Magazine article American Banker

GMAC Arm Plans Further Growth in Subservicing

Magazine article American Banker

GMAC Arm Plans Further Growth in Subservicing

Article excerpt

GMAC Mortgage Corp. of Horsham, Pa., is betting that the rise of higher-margin loan products will give its subservicing business a boost.

Thomas Donatacci, a senior vice president in the business development group, said in an interview Monday that the General Motors Corp. unit's subservicing portfolio doubled over the last 12 months, to more than $22 billion, and that he plans to "double our business again."

To that end, "I'll be looking at expanding our national sales force and looking at opportunistic acquisitions of other subservicers," he said. "I'll also be growing our advertising and marketing."

The flat yield curve and heightened competition have shrunk profit margins, and "originators are looking to shift production" toward products like home equity lines of credit or subprime loans, he said. "Many servicing systems are not equipped to handle those loans."

A few weeks ago Mr. Donatacci rejoined the unit after spending the last few years running the servicing brokerage business at Lehman Brothers' Cohane Rafferty Securities. During his stint at GMAC Mortgage in the 1990s, he worked on numerous large deals, most notably the 1998 acquisition of Wells Fargo Bank's servicing operations. (Norwest Corp., a megaservicer, later bought Wells Fargo & Co. and took its name.)

Now is "a great time to acquire" other subservicers, Mr. Donatacci said. The market "is growing so rapidly, and some of the small to medium size subservicers are going to have a difficult time competing with large players like ourselves."

The small originators that cannot service higher-risk loans, and the Wall Street players that aggregate these loans and the related servicing rights, are his targets for third-party business, he said.

Even if small banks could service the loans, they could not do so very efficiently, he said, and Wall Street typically has a hard time organizing servicing transfers from dozens of small sellers, so those firms are looking for someone to "manage large volumes of servicing transfers simultaneously and consolidate them" for securitizations. …

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