The entry of the nation's two largest mortgage companies into the subservicing business marks a sea change in the industry.

Norwest Mortgage and Countrywide Credit Industries are turning to the business of administering loans for others as a way to boost their profits.

Industry observers said their participation marks a change from the days when subservicers were either specialists, or companies that were making a last ditch effort to stay in the mortgage business.

"These are not the traditional companies on the way out," said Edward Elanjian, managing director of Cohane Rafferty Securities.

Subservicers work for lenders that do not want to perform tasks such as sending out monthly statements to borrowers or making collection calls. The subservicer receives a steady stream of revenue for servicing the loans and doesn't have to account for them on its books.

Norwest and Countrywide join Banc One Mortgage and Capstead Mortgage on a growing list of prominent lenders that have entered the subservicing market in the last year.

Some mortgage servicing brokers said companies will need more than sheer size and a well-known name to compete in the subservicing market. "You can't just be a bank franchise and think you're going to get the business," said Gerry Risi, senior vice president of CoreStates Capital Markets, Fort Lauderdale, Fla.

Thomas Boone, a managing director for loan administration at Countrywide, said he is not looking to compete with the more established subservicers. Countrywide is focused on subservicing for a few clients with significant volume, he said, in contrast to specialists Wendover Funding and Dovenmuehle Mortgage, which both serve a multitude of smaller clients.

"We're trying to find medium-size institutions that we can add value to. If we don't find any we won't do any" subservicing, Mr. Boone said.

Les Kimball, executive vice president and manager of loan administration for Banc One Mortgage, said Banc One is concentrating on private-label servicing-administering the loans in the name of the institution that owns them.

Analysts said many lenders, especially banks interested in cross-selling opportunities, don't want their customers to know the loans are being serviced by another institution. But in order to be a private-label servicer, a massive investment in technology is required.

Mr. Kimball said Banc One upgraded its servicing technology in 1993.

Some experts say the technology investment will be a barrier to entry for some companies that would like to join the rush to become subservicers. And other analysts say some mortgage banks might be wary of entering the subservicing market now that competition is on the rise.

"There isn't room for that many more companies to come in. There are a lot of good names already," Mr. Risi said.

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