The exclusive $100 billion mortgage servicing club grew to seven members as of June 30, 1998, up by one since June 30, 1997. That's because two servicers-HomeSide Lending and Washington Mutual-joined during the year while GE Capital Mortgage Service dropped off the list.
But those rankings are already out of date. When pending mergers are completed, the list will again be down to six. No. 7 Washington Mutual is about to acquire No. 11 Home Savings of America. And when No. 4 NationsBanc and No. 8 BankAmerica complete their merger, that will probably put the combined company into the No. 1 spot, ahead of Norwest, Countrywide and Chase Manhattan.
BankAmerica, with $98.8 billion, had been the leading contender to join the $100 billion club. With GE Capital Mortgage expected to continue to shrink, that leaves only GMAC Mortgage as a candidate for the club with its $92.9 billion. The company is acquisition-minded, having bought the Wells Fargo servicing portfolio in April.
The next company down the list is No. 12 Mellon Mortgage, which at $70 billion is a long way from qualifying for the club.
The wild card remains the status of GE Capital Mortgage. More than a year ago, the company's portfolio was said to have been on the block, but no buyer has emerged and the future of the assets remains unclear. The company is no longer building the portfolio, and it will likely continue to shrink. But anyone acquiring GE's servicing would immediately leap into the exclusive $100 billion-plus category.
A new feature of the servicing tables this time is a column showing capitalized servicing rights as a percentage of the loans being serviced by each company. This number is simply the net present value of the servicing rights being carried on the books, divided by the amount of loans outstanding.
Countrywide Home Loans has by far the highest figure among regular lenders at 1.94%. The company typically assumes a fairly long life for its servicing rights, then hedges that assumption. Among the top 10 servicers, the next highest figure is the 1.57% posted by HomeSide.
Most of the lenders with higher ratios are subprime lenders, who value their portfolios differently because of the higher fees they collect. Associates Home Equity, for example, had a ratio of 2.72%.
Most B&C lenders showed sharp declines in their ratios, usually reflecting the writedowns many of them took because of poorly performing loans in their portfolios. Green Tree, for example, fell from a ratio of 2.27% to 1.53%, and Tampa's IMC Mortgage dropped from 3.75% to 2.36%.
Banks and thrifts, which usually hold many or most of their mortgages for investment, usually have much lower ratios because they do not capitalize servicing rights on loans held for investment.
Meanwhile, prepayments were not a significant problem for the top 100 servicers. Loans were drained from their portfolios at an average rate of 15.01%, up from 10.80% a year earlier. But new originations amounted to an average of 35.07% of their portfolios, up from 19.30%. That resulted in a net portfolio gain of 13.62%.
Among the biggest servicers, a few showed some shrinkage in their portfolio. Norwest, for example, had a tiny decline, 0.31%, Fleet Mortgage dropped 3.85%, and GE Capital 7.16%.