Firms Struggle for Growth

The second quarter brought little relief to most of the nation's "mega" servicers as mortgage rates hit a five-decade low and firms struggled with impairment charges and the run-off of receivables.

But there are new signs that the impairment and run-off woes of the past two years could be coming to an end.

Rising mortgage rates are expected to slow prepayments, allowing the nation's servicers to catch their breath and actually grow their portfolios.

Moreover, according to exclusive survey data compiled by Mortgage Servicing News, two firms ranked among the top 10 experienced impressive servicing growth in the second quarter.

Countrywide Home Loans, Calabasas, Calif., saw its housing receivables increase by 49% in the second quarter (compared to the same quarter last year) and CitiMortgage, St. Louis, had a handsome 79% gain.

Countrywide managed to grow its housing receivables by ramping up production, while CitiMortgage did the same. But Citi's portfolio of servicing rights jumped dramatically because a year ago it hadn't yet closed on its purchase of First Nationwide Mortgage Corp., Frederick, Md., a $100 billion servicer owned by CalFed Inc.

At June 30, Countrywide serviced $592.1 billion in loans, ranking third behind Washington Mutual, Seattle ($726.9 billion), and Wells Fargo Home Mortgage, Des Moines ($592.6 billion).

CitiMortgage ranked seventh among servicers at June 30 with $196 billion on its books. A year ago, it serviced $111.9 billion in home mortgages. (The figures exclude loans serviced by CitiFinancial, Baltimore, the subprime division of the company.)

Among the top 10, three mortgage firms had negative servicing growth while one - Chase Home Finance, Edison, N.J. - had zero growth. (See tables.)

One firm experiencing negative growth was the nation's largest residential servicer, WaMu. WaMu's portfolio declined by 2% in the June quarter compared to the same quarter last year.

WaMu, investment bankers told MSN, was recently in the market to buy a large bulk portfolio of servicing from Ohio Savings, but didn't win the bid.

It's anticipated that in the months ahead, WaMu and other top 10 servicers will become large buyers of bulk servicing packages.

In late August, the yield on the 10-year Treasury was at 4.3%, about 100 basis points higher than in June. (Mortgages are pegged to the 10-year.)

Servicers and servicing brokers believe that the long swoon in interest rates is finally over and that the sale of bulk servicing packages will gain steam in the months ahead.

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