The shrinking profitability surrounding mortgage origination and management in the current tight funding and decreasing commission environment will force many players to adapt business models to declining revenue streams, or look to get out while they still can.Queensland-based mortgage manager Better Mortgage Management says it is actively seeking the acquisition of loan books, with the view more sellers will emerge as they evaluate their operations.Murray Cowan, managing director at Better MM, has a checklist when considering a book purchase."Factors which increase risk and impact the quality of a book include level of arrears, loan losses on the book, and evidence of fraudulent applications."Return from the book will also be impacted by the size of the trail margin on the loans - small trail margin may mean smaller profits because of the fact the book won't even cover inherent costs such as customer service, collections and a margin for risk."So such a book wouldn't be profitable and would in reality have little value.  "Books with large trail margins can result in high future loan run-off due to customers being on a higher rate, while a high ratio of Lo Doc and No Doc loans in a book can also impact the cost effectiveness of purchasing a loan book, as these loans typically have a shorter lifespan."Better has reviewed some mortgage books in the past twelve months, purchasing one small book and others in previous years."At this stage we are not seeing many distressed sellers, and many mortgage managers have downsized their businesses in response to slowing new business volumes, but if market conditions continue to be tight for non-bank lenders, we may see more over the next six to twelve months."We have been the under-bidder on a couple of occasions."Cowan adds in some cases purchasing books can be more cost effective than organic growth."But, care must be taken as to what price is paid relative to the quality of the book.  The main risk to profitability of a loan book is higher than anticipated levels of run-off from customers discharging their loans."Cowan said the recent official cash cuts, two percentage points since September,  have been of slight assistance, as they have been passed on by most of the major funders."However, continued support from our funders will be required to ensure we are able to hopefully take advantage of anticipated increased volumes, as a result of lower interest rates and higher government grants and stimulus packages."