As interest rates continue to fall and the end of the quarter nears, companies that specialize in brokering the sale of servicing rights are keeping busy.

In one large deal, Countrywide Servicing Exchange, a subsidiary of Countrywide Credit Industries Inc. of Calabasas, Calif., is auctioning a $4 billion portfolio on behalf of an undisclosed California company.

A little more than half of the portfolio is servicing for conventional loans insured by Fannie Mae and Freddie Mac; the rest is for loans owned by private investors. Bids were due Wednesday.

Cendant Mortgage, formerly PHH Mortgage, recently auctioned a $1.6 billion package of conventional servicing through Cohane Rafferty Securities, market sources said.

Bids on the package were due last week, the sources said. Officials at Cendant Mortgage and Cohane Rafferty declined to comment.

As reported earlier, a Midwest community bank looking to leave mortgage banking plans to sell $988 million of conventional servicing next week through MGIC Investors Services Corp., an affiliate of Mortgage Guaranty Insurance Co., Milwaukee. The name of the bank was not disclosed.

A servicer might want to sell some of its portfolio right now for several reasons.

"Some people may be able to book gains as a result," said Brenda White, a managing director at Warburg Dillon Read, formerly UBS Securities.

Indeed, servicing sales used to cluster around the end of the quarter, and particularly at the end of the year, though brokers say that is less the case these days.

Accounting rules imposed in 1995 require servicers to record on their books servicing rights for loans they originated. That diminished the gains lenders could realize by later selling the servicing rights on those loans, said Geoffrey Glick, an executive vice president at Hamilton, Carter, Smith & Co., a Beverly Hills servicing broker and investment bank.

But a company that carries servicing on its books at a conservatively low value can still record a profit by selling it for more, he said.

That may be why Cendant Mortgage, a subsidiary of Cendant Corp., which recently revealed accounting irregularities that caused its stock price to fall, sold $1.6 billion of its portfolio, Mr. Glick suggested. Its motivation may also have been to raise cash for the restructuring of its acquisition of American Bankers Insurance Group, or a combination of the two, he added.

Other servicers may be selling to adjust their portfolios, unloading servicing that they fear is highly susceptible to refinancings but that the market may value more highly, Ms. White said.

In a time of falling interest rates, the least prepayment-vulnerable types of servicing command "top dollar," Ms. White said. And some servicers may be suffering impairment losses, and have "no choice" but to sell, she said.

Recently, brokers said, prices have gone down for conventional servicing as a result of the drop in interest rates. When rates are low the value of servicing falls, because many loans are prepaid.

But servicing values are "still relatively rich," said Robert Husted Jr., principal at Mortgage Industry Advisory Corp., a New York risk- management firm. "Prices in the markets have not caught up with implied prepayments," he said.

And with a "potential tidal wave of prepays" looming, Mr. Husted said, selling servicing now makes sense to some as a "cashing- in of chips."

In the latest Mortgage Bankers Association of America survey, refinancings accounted for 55.4% of all applications, up from 52.1% a week before and from 45% the week before that.

It also used to be that pricing on servicing sales got weaker at the end of the year, because so much supply would come into the market at once, said David Ertel, a managing director at BayView Financial Trading Group, a Miami investment bank and servicing broker.

But in the last two years, bidders actually became more aggressive toward the end of the year because many of them had not yet used up their allocated budgets for buying servicing, and had to pay up for those deals that remained, Mr. Ertel said.

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