The tombstone ad heralding the deal hangs dead center among the framed ads on the wall at the Harrison, N.Y., headquarters of Cohane Rafferty Securities.

The investment boutique's role in National Australia Bank $1.23 billion deal to buy HomeSide Inc. was its highest-profile assignment to date-and underscored the outsized role the small firm is playing in the consolidation of the mortgage banking business.

Most of the other ads are for smaller mergers and sales of servicing rights that were engineered by the firm, which is headquartered a 40-minute train ride from Manhattan.

In the HomeSide deal, Cohane Rafferty was one of three firms to advise National Australia Bank in what would be the largest merger ever in mortgage banking.

Why would a huge acquirer turn to a small firm like Cohane Rafferty for advice?

"The mortgage business is a fairly complex business with a lot of moving parts," said Joseph J. Whiteside, a consultant to National Australia Bank. "It takes somebody like Cohane Rafferty that specializes in the mortgage business."

It also helps to have relationships with all the major players, said Edward Elanjian, a managing director of Cohane Rafferty. "Understanding the motivation of each constituent was our biggest contribution to the deal," he said. "We had worked with every one of those parties before."

Cohane Rafferty advised Michigan National Corp., which is now owned by National Australia, when it sold its national mortgage operations in 1994. At the time, Mr. Whiteside was Michigan National's chief financial officer.

The firm has also worked for HomeSide and its owners, BankBoston Corp., Barnett Banks Inc., and the venture capital firm Thomas H. Lee & Co.

Cohane Rafferty evaluated Prudential Home Mortgage's servicing portfolio for Thomas H. Lee and BankBoston before the two companies bid on it in 1995.

Investment banking and portfolio evaluation are just two fields Cohane Rafferty has developed since its founding in 1987.

That year Larry Rafferty, Tim Cohane, and William H. Curley Jr. left Thomson McKinnon, where they all worked in the mortgage banking division, to start their own firm. Mr. Rafferty is now chief executive officer, and Mr. Curley is president. Mr. Cohane left the company six years ago.

Cohane Rafferty started out mainly as a broker for servicing deals, which are still a major element of the firm's business.

There is a Wall Street-style trading floor in Cohane's office where auctions of mortgage servicing packages are held. Rather than submitting written bids for portfolios, potential buyers call up salesmen in Cohane Rafferty's office to check what bids are on the trading board before making their own.

Virtually the entire sales force has experience on Wall Street or the mortgage banking business and is comfortable with a frenetic trading atmosphere, Mr. Curley said. "I think the intensity of this process helps the seller obtain the best possible price."

Besides getting sellers the best possible price, Cohane Rafferty finds buyers that suit strategic needs for sellers. While price is a main determinant in finding a buyer, it isn't the only one.

Last year, for example, Source One Mortgage Services decided to sell off the bulk of its $27 billion servicing portfolio. But Source One wanted to build its subservicing business, which entails servicing portfolios for other lenders.

Cohane Rafferty had a strong relationship with Chase Manhattan Mortgage. It knew that Chase was looking to buy more servicing but would probably need a subservicer, because the bank was still consolidating the two large portfolios from the Chase/Chemical Banking Corp. merger.

The relationship helped Cohane to arrange a perfect marriage of seller and buyer. Source One completed a sale of $18 billion in servicing to Chase earlier this year. Source One and Chase agreed that Source One would subservice the portfolio for a minimum of one year. Chase kept the option to renew the agreement for two additional years.

"They are a very impressive group of creative dealmakers. I found their staff to be willing to work with you over a long period of time in order to understand your needs," said Terry Baxter, who was chairman of Source One Mortgage Services at the time of the sale.

Mr. Elanjian said he finalized the deal during a Sunday afternoon conference call with Mr. Baxter and the head of Chase's servicing operations, Stephen J. Rotella. No lawyers or investment bankers were required.

Consolidation in the mortgage industry has made it imperative to offer more than investment banking and brokerage services.

To keep customers coming back once they've completed purchases or sales, the firm has expanded its advisory capabilities.

"A lot of times we go into meetings with clients to talk about strategic planning and a long-term approach. Clients use us as a sounding board," said Donna Krall, a senior vice president in charge of due diligence.

Elizabeth Workman, a managing director and head of the firm's analytics group, said Cohane Rafferty analyzed more than $1 trillion in servicing in the first half of this year. About half of this analysis was for possible servicing sales, but a growing part of Cohane's analytics business is evaluating portfolios for prepayment and accounting risks.

Cohane Rafferty has not limited itself to the mortgage business. While that sector remains the firm's specialty, two managing directors, Robert P. Toppe and Roger C. Vogt, head a loan portfolio sales group that handles sales of nonmortgage assets such as credit card and student loan portfolios.

Mergers in the financial services industry are not limited to banks.

Major Wall Street brokerages are also consolidating, a phenomenon that Mr. Rafferty says will benefit his firm and other boutiques.

"For the Wall Street firms, the bigger they get, the more pressure there is to do bigger and bigger deals," Mr. Rafferty said.

Though Cohane has become known for deals that involve high-profile players, Mr. Curley said half of its business comes from working with smaller lenders.

But it's anybody's guess how long many of these smaller companies will last, given the rapid consolidation taking place among mortgage lenders.

That's why forging relationships with the industry giants is seen as even more crucial today.

"This industry, frankly, is too small, and the players are too big," Mr. Elanjian said. "We're not looking to make enemies." u

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