers typically receive 28 basis points a year for each $1 of conventional loans they service and 40 to 42 basis points for every $1 of government loans.

With the acquisition - and its $9.3 billion of residential servicing - Mellon's residential servicing portfolio jumps to $45 billion. The increase takes Mellon to 11th from 17th among all residential servicers.

The purchase also helps the bank achieve economies of scale, analysts said. Large servicers are able to afford the technology investment required to bring servicing costs down.

All told, Metmor Financial operated 104 residential offices in 22 states. Metmor Financial also has 15 commercial origination offices in seven states.

"This is a very good strategic acquisition," given the company's diversity and market base, said Mr. Solheim.

The purchase also gives Mellon Mortgage's residential operation an entry into California and the Midwest, where Metmor Financial operated numerous offices. With these additions, the Southeast remains the only part of the country where Mellon Mortgage does not now have a presence.

Mr. Solheim said he was in no hurry for another acquisition to enter the Southeast. "Right now, I'm focused with dealing with exactly what I've got," he said.

Indeed, the company is in the midst of melding Metmor Financial's technologies and systems with Mellon's. Mellon is also seeking salespeople to work at a number of Metmor Financial loan offices.

Mellon has also decided to retain Metmor's Overland Park, Kan., servicing center and will ask most of its employees to stay on, Mr. Solheim said.

The Metmor Financial purchase, announced in July, is the latest expansion move by Mellon Mortgage. The company entered the Northwest in 1994, when it bought U.S. Bancorp's mortgage company.

Last year Mellon Mortgage also acquired Northern Mortgage Co. of Norwell, Mass., and bought four residential mortgage offices in Texas from Roosevelt Bank of Chesterfield, Mo.

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