Commercial banks haven't exhausted their appetite for the mortgage business, according to Brenda B. White, managing director of UBS Securities LLC.

Banks have emerged as the largest servicers of mortgages. In 1995, they serviced 39.3% of all home loans, up from about 25% in 1992.

But with no dearth of capital on their hands, banks still have "lots of room" to continue to accumulate servicing, Ms. White told executives at a Mortgage Bankers Association of America conference in New York Friday.

One measure of their room for growth is the ratio of the value of servicing rights to Tier 1 capital at big players like BankAmerica Corp., Chase Manhattan Corp., and NationsBank Corp. The ratio is low - ranging from 3.2% to 7.1%.

Moreover, originations at the bank-owned mortgage companies can replenish only a small portion of their already sizable servicing portfolios, Ms. White said.

At Norwest Mortgage, the largest servicer, mortgage originations in 1996 were likely about 30% of the company's $176.4 billion servicing portfolio. At BankAmerica Mortgage, last year's production was only 20.2% of the company's $81.4 billion servicing portfolio.

So, how are mortgage companies - including those owned by banks - likely to acquire new servicing rights?

Ms. White said there is "renewed interest" in buying retail origination franchises. Companies are once again "willing to pay an upfront premium" for retail franchises and lessen their dependence on broker and correspondent originations.

Bulk purchases of servicing are less attractive now that accounting rules treat originated and purchase servicing rights equally, she said.

Ms. White isn't expecting banks to remain this committed to the mortgage business indefinitely. She said a big refinance boom, for example, would force banks to substantially write down the values of their servicing portfolios, and perhaps lead them to reevaluate their mortgage strategies.

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