Norwest Corp. is negotiating to buy Directors Mortgage Loan Corp., the nation's largest privately held mortgage bank.

Industry sources say a deal has almost been completed and should be announced soon. The price could be as high as $250 million.

The purchase would mark Norwest's second major acquisition in mortgage banking this year. In August, the Minneapolis-based company announced plans to buy the mortgage unit of Michigan National Corp.

Norwest declined to comment and officials at Directors could not be reached. In September, however, Directors announced that it was putting itself up for sale.

Directors, based in Riverside Calif., is one of the top 15 mortgage originators in the country, having produced more than $10 billion of loans last year. It is the 28th-largest mortgage servicer, processing monthly payments on about $16 billion of loans

Observers say that Directors would immediately give Norwest a sizable presence in the California mortgage market. Although Norwest's mortgage unit is one of the top five originators in the country, it has done relatively little business in California.

The deal could put considerable pressure on Countrywide Credit Industries, California's largest mortgage bank.

"This is really a challenge to Countrywide," said one industry insider. "Directors is in Countrywide's backyard."

Both Norwest and Directors are heavy originators of loans backed by the federal government, but in different parts of the country.

"It's a natural alliance," said a top executive with a company that competes with Directors, "they are strong in a lot of the same ways but without much overlap."

Directors was .founded in 1976 by the late A. Gary Anderson, who reportedly was made very wealthy by the company. When he died two years ago, ownership passed to a family trust.

While the company resisted issuing stock during a boom in initial public offerings in 1992, it has apparently found strong reasons to join this year's wave of mortgage mergers.

"The advisory board feels that it is now appropriate to pursue for growth and investment," Ray Crebs, chairman of Directors, said in announcing the sale effort in September.

The company hired Washington-based Furash & Co. to handle the sale.

Like many mortgage banks, Directors has suffered a sharp drop in originations this year as interest rates have risen. Through June, it produced $3.7 billion of loans.

As more details of the negotiations come to light, one issue that will be closely watched is price. The value of mortgage companies was called into question recently when North American Mortgage Co. pulled itself from the auction block, saying it had been unable to attract sufficiently high bid.

Norwest has a reputation for balking at paying high premiums for production.

However, Directors has a well-regarded retail network and is not believed to be in a situation where it is forced to sell.

Norwest Mortgage has been one of the fastest-growing mortgage companies in the country. Under Mark Oman, president, it has rocketed to No. 5 in servicing from No. 189just six years ago.

The company is considered especially strong in retail originations, with a vast network of offices spanning the country.

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