Norwest Corp., Banc One Corp., and Mellon Bank Corp. are among the bank companies that will spend 1996 hot on the trail of mortgage companies, industry experts say.

Analysts and executives predict purchases of both large and small lenders as banks strive to amass servicing and expand into new geographic areas.

"Size and scale are important in this industry," said Joe K. Pickett, chairman of the BancBoston Mortgage Corp. unit of Bank of Boston Corp. "If you can grow and hold down costs, you can certainly be profitable," he said.

Banks piled up mortgage company acquisitions in 1993 and 1994 but spent much of last year on the sidelines absorbing their purchases.

"A lot of banks' mortgage companies increased significantly in size in 1994," said Mark Oman, president of Norwest Mortgage Co., Des Moines. "For many, 1995 was a digesting year."

Indeed, the last significant deal occurred in September, when Mellon bought Metmor Financial, which serviced $13.6 billion of loans. Mellon has also reportedly agreed to buy Source One Mortgage Services Corp., another lender, although executives at the bank declined to confirm it.

Bank mergers are one reason for last year's slowdown, as banks concentrated on melding their respective mortgage units instead of playing the field, industry experts say.

Now, with interest rates remaining low, many borrowers are paying off their loans, and banks are being forced to consider mortgage company acquisitions to build business, industry analysts say. Primarily, banks are seeking servicing income that comes from collecting and processing loan payments.

BancBoston plans to use acquisitions to help boost the loans it services to $100 billion, from $40 billion, Mr. Pickett said.

He declined to say how long it would take to reach that target. But he did say the industry's preoccupation with predicting a merger wave may be misguided.

"There's been an awful lot of talk, but we haven't seen much action," he said.

The mortgage units of Banc One Corp., Mellon Bank Corp., PNC Bank Corp., Norwest Corp., and SunTrust Banks Inc. all pop up as potential acquirers of independent mortgage companies. Industry observers don't rule out selective acquisitions by Chemical Banking Corp.'s mortgage unit after its merger with Chase Manhattan Corp. is complete.

Norwest - an active acquirer during the past two years - hasn't quite lost its appetite for purchases. The company is said to be on the verge of buying a large part of Prudential Insurance Company of America's residential lending unit.

Mr. Oman declines to discuss Prudential, but he does acknowledge his company is shopping - carefully. "If there is a transaction that makes sense in furthering our strategic goals, we will do it," he said.

BancOne Mortgage is also selectively eyeing opportunities. "We've looked at acquisitions and set a certain price that we'd be willing to participate at," said Albert Will, chief operating officer at the Indianapolis company. "We're not disappointed we've been on the sidelines so far," he added.

Banks lack any other option, said Gareth Plank, a mortgage company analyst at Rodman & Renshaw, San Francisco. Prepayments are sharply cutting into servicing portfolios, forcing banks to look outside to replace lost business, he said.

Mr. Plank said he expects banks to be shoppers even though they have had mixed results with prior purchases. "Banks find themselves in the awkward position of needing the hair of the dog that bit them," he said.

Culture shock is most often cited as the stumbling block in past acquisitions. A number of entrepreneurial mortgage executives jumped ship after encountering banks' more staid way of doing business.

"All the whiz kids from the mortgage companies are gone," one industry executive said.

While acquisitions by larger bank mortgage companies garner the most attention, many small transactions will occur as banks seek regional expansion, industry observers say. Banks will also be attracted to companies that are niche players, including lenders that deal with subprime borrowers.

"Right now, the big interest in the industry is in B and C producers," said Richard Melnick, who works on mergers as a law partner at Shulman, Melnick in Rockville Md. "Banks feel that's where the profit margins are," he said.

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