Time for a Small Servicer?(mortgage servicers)(Brief Article)

At the recent mortgage servicing asset conference in Arlington, Va., sponsored by Executive Enterprise Institute, we heard an interesting idea whose time may have come. MBA chief economist Douglas Duncan, noting the technology changes that have occurred in recent years, suggested the time may be right for a new firm to enter the mortgage servicing business. That's right, after years of consolidation with many small lenders exiting the servicing side of the business, the climate may actually be suitable for new entrants.

That's because a new servicer could implement the latest in cutting edge technology without having to wrap it around a "legacy" mainframe system that may be outdated and out of shape by the standards of today's best data management systems. A new entrant also would be free to hire new employees who could be immediately trained in the new ways of doing business, rather than trying to force employees who are used to doing business in a traditional way to adapt to a new business model.

It may sound like a radical proposition. Mortgage servicing is a complicated and capital-intensive business. There are plenty of barriers to getting into it. But at the same time, it's a very profitable business, and may become more so. One recent Wall Street report estimated that within 20 years, ...