Is HomeSide Alone? Rumors Point Toward More Writedowns.(Brief Article)

Thanks to a new round of servicing-related writedowns, HomeSide Lending, the nation's sixth largest residential servicer, is worth $2.2 billion less than it was six months ago (see related story, page 1).

Not only have the massive writedowns shocked the mortgage industry, but it has many mortgage professionals asking themselves, and others, a very basic question: Is HomeSide an isolated case? So far, the answer appears to be yes - that HomeSide's writedowns could be an aberration, but rumors abound that another mega-servicer could shock the industry when third-quarter earnings begin appearing in October.

One source said he has heard that one top firm will soon announce a servicing-related writedown of $600 million - but so far nothing suggests that this rumor will come true.

As of late September, none of the nation's top servicers - outside of HomeSide, that is - have disclosed any type of major hits to the value of their servicing rights. But with refinancings running at about 55% of all loans produced, and servicing rights prepaying faster than anticipated, it stands to reason that some mega-servicers, despite their best efforts in hedging, could begin disclosing writedowns - and soon.

"Banks can hide the writedowns - but only for so long," said one East Coast-based servicing analyst. "I think soon we'll see a mentality takeover that says, 'There's so much bad economic news out there we'd better disclose sooner rather than later.'" HomeSide services $187 billion in loans.

Five firms rank above it: Washington Mutual ($470 ...