It's not every day you see a $10 billion chunk of mortgages change hands.

But Bank of America's (BAC - News) sale of mortgage servicing rights on $10 billion in loans last week to Nationstar Mortgage (NSM - News) was just a small step in what some expect to be a multi-year, multi-trillion-dollar migration of real estate finance.

Last August, Bank of America sold rights to $73 billion in mortgages to government-owned Fannie Mae. Loan servicer Residential Capital, which filed for Chapter 11 protection in May, has servicing rights to $374 billion in mortgages on the block.

"We know that BofA is running out of the servicing business like a wild person," said Henry Coffey, an analyst with Sterne Agee. "We don't know what everybody else is doing.

Rights to mortgages totaling as much as $4 trillion could be headed toward similar sales, according to reports citing a forecast from Fortress Investment Group (FIG - News), which owns 77% of Nationstar.

The sale to Nationstar calved off about two-thirds of Bank of America's remaining servicing rights portfolio.

The deal followed a February agreement between the Department of Justice and the five largest mortgage servicers: JPMorgan (JPM - News), Wells Fargo (WFC - News), Citigroup (NYSE:C), Ally Financial and Bank of America. It required the banks to restructure their servicing operations in order to ease pressure on stressed homeowners.

The $25 billion truce was the largest-ever joint state-federal civil settlement. Spread over three years, it was a financial slap on the wrist. But the deal's broad and explicit changes to servicing tactics nudged forward the BofA sale. It also played a role in pushing Ally's Residential Capital toward failure.

Banks were already paring their servicing operations in order to cut costs and free up capital. The Federal Reserve said in December the international banking recommendations known as Basel III would apply to all U.S. banking institutions with more than $50 billion in assets. Under those rules, servicing rights are assigned risk.

"If you are a bank and you own the servicing rights, you have to have capital against those rights, just like any other asset," said John Bancroft, executive editor of Inside Mortgage Finance.

As a result, all the major servicers have sold at least some of their servicing holdings. All the investment banks are getting out of the business, Coffey says. So are the giant insurer MetLife (MET - News) and banks like First Tennessee.

"You know that more than that is going on. You just can't get your fingers around it," Coffey said.

Four companies appear to be picking up the bulk of the business, according to Coffey. They are spread across several IBD industry groups.

The two largest players are in the Finance-Mortgage & Related Services industry group. Atlanta-based Ocwen (OCN - News) has a market capitalization of $2.2 billion. Nationstar, based in Lewisville, Texas, has a market cap of $1.8 billion.

Walter Investment Management (WAC - News), a Tampa, Fla., real estate investment trust, weighs in at $602 million and is part of the mortgage REIT industry group. The fourth player, Seterus, is a unit of tech giant IBM (IBM - News), which acquired the business from Bank of America in 2010.

The windfall in servicing rights has pushed the mortgage finance group to a steady top-five ranking among 197 industries tracked by IBD. Nationstar and Ocwen are trading near all-time or multi-year highs.

To Serve And Protect Servicing rights are created when mortgages are securitized. Loan originators or owners bundle scores of mortgages into investment vehicles called mortgage-backed securities, or MBSs. They then sell them to buyers who hold the title to the homes until the loans are satisfied.

Originally, such bundles were sold solely to the big government-sponsored enterprises, or GSEs, Freddie Mac and Fannie Mae. But the market broadened over the years. All types and sizes of investors and firms are now able to buy securitized loans.

When borrowers began to default in waves heading into the banking collapse in 2008, MBS earned the label "toxic assets." The February DoJ agreement and the pruning of servicing portfolios among major banks are part of the ongoing effort to manage the damage inflicted by securitized mortgage failures.

Servicers manage loans and deal with homeowners. They collect payments, impose penalties and stay on top of mortgages that are either delinquent or at risk of becoming so. The servicer hands the monthly payments to the mortgage owners, keeping a fraction for the service.

The value of securitized loans decreases with every wave of monthly payments. In addition, many mortgages within the MBS disappear as loans are paid off or refinanced.

Servicers' profits are determined both by the state of the economy, and by the servicer's ability to manage its costs.

In a healthy market, mortgage portfolios shrink more quickly. Payments are generally made on time. Many homeowners opt to pay above the required minimums. Others sell their homes and pay off the mortgages.

A weak economy can benefit servicers able to hold down their costs, says Inside Mortgage Finance's Bancroft. Portfolios of mortgage-backed securities shrink less quickly and stressed mortgages generate more fees. But they are also more labor-intensive.

"If delinquencies remain high and foreclosures remain high, you are buying an asset that is going to cost you more to service," Bancroft said.

In the first quarter, Nationstar bid a reported $2.3 billion for rights to service $374 billion in mortgages being sold by Ally's Residential Capital. In March, it outbid Ocwen for $63 billion in servicing rights offloaded by Aurora Bank, formerly Lehman Brothers Bank. The deal is set to close this month.

The combined deals are enough to make Nationstar the largest independent servicer. But Ocwen, the oldest player among the top four servicers, also appears set for a growth spurt.

It paid $615 million for rights to $30.3 billion in loans during the first quarter. Ocwen has traditionally made most of its money from dealing with ailing, subprime mortgages not owned by the GSEs. It also has a reputation as a tough cost manager, outsourcing customer service and programming operations to India and South America to cut expenses. It boasts pretax margins of 27% vs. Nationstar's 6%.

But Nationstar has come on hot and heavy since its March initial public offering, gobbling up a broad range of business and emphasizing effective customer service.

"Of the three, (Nationstar is) the most diversified in terms of what their identified business is," Coffey said.

Interested Parties Home Loan Servicing Solutions (HLSS - News) was launched in February as a holding company for mortgage rights serviced by Ocwen. It is a passive foreign investment company, or PFIC, incorporated in the Cayman Islands.

A REIT-like structure, it pays taxes only on its U.S. management operations, allowing it to pass more cash flow through to investors as a dividend. The company currently offers a 9% dividend.

Newcastle Investment (NCT - News), owned primarily by Fortress, has adopted a similar arrangement. It is a real estate investment trust that owns rights to mortgages serviced by Nationstar. Its current dividend is 12.8%.

Newcastle provided 63% of the $268 million in capital for Nationstar's purchase of the Aurora Bank portfolio. In return, Newcastle will own 65% of the servicing rights. The two companies are similarly partnered on Nationstar's Residential Capital and Bank of America servicing rights deals.

Outlook The outstanding balance on U.S. mortgages stood at $10.29 trillion at the end of last year. Within that mass foreclosures remain a central concern.

Foreclosure resales were a fifth of all U.S. existing-home sales in April. Stan Humphries, chief economist with home data website Zillow, said expectations were for a rise in foreclosures following the deal between banks and the DoJ in February.

But the rate of new foreclosures, called liquidations, slipped to 6.8 per 10,000 homes — about half of its 2010 peak.

"The lenders and servicers who were part of the (February DoJ) settlement are probably doing a lot more principal reduction now as a part of their modification plans," Humphries said, "which is resulting in fewer foreclosures.

Still, nearly a third of U.S. homeowners remain underwater, owing more than their homes are worth, according to Zillow. Markets such as Miami and Arizona's Maricopa County (which includes Phoenix and Scottsdale), have been held up optimistically as pockets of strength as housing prices begin to firm at low levels.

But the support for those prices has come largely from investors drawn by foreclosure and short-sale prices. On one hand, that's a positive, Humphries says, because it provides banks with a market to work through their backlogs.

"Nationally, investors are providing about a fifth of housing demand," Humphries said. "But in a lot of these markets, that number is substantially greater than one-fifth.

But those sales also cloud actual housing demand. With more than 55% of homeowners still underwater in Phoenix and 46% gulping for air in Miami, Humphries suggests any significant uptick in values is likely to be met with surges of supply as homeowners time the sales of their homes.

For servicers, underwater mortgages and weak home values can be a plus. That works well with Humphries' forecast for a long, slow recovery of maybe 1% to 3% in home values per year.

"Wait until 2016, and you get back to more normal appreciation," he said, adding that normal is in the 2.5% to 5% range.