First Union May Acquire Prudential Unit : Deals: The purchase of the mortgage business would bolster the bank in the Northeast, experts say.

First Union Corp. was not talking Monday about reports that it is negotiating with Prudential Insurance Co. of America to buy all or part of the insurer’s $78-billion mortgage business.

Such an acquisition would strengthen First Union’s presence in the Northeast at the same time the bank is about to consummate a deal to acquire New Jersey’s biggest bank, analysts said.

Citing sources familiar with the negotiations, the Wall Street Journal reported Monday that First Union could team up with Norwest Corp. of Minneapolis to bid for a substantial portion of the Prudential unit or put in its own bid.

The American Banker, a trade journal, reported Monday that First Union’s deal involves purchasing the rights to service $30 billion of high-balance mortgages. That would vault First Union into the ranks of the nation’s top 10 servicers. Mortgages servicing involves handling payments and other paperwork.

Citing sources close to the deal, the paper said Norwest would acquire $42 billion in servicing rights, making it the nation’s largest servicer.

Both First Union and Norwest declined to comment.

Rick Matthews, a spokesman for Newark, N.J.-based Prudential, said the company has no definitive agreement. He declined to comment further.

The Prudential unit, Residential Services Corp. of America, based in Clayton, Mo., originates and services residential mortgages. With a portfolio of $78 billion in loans, it is one of the biggest mortgage operations in America.

The unit has been on the auction block since March. The Wall Street Journal said experts estimate it could fetch as much as $1 billion.

First Union is close to completing its $5.4-billion merger with First Fidelity Bancorp, which also is based in Newark.

Dean Witter Reynolds analyst Anthony Davis told the Wall Street Journal that First Union is about to enter states such as New York, Pennsylvania and Connecticut, which he described as “markets with a higher per-capita income” than several of First Union’s current markets in southern states.

First Union needs the capability to service the larger, jumbo mortgages that are more common in the new markets, he said.

With a mortgage-servicing portfolio of about $37 billion, First Union ranks about 15th in size in the industry. Several analysts have speculated that the bank could bid for other mortgage-service businesses to compete against other strong rivals, including hometown player NationsBank Corp.