There is one aspect of the mortgage lending industry that
differs considerably from other forms of lending - that of mortgage
servicing. It is rare for a bank to buy the servicing rights for a
portfolio of student loans, auto loans or even commercial loans
from an originator. But this is a very common practice when it
comes to home loans, in which banks assume the risk involved with a
mortgage portfolio by buying the servicing rights from the original
lender, in return for all future payments from the borrowers making
up that portfolio. As the big banks already have a strong workforce
focused on servicing their primary loans, the mortgage servicing
business allows them to generate additional revenues by using the
very same resources.
Abiding by the logic, the country's biggest mortgage originator
), is also the biggest mortgage servicer. Bank of America (
) held the top spot for the service from the time it acquired
Countrywide in 2008 till the end of 2011, as the banking group's
decision to scale down mortgage operations gave Wells Fargo the
lion's share of the market.
See the full Trefis analysis for
| U.S. Bancorp | Bank of
The table below summarizes the size of third-party mortgage
servicing portfolio for each of the country's five biggest banks at
the end of each quarter, over the last two years. The data has been
compiled using figures reported by the individual banks as a part
of their quarterly announcements.
(in $ billions)
|Bank of America
A quick glance through the table highlights how closely the
mortgage servicing business is tied up to the mortgage origination
business, as we detailed in our recent article U.S. Banking Review:
Mortgage Origination Comparisons. The banks which are known to
focus considerably on mortgage lending (Wells Fargo and U.S.
Bancorp), are the ones who have seen an increase in their
third-party mortgage servicing portfolio.
On the other hand, banks which have been trimming mortgage
businesses show a clear reduction in the size of this portfolio.
The banking giants Bank of America and Citigroup, have both been
plagued by mortgage-related charges since the economic downturn
and have only recently been able to muster the courage to
renew their focus on the mortgage business.
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