Comment: And Now, the Forecast for Consolidation

Concentration in the mortgage industry, particularly in retail originations, will be the big story over the next several years as the giant national competitors firmly establish themselves.

Some likely developments:

The mortgage as loss leader: gateway retailing at Countrywide.

While no one at Countrywide would ever agree that its mortgage pricing creates initial losses, it is their clear intent to become the last mortgage lender their customers will ever do business with, e.g., they will never lose their borrowers to another lender. And while they're at it, they plan on selling their homeowners every other product or service that the Countrywide delivery channels can handle.

Best-in-class at specific functions: GE Capital Mortgage.

GE is very big - $120 billion in servicing and rising. It is very low- cost. And in its other business units, it manufactures every type of financial product and service that a homeowner might want or need.

Relationship retailing via 800 Service Quality: USAA.

Everyone by now knows about USAA's commitment to provide world-class service to its member-customers. Their recent partnership with PHH/U.S. Mortgage outsources mortgage origination functionality while retaining service quality and the exclusive rights to post-mortgage retailing based upon that gold mine of information, the mortgage application.

Best-in-class at the realtor-location point of capture: Norwest, Amerus.

If you like Norwest's Multiple Listing automation via Boris Systems - a realty-focused strategy - you'll love what Amerus Bank and its affiliates, owned by American Mutual Life, are building in the Midwest: a one-stop home buyer-seller service capability combining real estate brokerage, insurance, mortgages, and personal financial planning.

Big, tough, disciplined, and everywhere: Fleet.

Anyone who knows Jack Daly, Fleet's new head of originations, knows that Fleet will very likely become the company that is able to function like a mortgage banker in individual markets yet capture the scale advantages of a national operation.

The business positioning issue is clearly worth executive management time: there's $3.1 trillion in mortgage loan outstandings, perhaps $800 billion in primary origination volume - and all those customers.

But selecting the business model appropriate for any individual bank and achieving the necessary level of excellence in performance will not happen without organizational discipline and focus. And maintaining the "as was, as is" traditional mortgage business model makes little economic or marketplace sense.

Just ask the people at Wells Fargo.

Mr. Partridge is director of the financial institutions practice at Towers Perrin.

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