Norwest Mortgage Inc. is the new undisputed king of the servicing world.
The company's servicing portfolio has more than doubled from last year, mostly through the acquisition of Prudential Home Mortgage and its $78 billion servicing portfolio earlier this year.
On a pro forma basis - including Prudential's portfolio in last year's total - Norwest's portfolio grew 15%.
Norwest now services $205 billion in residential mortgages. And Cara Heiden, executive vice president of loan administration, said further portfolio growth should be expected.
"We have plans to accommodate, if you will, our origination capacity. We will significantly grow the portfolio as a result
of supporting originations,"
Norwest was the largest originator of mortgages during the first half of the year, with loan volume of $26.6 billion.
In addition to capitalizing on its own existing originations, Ms. Heiden said, the company can take advantage of Norwest Corp.'s vast customer base and cross-sell its mortgage products with other Norwest banking products.
Ms. Heiden said Norwest may acquire more portfolios as companies dump servicing assets.
Under a rule established last year by the Financial Accounting Services Board, companies may be more willing to sell all or part of their portfolios rather than retain and hedge them, Ms. Heiden said. The rule, FAS 122, mandates that originated servicing rights be included on a company's balance sheet. Previously, only acquired servicing rights had to be capitalized.
"I think you'll see future consolidation as result of FAS 122," Ms. Heiden said.
But can Norwest's portfolio get much larger without becoming too big to manage effectively?
Ms. Heiden believes it can. She said the key is for the company to mitigate losses and control costs.
Following the completion of the Prudential deal in May, Norwest closed one of its servicing centers. It picked up two from Prudential and still has eight overall.
Norwest has also modified its hedging strategies since the acquisition of Prudential's portfolio and implementation of FAS 122. It will focus more on hedging balance sheet assets, Ms. Heiden said.