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Editorial: Slowdown Won't Crimp Us

Sure, mortgage lending volume is expected to decline this year. And next. And the growth rate for mortgage debt outstanding - a good barometer of the size of the mortgage market - may not be in the double digits anymore. Most industries would be glad to face the problems that the mortgage industry is facing right now.

Think about the auto industry, or for that matter, the entire manufacturing sector. And I bet you wouldn't want to trade places with executives in the airline industry either.

Mortgage debt outstanding is possibly the best measure of the size of the mortgage servicing industry. And despite a likely slowdown in MDO growth right now, the industry's been on a tear over the course of the last decade or so.

Let's look back at 1993, the start of a refinancing boom that - at the time - seemed like one for the record books. There was $3.4 trillion of mortgage debt outstanding at the time, $3.1 trillion of it backed by single-family homes and approximately $270 billion of multifamily debt.

Then the big growth spurt starts. In 1997, mortgage debt outstanding passes the $4 trillion threshold. The industry surpasses $5 trillion in 1999. But the big figures come in after the mega-refinancing boom that ushered us into the new millennium. In 2005, total mortgage debt outstanding stood at approximately $9.9 trillion, with $9.2 trillion of that in the single-family sector, according to Fannie Mae. If we haven't hit the $10 trillion level yet, we can't be far off.

Growth of that magnitude - MDO has risen by double-digit rates in recent years - makes the mortgage servicing industry an attractive long-term investment. Sure, there will be refinancing booms that cause portfolio churning and impair the value of servicing rights, but they will pass. And there will be upheaval as various parts of the industry and occasional new entrants battle for market share in the fields of credit risk management, interest rate risk management and loan administration involving that $10 trillion of mortgage debt. Some will win and some will lose, and despite all the gloom about a housing downturn, home finance remains an attractive business to be in. And the servicing side of the equation will continue to grow, probably at less staggering rates, for the foreseeable future. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com

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