Knutson Mortgage Corp., a midsize mortgage bank based in Bloomington, Minn., has put itself up for sale.
Confirming rumors about the plans, the company said Thursday that it had hired Bear, Stearns & Co. to assist.
"We are aware of the significant premiums being offered and paid" for mortgage companies, said Michael Goldner, chairman of KMC Management Inc., Knutson's parent.
He said the investment bank was retained to test the company's value on the open market.
Knutson, which has a servicing portfolio of $5.8 billion, is the latest mortgage bank to join the parade of companies seeking to be bought.
As banks have demonstrated their willingness to pay handsomely for mortgage banks, companies such as American Residential and Express America have decided to seek out strategic partners.
An extremely slow year for mortgage originations has only fanned these flames.
Mr. Goldner stressed that Knutson was only willing to sell to a buyer that would "maintain Knutson as a Minnesota-based going concern under the leadership of current management." The company is headed by Glenn Wilson, a mortgage veteran.
Knutson is owned by a group consisting of Chemical Venture Capital Associates, Chase Manhattan Capital Corp., and Goldner, Hawn, Johnson & Morrison, as well as senior management.
They purchased the company from the Resolution Trust Corp. in October 1992.
Several venture capital partnerships that purchased mortgage companies from the RTC in the early 1990s have been able to turn them around and sell them to banks in the past six months at handsome profits.
Sunbelt National Mortgage was sold by its owners to First Tennessee National Bank late last year and Crossland Mortgage Corp. was bought by First Security Bank of Utah.
Knutson processes monthly payments on a total of about $10.2 billion, according to Mr. Goldner, but it holds the servicing rights on only $5.8 billion of that. The rest of the work is done for other servicers.
Knutson produced some $2 billion of loans last year and is on track to do $1.8 billion in 1994.
Loans are generated through 25 offices in nine states, primarily in the Midwest. About 60% of production was through retail channels the company said.
Sources close to the deal said that a bank, perhaps one that wanted to expand into the upper Midwest, was the most likely type of buyer.
Mr. Goldner declined to say whether the company was involved in talks with a bank.