I’m seeing a lot of lenders and servicers who are becoming even more conservative in the first quarter of 2014.  They’re concerned (and rightfully so) about taking a misstep in this new regulatory existence.  They’re hoping to ride out the down market.  Many times, that’s a prudent approach.  But I worry that some are overestimating their staying power–even with large servicing portfolios.   

As a hypothetical, take a company that has $8 billion of servicing but is losing significant dollars each month.  This is happening in more than a few place. I believe that, should they continue to lose money, the agencies could in fact take over their servicing portfolios or take other drastic steps.

Why?  Because, at some point, should the advances come to a point of being out of control, those lender/servicers could be staring down insolvency. On paper they are wealthy.  In reality, they are on their way out of business.

The solution?  Mergers if they don’t run out of time.  Selling the servicing and closing up the shop.  Selling the business. In the mean time, ridding themselves of excess overhead is something that must happen quickly.

I worry for those who aren’t careful in their planning for this strange new market.  The mortgage lending industry is truly a funny business.  One day you are on top of the world and the next you are down and out.  Don’t let this happen to you.