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Future Financial Winners and Losers

Editor's note: This is the second of Scott Rothbort's two-part look at the future of the financial services sector.

Mortages: The Return of the S&Ls

The era of mortgages gone wild is over. The days of Countrywide (now owned by Bank of America (BAC)) and Thornburg Mortgage (now traded over-the-counter) are behind us. When the real estate market returns to "normal," gone will be the standalone mortgage companies, which rely on credit default swaps or unsecured borrowing to fund their origination businesses.

When the dust settles from the current financial shakeout, mortgages will probably be sourced in a much more traditional way -- from deposits. This is going to benefit the smaller and localized savings and loan industry, which was destroyed by the S&L crisis of the late 1980s and crushed by the once mighty Wall Street asset-backed security machine.

Local S&Ls will also benefit from an increase in local deposits, as depositors become more leery of the large money center banks, such as Citigroup (C), JP Morgan Chase (JPM) and Bank of America.

The five largest S&Ls by market cap are: People's United (PBCT), Hudson City Bancorp (HCBK), New York Community Bancorp (NYB), Capitol Federal (CFFN) and First Niagara (FNFG). I would note that all but First Niagara have spurned the government's TARP (Troubled Asset Relief Program).

(Don't miss: "Opinion: A Plan to Resolve the Banking Crisis")

Wondering what will happen with Fannie and Freddie? Fannie Mae (FNM) and Freddie Mac (FRE) will most likely have shackles put on their activities, in essence, forcing these GSEs (government-sponsored entities) back to lending according to their original mandates.

Additionally, Fannie and Freddie will fund and execute the Obama administration's foreclosure prevention plan. They will contribute more than $20 billion to the $75 billion loan modification program, which was unveiled last week. The funds will be used mainly to subsidize interest rates so troubled borrowers' monthly payments can be lowered to affordable levels.

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