Mellon Mortgage is dragging its feet in negotiations to buy Source One Mortgage, according to a statement by Fund American Enterprises Holdings, Source One's parent company.

In December, Mellon proposed buying all of Source One, the release said, but has since "revised the scope and other terms of the transaction it is willing to discuss."

A Mellon Mortgage spokesman confirmed the company is in discussions with Fund American. He declined to comment further.

A mortgage industry insider familiar with Source One's servicing assets said its portfolio was loaded with excess servicing, which carries a high risk profile and may be of concern to a conservative organization such as Mellon.

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