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Mega-Servicer Share Could Slow Mega-Servicer Share Could Slow in Time

Washington-The nation's top five residential servicers, as a group, are continuing to increase their market share grip on the servicing business but there are tentative signs that barring another large M&A deal the trend could be slowing.

At the end of March the top five serviced almost 67% of the nation's $9.55 trillion of home mortgages, a slight decrease from the fourth quarter but a 23% gain in share from the same period last year, according to exclusive survey figures compiled by Mortgage Servicing News.

Thanks to its purchase of Countrywide Financial Corp. last summer, Bank of America ranked first among all servicers for the period ending March 31 with a 21.63% market share and a receivables base of $2.11 trillion.

Compared to the first quarter of 2008, BoA's servicing portfolio spiked by 299% but almost all of its growth was due to its purchase of Countrywide, which had built its business over 40 years. At the end of the first quarter of 2008, BoA ranked a distant sixth among all servicers with $529 billion in receivables.

Wells Fargo ranked second with $1.76 trillion in servicing rights on its books, a 19% improvement from last year but part of its growth can be attributed to its purchase of Wachovia Corp., Charlotte, N.C., which had almost $200 billion in housing receivables.

Together BoA and Wells control about 40% of the servicing rights market. Chase, a subsidiary of JPMorgan Chase, ranked third at March 31 with $1.47 trillion, an 86% gain. But Chase's receivables benefited from JPM taking over Washington Mutual last fall with government aid. WaMu had $615 billion in servicing rights and a 5.56% share. CitiMortgage and Residential Capital Corp. ranked fourth and fifth among servicers, with $791 billion and $390 billion in servicing rights, respectively.

If the M&A deals are backed out, the top 10 ranked servicers had little in the way of organic (non-M&A) growth. U.S. Bank Home Mortgage of Minnesota is the only exception, growing its portfolio by 30% without any major acquisition.

A glance at the top 10 shows that none of these firms are in immediate danger of failure or government takeover, which means that the only way for this group to grow is to produce additional servicing rights through originations.

Of course, it's always possible that as the year marches on some of these shops may try to sell servicing rights as a way to raise cash. It's also possible that time may run out for Citigroup and the GMAC-owned Residential Capital Corp., which means these two could be forced into shotgun marriages by yearend.

The nation's subservicers had moderate growth during the quarter.

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