The precipitous drop in refinancing activity expected this year could bring about widespread consolidation in the residential mortgage lending and servicing fields, according to Loan Logics, a mortgage loan quality and performance management software company.

“This year is shaping up as a year of volatility for the residential mortgage industry, with originations plunging as interest rates rise in response to $1 trillion reductions in asset purchases by central banks,” Les Parker, senior vice president of industry relations and consulting at LoanLogics said in a statement.

Parker recalled the year following the first great mortgage refinance boom in the early 90s, when originations dropped sharply after interest rates rose, prompting many lenders to close or consolidate with stronger partners.

“2018 just may look like 1994 to mortgage bankers,” Parker said in a statement. “With the anticipated drop in originations and the scramble to keep market share, the resulting margin collapse and liquidity problems will lead to more industry consolidation and insolvencies,” Parker wrote in a recent newsletter. “Non-depository mortgage bankers lack liquidity; when interest rates move outside of expected ranges, volatility expands and cash demands rise.”

“Mortgage servicing rights, already under distress, will discover a lower nadir due to too many sellers and too few buyers,” Parker said in a statement. He added that will eventually provide a buying opportunity for some savvy investors.

Higher interest rates won’t be the only problem mortgage companies will face this year, according to Parker. “When volatility expands, the regulatory burdens of Dodd Frank, Basel III and other local, state, federal and international laws and rules will bring about unintended consequences of dislocation and illiquidity,” Parker wrote.