Wells Fargo Bank may be looking to sell part of its servicing portfolio, servicing brokers said.

The San Francisco bank would not comment about the rumors but observers said a sale would make sense because there are industrywide concerns about runoff. Borrowers, seeking to take advantage of low rates, are refinancing at record levels.

There appear to be several large servicing sales in the works. GE Capital Mortgage Services, for one, is said to be considering a sale.

The refinancing boom could be more of a problem for Wells than for other large servicers because the bank does not have a large production arm which can replace loans that run off, observers said.

As of June 30, Wells had a $37 billion servicing portfolio, the 18th largest.

Wells stopped originating loans for itself in 1995, citing intense competition and thinning margins. Later that year, the bank formed a joint venture with Norwest Mortgage, the nation's largest lender, in which Norwest originated loans in Wells branches.

But last August, that ended. The reason, observers said, was the conflict of having Norwest Mortgage loan officers in Wells branches. Norwest heavily cross-sells other bank products through its mortgage division.

Wells, however, now has a joint venture with PHH Mortgage Services, a nonbank. PHH had a similar partnership with First Interstate Bank, which was acquired by Wells in 1996.

A Wells spokesman said PHH is originating mortgages through a telemarketing division as opposed to having loan officers in Wells branches. In addition, customers can visit Wells' Web site for mortgage information.

But analysts said it would not be a big surprise if Wells sold all or part of the servicing portfolio because the bank has not been as committed to mortgage banking as other large banks, such as Norwest Corp. and Chase Manhattan Corp.

"Servicing is an economy-of-scale business. The portfolio might be of greater value to someone else," said Raphael Soifer, an analyst with Brown Brothers Harriman.

Mr. Soifer said Wells' origination strategy is a defensive move. Although mortgages are not a huge strategic part of its overall business, the bank does not want to lose customers by not having mortgage production capabilities, he said.

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