IN 1995, I WROTE AN EXTENSIVE ARTICLE for this magazine analyzing consolidation trends within the mortgage banking industry over a 10-year period beginning in 1985. Then in 1997, I wrote an article that addressed evolving industry trends--particularly the infatuation that commercial banks had developed with mortgage banking. Since we're in the midst of summer, I thought it might be nice to kick back, reflect and take a look at where we were then and how much things have changed--or perhaps not changed as much as we think.
First, let's look at the list of top-10 servicers as of June 30, 1995. Fleet Mortgage Corporation, Nationsbanc and Bank of America were No. 4, 6 and 8, respectively. Today these three banks have become one bank, Bank of America, which is ranked sixth in mortgage servicing. (See end-note for source of ranking information.) No. 7 and 9 back in 1995, Chase and Chemical, also merged and are now ranked fourth. Norwest--now Wells Fargo Home Mortgage--bought GE Capital Mortgage (ranked No. 2 in 1995) and Prudential (ranked No. 5 in 1995), and is now the second-largest servicer.
Home Savings, tenth on the list in 1995, was purchased by Washington Mutual, which is now the third-largest servicer. Only Countrywide Financial Corporation, at the top of the list in 1995, remains in that position and accomplished this without significant servicing acquisitions.
Let's look at the volumes we thought were significant 10 years ago. In 1995, Countrywide serviced $121 billion, yet today it services $964 billion. Consolidation of servicing among the top-10 servicers had reached 26 percent of total market share in 1995. At the end of 2004, these servicers were servicing 60 percent. If we take a broader look at the top 25, which had a market share of 42 percent in 1995 and 67 percent at the end of 2004, we find that the consolidation of servicing has become much more concentrated among the top 10. In fact, as of June 30, 2005, the top four controlled almost 40 percent of all servicing (including prime and nonprime).
Consolidation within mortgage origination is more complex. Even though the top 10 originators are the ultimate repositories for 59 percent of originated product, the source of this product has not changed dramatically over the years. Retail originations are responsible for roughly 40 percent of total originations today, compared with 37 percent in 1995. Broker-originated loans have gained share over correspondent originations, with...