Despite industry rumblings to the contrary, Mellon Bank Corp. apparently remains interested in purchasing Source One Mortgage Services Corp.

The Pittsburgh-based banking company was continuing discussions last week with Source One's owner, Fund American Enterprises Holdings, according to executives who are watching the issue closely.

Mellon and Fund American have declined to comment on the issue, but some industry watchers say Mellon remains the only bidder.

Now, the two sides will have to decide, among other things, on a mutually advantageous time for the deal to close, observers say.

Speculation surfaced recently that Mellon had walked away from the table, unable to come to terms after lengthy negotiations.

Discussions did go off track earlier this year when Mellon, in taking a close look at Source One's operations, turned up assets it was uncomfortable with. But that matter is said to have been worked through, with Mellon possibly scaling back the scope and price of its purchase.

In a letter of intent disclosed last December, Mellon agreed to pay $350 million for Michigan-based Source One, which services $28.7 billion of assets.

If the deal goes through, the purchase will be Mellon's fifth mortgage company acquisition in two years. The drive has so far more than doubled Mellon Mortgage's servicing assets, which now top $45 billion. The Source One servicing could put Mellon into the top 10 among servicers nationally.

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