The year's most hotly anticipated mortgage acquisition may turn out to be a subcontracting arrangement.

It has been rumored for weeks that General Electric was close to selling all or part of GE Capital Mortgage Services to Wells Fargo. But people familiar with the situation say the deal may not be structured as an outright sale.

Instead, they said, GE is considering retaining its portfolio of servicing rights on $79 billion of home loans and hiring Wells to service the loans.

Market sources said this type of arrangement, known as subservicing, would spare GE from taking a loss on the sale of the unit. Spokesmen for Wells and GE Capital Mortgage Corp., the parent of Mortgage Services, declined to comment.

By hiring Wells Fargo Home Mortgage, the third-largest mortgage servicer, to subservice the portfolio, GE could write down the asset over several years rather than take a big immediate hit.

GE has not disclosed the unit's book value, but it is widely believed to be higher than what most buyers would be willing to pay. Brokers have estimated the market value of the portfolio at $1.5 billion..

The company never disclosed what it originally paid when it bought the mortgage company in 1990 from Travelers Corp. At the time news reports said the price was estimated to be between $190 million and $215 million.

In early 1998 GE reportedly put the unit on the block. Citicorp, Chase Manhattan Corp., and an investor group led by former Citicorp Mortgage chief Richard Thornberry were all said to have bid on the company. GE did not find any bids to its liking, or above book value, market sources said at the time, and by June 1998 the firm had given up on trying to sell it.

By late January the mortgage unit was rumored to be on the block again. Since then reports in the trade press have said that Wells' Des Moines mortgage unit is close to buying it. No announcement has been made.

"This is gonna be like the musical 'Cats'," said Herman Churchwell, chief executive of Hamilton, Carter, Smith & Co., a Beverly Hills servicing brokerage. "It keeps going and going and going."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.