Four big lenders accounted for 26.5% of mortgage-backed securities backed by federal agencies in the first half, according to an industry newsletter.

Norwest Mortgage, Countrywide Home Loans, Chase Manhattan Mortgage, and Fleet Mortgage Corp. issued a combined $65.6 billion of the $247.5 billion in securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae in the first half. The data, which reflects volume by the 200 largest lenders, was compiled by Mortgage Marketplace, an American Banker newsletter.

In 1995, the top four lenders - then Countrywide, Norwest, Prudential Home Mortgage, and Fleet - issued 22.3% of a total of $312.4 billion of securities. Numbers for the first half of 1995 were not available.

The dominance of four mortgage originators is remarkable, given the highly fragmented nature of the business. There were almost 10,000 home loan lenders in 1995, according to statistics compiled under the Home Mortgage Disclosure Act.

One reason the big originators are getting bigger is that they are bulking up in mortgage servicing, said Claus Lund, senior vice president and head of mortgage asset management at Bank of America Mortgage, San Francisco. To replenish their new servicing mega-portfolios, which lose billions of dollars of loans to refinancing and transient homeowners, mega- servicers must also be mega-originators, he said.

"Say you have $100 billion in your servicing portfolio. You see $15 billion to $20 billion rolling off every year," Mr. Lund said. "You think, 'Gosh! That's an awful lot of loans disappearing out of my portfolio. It's expensive to go out and drum up new business. Why don't I try to capture that runoff?'"

To woo these customers, lenders send mailings explaining that borrowers don't have to switch to another lender in order to refinance, Mr. Lund said. But there's a fine line between encouraging customers who wouldn't otherwise have refinanced and capturing those who would have refinanced with a competitor, he said.

As a result, mortgage securities holders, stung by the refinance boom of the early 1990s, remain wary of such solicitation programs, he said.

Large lenders are also paring down the documentation needed to refinance existing loans, he said.

Linda Lowell, senior vice president and mortgage analyst for PaineWebber Securities, said that these developments shouldn't worry most investors after the refinance boom of the early 1990s.

"We know how intensely refinancings are solicited," Ms. Lowell said, and the prices offered for mortgage securities factor in those prepayment concerns. But, she acknowledged, the new concentration "would make the case stronger for some people who are still worried" about the issue.

Mark Korell, group president of lender and investor services at Norwest, also downplayed the impact of the increased concentration.

"When the top five players have 50% of the market, you might be talking about something," Mr. Korell said. "But we're a long way from that. This is still a very competitive, very diverse industry."

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