Service Portfolios of the Commercial Banks of the State of Connecticut, 1974

Date of Submission


Document Type


Degree Name

Master of Business Administration (MBA)




Ned B. Wilson


Bank investments --Connecticut, Mortgages --Connecticut,

Call No. at the Univ. of New Haven Library

AS 36 .N29 Bus. Adm. 1975 no.6



The purpose of this paper is to explore the degree to which the commercial banks of Connecticut utilize the secondary mortgage market. That is, are commercial banks active in the business of selling mortgage loans rather than retaining them for their own investment? Can any bank, regardless of size, participate in this type of activity? Why or why not? Does participation in this activity enhance or detract from the profitability of the mortgage department? An attempt has been made to answer these questions, and others. The initial chapter deals with the definition of a servicing portfolio and an explanation of the servicing relationship between the customer, the bank and the investor. The discussion includes an explanation of the economic forces and business considerations at work that may lead a bank to consider the use of the secondary mortgage market and the establishment of a service portfolio. The intent of Chapter II is to orient the reader and to acquaint him with the terms to be used in the ensuing analysis.

The research method is described in Chapter III. The data for this an?.lysis was obtained by means of a survey of the commercial banks of Connecticut in November of 1974. Each bank was mailed a questionnaire.^ While absolute statistical validity cannot be claimed due to the lack of randomness in the selection of the responses, it is felt that the data is representative. It is felt perhaps, that tae extremes in the range of activity may be missing from the sample. That is, banks which have absolutely no interest in the servicing of mortgage loans, and banks that are heavily involved and, therefore, feel that little could be gained from participating in the study, may be under-represented in the data. The reader should, therefore, take this possible bias into account while reviewing the data.

Despite very real limitations in the data, information concerning the ability of banks of various sizes to participate in the mortgage servicing activity, the staffing requirements of various levels of activity and the relationship of automated data processing to activity levels is considered significant. The question of the effect on profitability, however, remains largely unanswered. It may not even be possible to limit the inquiry to the narrow area of a bank’s mortgage area when discussing the profitability question. Overall bank profitability may be a more relevant index to use rather than portfolio yield. The ability of a bank to offer a complete range of services to its customers, including mortgage financing, may help the bank to attract and retain profitable customers. Further study is necessary to obtain a definite answer.


Author: B. Patrick Madden.