The rapid consolidation in mortgage banking will continue this year, according to a prominent investment banker.

Current consolidation is consistent with longer-term trends, said Brenda White, managing director for UBS Securities. She spoke at a senior executives conference in New York last week sponsored by the Mortgage Bankers Association of America.

The players and their commitment to the business have changed over the last 10 years, she said.

The catalysts driving the current merger and acquisition trend, Ms. White asserted, are cross-selling opportunities, low interest rates, the need for a balance between servicing and originations, and the liquidity of mortgage banking assets.

"Talk of cross-selling is like the search for the holy grail," Ms. White declared, adding that only recently have benefits from cross-selling been realized by large servicers.

Some servicers had quit the business because efforts to sell mortgage customers other products were not effective, she said.

"The liquidity of the market for mortgage bankers makes it easy to get in and out of mortgage assets," Ms. White said. "They can cash the assets and use the capital for other areas of their business."

The mortgage industry is known for its volatility, and some servicers have left the business once they experience that volatility, she said.

Ms. White has been through many industry trends in her 14-year investment banking career. She has been at UBS for eight months, after 11 years at Salomon Brothers. She represented American Residential Holdings in its sale to Chase Manhattan Bank, BankAmerica Corp. in its purchase of Arbor National Holdings and First Nationwide in its acquisition of Lomas Mortgage USA.

The current merger activity among commercial banks is likely to lead to more divestitures of mortgage banking assets because of overcapacity, she said.

Of the top 10 mortgage servicers in 1984, only Fleet Mortgage Group and Norwest Mortgage were among the top 10 as of last Sept. 30, Ms. White said. The market share of the top 10 has increased from 6.5% of all servicing in 1984 to 26.7%.

Now that servicing assets are put on a company's books under new accounting rules - whether the servicing was purchased or originated - the resulting added volatility might scare more servicers.

Ms. White made two predictions at the end of her presentation. She said she expected three more companies to join this year the short list of those with more than $100 billion in servicing, and she said that the public equity markets would be accessible to mortgage banking companies.

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