Analysts were predicting that a wave of mortgage industry consolidation could follow the announcement by Challenger Financial Services yesterday that it had acquired one mortgage aggregator, moved to increase its stake in another and to take an interest in a third.Challenger will pay $163 million for Choice Aggregation Services. It will acquire the 85 per cent of Plan Australia that it does not already own and it will take a 19 per cent stake in Fast, a Western Australian aggregator.A source estimated that Challenger had paid about 15 times earnings for Choice, based on assumed net profit of $11 million for Choice's 2006/07 financial year.The group's push into the distribution end of the mortgage market complements its existing investment in the industry. It has a white label wholesale funding business, Challenger Mortgage Management (formerly Interstar Securities), a commercial mortgage business that sources loans for the Challenger Howard Mortgage Fund and a 40 per cent holding in Homeloans Ltd. At the end of June the group had $23 billion of mortgages under management and its mortgage operations reported earnings before interest and tax of $90 million.Fujitsu Consulting general manager Martin North said there was plenty of scope for consolidation across the mortgage value chain. North said: "The aggregator acts as an intermediary between the lender and the broker, providing a range of services to the broker. It is a part of the industry that is in need of greater efficiency. "We still see loan documents reworked several times as applications go through the funding process. Some investment in lean processing technology would shorten cycle times and cut costs."It makes sense to offer an end-to-end service just as you have in wealth management. We could see a small number of powerful platform (aggregator) products integrated with funding and broking."That may well be the future of the mortgage industry and I would not be surprised to see the big banks move on groups like Mortgage Choice and AFG to secure their own distribution."Challenger chief executive Mike Tilley said the three companies had distinct business models and would continue to operate as separate companies.Challenger will add value by combining back office functions to save costs. Tilley said Challenger would bring balance sheet support for investment in systems and higher professional standards.Challenger made its initial investment in Plan Australia in 2005. Plan's managing director Alex Moulieris said Challenger had supported the company's recent diversification into sales of life insurance.Plan is assessing a pilot in Victoria where a team of licensed financial planners worked with Plan broker members to write life insurance business. Challenger owns a financial planning business called Genesys. Moulieris said Plan had been able to tap Genesys for assistance with the project.Moulieris said: "Broking has grown up from a cottage industry in the past decade. We are diversifying and building competence in areas like business coaching and sales training for our members. You need resources to be able to do that."One group watching yesterday's developments with interest was the country's biggest aggregator, AFG,