The Principal Lesson.

Principal Financial Group, the parent of Des Moines-based Principal Residential Mortgage announced in December that a writedown of its mortgage servicing rights would reduce net income and operating earnings by upwards of $70 million. In and of itself, that would hardly be big news given current interest rate conditions. But for the first time, Principal said that its impairment charge will not be offset by loan production gains.

And that could be a problem for the industry as the refinancing boom slows down.

For the past several years, lenders have taken big hits from servicing amortization and impairment. But always, they could rely on loan production gains - part of the "natural hedge" - to offset the servicing losses. But what happens at the end of the biggest refinancing boom in history? With loan volume slowing down and the origination market becoming more competitive, lenders may find it more difficult to offset servicing losses.

Hopefully, the flow of mortgage servicing impairment charges will slow down as well. But with 30-year mortgage rates still below 6% as last year came to a close, it is likely that refinancing activity will continue to account for a big chunk of mortgage lending. And that means portfolio runoff remains an issue for mortgage servicers.

But at the same time, lending volume is expected to slow this year, and perhaps ...