Mortgage Scene: Do Mega Servicers Create Mega Concerns for the Industry?(Brief Article)

We're almost at the midway point to the "five and five in five" prediction. In case you're wondering, "five and five in five" refers to a prediction made by two of the industry's leading executives - Angelo Mozilo of Countrywide and Kerry Killinger of Washington Mutual - that within five years (or so) just five firms would control (more or less) most of the origination and servicing market in the U.S.

The prediction was first made by Angelo Mozilo back in 2000. Mr. Killinger, a few months later, said the same thing. Having just five firms control these two pillars of the mortgage industry would be an astounding development, one that would have ramifications for just about anyone who plies his/her trade in mortgage banking.

At this point it seems clear that the top five lenders will not control the entire production market by 2005. It seems that, increasingly, that production is, in fact, deconsolidating, and we're morphing into an industry of "whale" and "minnow" producers - that is, dozens of wholesalers and thousands upon thousands of broker/correspondents that interface with the consumer.

But the question - in regard to production - then becomes: how many of these "whale" producers' (using retail, wholesale and correspondent) channels will be left standing in 2005 after the current refi boom has run its course? At last check, there were 60 major conventional wholesalers and 40 or so subprime wholesalers, so whittling down that group to five will take some time, that is, if you believe in "five and five in five." It could happen. I'm not discounting that in the least - but predicting the future of this industry has never been easy.

As for servicers, the top 10 processors of residential loans already control 50% of all the outstanding housing debt in the U.S. (WaMu ranks first, Countrywide fourth, based on second-quarter numbers.) Interestingly, the top five control 40% with the next five cornering just 10% of the market.

But these are not ...