The boom in mortgage refinancings has sent banks scurrying to buy loan origination units.

Large banks active in the field want to bolster their origination capabilities in order to replace loans in their servicing portfolios as consumers refinance, investment bankers and analysts said.

"The demand for mortgage companies, both originators and servicers, is the highest we've seen in years," said Jeffrey M. Levine, national director of investment banking at BayView Financial Trading Group, Miami.

This week the huge mortgage unit of Norwest Corp. agreed to buy certain production operations of WMC Mortgage Corp., Woodland Hills, Calif. The deal, involving a unit that writes prime-quality loans, bolsters Norwest's position as the top mortgage originator.

In December, National City Corp. agreed to buy the origination businesses of First National Mortgage and Eastern Mortgage Services, the two mortgage subsidiaries of First Maryland Bancorp. And investment bankers and others suggest that more deals are on the way.

The trend has been fueled by an explosion in residential refinancings. With a strong bond market pushing mortgage rates to unusually low levels, many homeowners are trading old loans for new ones with lower monthly payments. Experts say the activity is rivaling the historic refinancing boom of the early 1990s.

As top companies look for ways to keep pace, the prices of origination units are rising markedly. On some recent deals, investment bankers say, buyers have paid more than 0.75% of the target's annual originations, up from a norm of about 0.50% just a few months ago.

For example, a company with originations of $5 billion might now fetch close to $40 million, up from $25 million last fall.

The price of Norwest's acquisition of the WMC operations was not disclosed, but investment bankers estimated it at about $20 million. WMC, formerly Weyerhaeuser Mortgage, last year wrote about $3 billion of "A" mortgages.

Des Moines-based Norwest Mortgage, which wrote more than $55 billion of loans last year, is likely to remain an aggressive acquirer of origination units, said Katrina Blecher, an analyst at Gruntal & Co. Norwest services an industry-leading $208 billion of mortgages, and those holdings constantly need to be replenished, Ms. Blecher and others said.

Norwest officials were not available to comment.

Michael McMahon, an analyst at UBS Securities, said the annual originations of the top 10 servicers tend to equal about 18% of their servicing portfolios. But if interest rates remain at current levels, loan runoff from the portfolios could top 30% a year, he said.

That would require companies seeking to maintain or increase their portfolios to buy either more servicing rights or more production capability.

"Most of these companies are interested in growing, not just maintaining" current volumes, Mr. McMahon said.

Some analysts said many small, independent companies would be better off selling, taking advantage of larger banks' interest in production.

"There are very few independent mortgage banks that can generate an adequate return on the prime side," Mr. McMahon said.

Chuck Klein, executive vice president of Charbonneau-Klein Inc., a Houston investment bank and broker specializing in mortgage banking, said banks are "crawling all over themselves to buy production."

Both small and large banks are hungry for production, he said, because they want to increase their customer rosters-and thus increase cross- selling opportunities. And for smaller banks, increasing the customer base makes them more attractive targets, Mr. Klein noted.

Even larger originators are seen as vulnerable. One company mentioned as a potential target for banks is Resource Bancshares Mortgage Group. The company originated $10.8 billion in 1997 and has a relatively small servicing portfolio, at $7.1 billion.

Resource's stock had been trading as high as nearly $19 a share last June, but after the company aborted a deal to buy Walsh Holding Co., a subprime lender, its stock fell to about $11.50 in October. As rates have fallen, the stock has recovered somewhat and is now trading at about $16.

On Friday, the company adopted a shareholder rights plan to guard against a hostile takeover. It said the "poison pill" plan was not in response to a specific takeover threat.

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