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Washington's influence.

The servicing sales market is booming today, despite some small dark clouds originating out of Washington, D.C. To get a glimpse at how fast this sector is growing, one needs only to look at how much bigger the 10 biggest servicers got from 1990 to 1991. The average increase in portfolio size for the top 10 group from year-end 1990 to year-end 1991 was 32.5 percent, according to servicing industry data. And what that really meant was the mega-servicers were adding 32.5 percent on top of some already huge portfolios in one year's time.

Futhermore, the appetite for current-coupon servicing in today's low-interest rate market is bidding up prices frenetically, particularly for good-quality, conventional servicing. The GNMA servicing market is enjoying something of a renaissance in this market, as prices for conventional servicing soar upward with demand and traditional buyers of conventional servicing are giving GNMA servicing a second look.

Servicers are willing to pay up for this newly minted servicing because the likelihood of runoff from these portfolios in greatly diminished--at least based on current experience--because the rates on the loans are low enough to seemingly insulate the servicing from refinancing for awhile.

The robust health of the servicing market and the demand by the strongest companies to rapidly build their servicing portfolios has helped the government's thrift cleanup effort immensely and cut the taxpayer's portion of the tab measurably. Since 1989, the RTC has been on a learning curve discovering first-hand how valuable an asset mortgage servicing is. RTC has sold roughly $153 billion in mortgage servicing since then. So, the federal government should know more than anyone how valuable this market is to preserve. Nevertheless, there are some pending developments in Washington that experts say will clearly depress the value of servicing if adopted.

One such provision is a measure that would include purchased servicing in a group of intangible assets that would have to be amortized evenly over 14 years. This measure still could be included in any tax legislation that has a chance of moving in the few legislative days left in this session. That is but one example of how Washington is having an impact on the servicing market. In this issue, we will explore some of the other ways that the federal government or the Congress has directly or indirectly shaped the attitudes and strategies of the players in the servicing marketplace.
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:mortgage servicing
Author:Hewitt, Janet Reilley
Publication:Mortgage Banking
Article Type:Editorial
Date:May 1, 1992
Previous Article:Economic trends.
Next Article:Boardroom view.

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