Not for sale.

Author:Hewitt, Janet Reilley
Position:Mortgage banks

You know mergers are rampant when you hear a privately held mortgage banker voluntarily announce at the end of his speech to a large industry gathering, that, "No. We're not for sale."

If there are some key themes underscoring the mortgage business today one of them has to be the aggressive hunt by commercial banks for acquisition candidates among independent mortgage banking firms. Ray Crebs, chairman, president and CEO of Directors Mortgage Loan Corporation, Riverside, California realizes his firm fits the description of an attractive candidate. But the privately held mortgage company intends to try and buck the trend and be a "survivor" as one of a shrinking number of independent mortgage banking firms, Crebs said recently in a speech to the Western Secondary Mortgage Market Conference.

Even so, he predicts that "85 percent of mortgage bankers will be owned by banks by the start of 1996." He told the audience at the conference in San Francisco that the final adoption of new accounting rules for originated servicing by the Financial Accounting Standards Board (FASB) will probably provide another jump start for a lot more merger and acquisition activity.

Part of what's been driving mortgage bankers into the willing arms of banks is a sharp drop in overall production volume and a pronounced market share shift to portfolio originators. So, on top of the fact that volume is down--the business that's out there is going disproportionately to originators who specialize in ARMs. Needless to say that tends to be thrifts and commercial banks--who can put aggressively priced ARM loans into portfolio and let them sit a spell. This has put the I squeeze on mortgage bankers who must sell everything they produce into the secondary market or to a private investor such as a thrift that puts them in portfolio. Crebs summarized what's driving mortgage bankers to be acquired by banks as the need for capital, the need for products "we don't have;' and the need to finance technological advances that are "still a long ways from being done."

Crebs has seen production volume drop by 50 percent to 80 percent from November 1993 levels. This has triggered attempts by private mortgage companies to drastically downsize their origination operations, but it also has prompted heavy selling of servicing. Crebs told the Western Secondary, "We're downsizing, consolidating, and laying off people. Many I believe will find jobs in the thrift industry, originating ARM loans."


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