and technologically advanced big mortgage servicing operations, according to a study. Bank of America and Norwest Mortgage also scored high in the analysis by Smith Barney's corporate debt research group. The companies earned the top marks by, among other things, servicing more loans with fewer employees, Smith Barney said. David Hendler, its director of corporate debt research, and Winnie Cheng, an analyst with the group, based their findings on a study of the 19 largest mortgage servicers in the United States. They looked at the business from a bondholder's perspective to determine what role, if any, it plays in determining banks' credit ratings. "The majority of mortgage servicers are units owned by banks," Mr. Hendler said. "So the way to find out what is going on in servicing is to follow the bank units." The study concluded that capital produced by a banking company's mortgage servicing arm can indeed help boost the company's credit rating. Technology drives the efficiencies at mortgage servicers, Mr. Hendler said. The more advanced the technology, the more successful and efficient the servicing operation is. The study's leaders, Countrywide Funding and BancBoston Mortgage, play up their commitment to technology more than other servicers, and have better-than-average servicing quality. "Countrywide is far and away the most technology-driven servicer," Mr. Hendler said. Current technology also helps Countrywide's costs remain among the lowest in the industry. Consolidation of servicing is helping those at the top. As there are fewer industry players, the top servicers will capture refinances from their own portfolios as customers prepay loans to refinance. This reduces the negative effects of prepayments on servicing portfolios. BancBoston benefits from its parent's stated commitment to the business, Mr. Hendler said. The mortgage operation's low delinquency rate and low servicing costs per loan keep its servicing operations profitable. Indeed, while the industry average of loans serviced per employee is 850, BancBoston employees service 1,100 each, Mr. Hendler said. BancBoston may soon see a tangible benefit from its loan servicing arm. Mr. Hendler said he expects the bank parent's senior debt to be upgraded in the next year, with help from the mortgage unit's servicing efficiencies. One of the first companies to apply imaging technology to servicing was Norwest, which Smith Barney placed in the second tier of efficient servicers. Mr. Hendler said Norwest has one of the best efficiency ratios, but could improve by consolidating its seven servicing centers. GE Capital Mortgage and GMAC Mortgage have significant servicing operations with low operating costs, according to the report. But both parent companies are so large that the mortgage servicing operations have little impact on the economic health of the corporate parents. The servicing operations of Barnett Bank, Mellon Bank Corp., and Home Savings of America are all of significant size, the report said, but each has troubles that prohibit it from entering the ranks of top servicers in terms of size and profitability. "Some confuse big with being the best," Mr. Handler said. He puts Fleet Mortgage - which handles $103 billion in servicing - in this category. Fleet's portfolio may be large, but it also has relatively high delinquencies, and the company is slow to adopt new technology, the study said. Great Western Financial and Citicorp Mortgage are two companies listed as the least efficient and least technologically advanced. Citicorp executives have stated that the banking company prefers to concentrate on its profitable credit card division and deemphasize the mortgage unit. Great Western has acknowledged the need to upgrade its technology, a step that Mr. Handler said would help the servicer become more efficient.
