Mellon Mortgage Co., Houston, moving to increase its presence in new markets and expand its servicing portfolio, has struck a deal to buy Metropolitan Life Insurance Co.'s mortgage unit, Metmor.

The deal, priced at $165 million, will bring the Mellon Bank Corp. unit's servicing portfolio of residential and commercial loans to $45 billion. Metmor, based in Overland Park, Kan., services over $13 billion in loans.

The move is consistent with Mellon's plans to increase its presence in several key markets, including the Pacific Northwest and the Midwest, said Richard L. Solheim, president of Mellon's mortgage unit.

In 1994, Mellon entered the Northwest when it bought U.S. Bancorp Mortgage Co. That year, it also acquired Northern Mortgage Co., Norwell, Mass., as well as four residential mortgage offices in Texas from Roosevelt Bank of Chesterfield, Mo.

"We have been in a growth mode since we bought U.S. Bancorp a year ago," Mr. Solheim said. "We are in the market. We're a buyer of servicing on an ongoing basis."

Metmor shut down its retail origination operation in September 1988, but has continued to originate commercial loans and service both commercial and residential loans.

Mellon will keep a servicing operation in Kansas as part of the deal, said Robert D. O'Reilly, senior vice president for loan operations at Metmor. He said it is not yet clear what Mellon will do with Metmor's origination operations.

Metmor hopes to close the deal by Aug. 31, Mr. O'Reilly said.

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