Home loan tax servicers feel the pinch.

The battle for market share between the two main tax servicers for home lenders has intensified.

Sinking loan production and lenders' consolidation have First American Real Estate Tax Service, Irvine, Tex., and Transamerica Real Estate Tax Service - a San Francisco division of Transamerica Corp. - scurrying to maintain their respective footholds, industry observers and company officials say.

"I would say that the bigger companies are probably taking a whack more than the smaller companies," said Joseph A. Manelski, president and chief executive at American Realty Tax Services Inc., a second-tier tax servicer based in Vienna, Va.

Companies like American Realty keep track of tax funds in escrow in servicing portfolios and prepare payments to the municipalities involved. As portfolios have grown over the years, the need for help from tax servicers has also increased.

But the weakening of loan production that has impacted the lending industry has hurt tax servicers.

David J. Kurtzman, Transamerica president and chief executive, said business is down about 50% for the year ended in October.

And the increased consolidation in the lending industry has not helped, either.

"Rather than competing for a relatively large number of medium- size customers, we are competing for a smaller amount of larger customers," Mr. Kurtzman said.

Transamerica services the taxes on 16.5 million loans, he said.

Gregory Cassius, a senior vice president at First American, said an old industry discount is now haunting tax servicers.

Long ago, the top tax servicers adopted a competitive practice of not charging customers to work on recently purchased loans. But coupled with a lame lending market, the freebie is starting to cut into already-thin profit margins, he said.

Mr. Kurtzman, at Transamerica, said competition had forced his company to introduce new products like the tax payment processing service. The service fulfills all of a company's tax needs and lets it reduce tax department staff by as much as 80%, he said.

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