AmSouth Bancorp.'s decision to sell most of its mortgage banking assets points to a developing trend in the consolidation of the home lending industry.

Many in the industry believe that banks, which mostly had been buyers, will begin to be sellers as well.

AmSouth is the second bank in recent months with a considerable profile in mortgage banking to choose to exit the business. In November, Keycorp announced that it would seek to sell its $24 billion servicing portfolio and other assets.

"There is a high cost and a volatile earnings stream associated with the mortgage business," said John W. Woods, AmSouth's chief executive officer, "and it is difficult to achieve the level of business necessary to benefit from the economies of scale that larger mortgage servicing companies achieve."

Analysts echoed that sentiment. "They feel they can't get the sheer volume to get real economies. You need size to compete," said Ken Hemauer, a vice president at Robert W. Baird.

AmSouth plans to sell its servicing business, along with eight originations offices that are outside its banking area. The bank will continue to offer mortgages to its banking customers.

The bank has a servicing portfolio of about $10 billion and originated $959 million of home loans in the first six months of last year.

Salomon Brothers Inc. has been hired to handle the sale.

In announcing its move to sell mortgage banking assets, Keycorp also cited the difficulty of amassing the necessary scale for peak efficiencies. Size is especially important in loan servicing, where a substantial and ongoing investment in technology is required to remain competitive.

The decision to exit the loan servicing business will allow AmSouth to reduce staff and improve efficiency ratios, according to Mr. Woods. In addition, selling the mortgage servicing operations would eliminate the intangibles of all purchased mortgage servicing rights from AmSouth's balance sheet and further strengthen the company's capital ratios, he said.

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