Loan Servicing May Get New Giant

Mortgage bankers can expect another mega-servicer in their midst if NCNB Corp. acquires C&S/Sovran Corp.

The combined entity would rank as the nation's fifth-largest servicer, processing monthly payments on some $30 billion of mortgages. Currently, NCNB ranks No. 14 and C&S/Sovran No. 20, according to American Banker research.

In some ways, the prospects of such a large-scale servicing operation mirror the overall opportunities and challenges posed by a combination of the two banking companies. The two companies confirmed recently that they are exploring a merger.

Competitive Edge Possible

On one hand, a $30 billion servicer could eventually achieve attractive economies of scale, which in turn could provide a competitive advantage in originating and purchasing mortgages.

But experts caution that efficiency would by no means be assured. For one thing, the mortgage units of both NCNB and C&S/Sovran, like their parents, are still trying to digest big mergers and acquisitions carried out in 1990.

Last October, for example, NCNB Mortgage Corp. acquired a $9.5 billion servicing portfolio from Fundamental Mortgage Corp., Dallas. That purchase, combined with rapid growth in originations, lifted NCNB's servicing total to about $16 billion at the end of last year from $4.7 billion last June.

Consolidation in Louisville

NCNB Mortgage is now trying to consolidate, moving all its servicing to Louisville, Ky. It recently closed a servicing center in its parent's hometown of Charlotte, N.C., and has said that another facility, in Lubbock, Tex., will close on Sept. 1.

Christopher Gilson, chairman of the unit, declined to comment this week on a combination of NCNB and C&S Sovran.

C&S/Sovran, meanwhile, ended up with two mortgage banking units after the September merger of Citizens and Southern Corp. of Atlanta and Sovran Financial Corp. of Richmond. While the two units operate separate servicing facilities, they have begun to share marketing strategies, product menus, and pricing schedules.

Bryant W. Baird Jr., who co-ordinates the units, said C&S/Sovran and NCNB have only begun begun to explore one another's servicing operations. But, he said, "It could be a good fit."

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