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KeyCorp to Buy Large CMBS Servicing Portfolio from B of A

MAY 10, 2013 10:45am ET
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Score one for the little, er, midsize guy.

A real estate arm of KeyCorp has agreed to purchase more than $100 billion of servicing rights on commercial and multifamily loans from Bank of America, Keycorp said in a press release Thursday.

KeyBank Real Estate Capital, the commercial real estate business unit of KeyCorp, will purchase substantially all of the third-party commercial mortgage servicing business from B of A's global mortgages and securitized products business. The portfolio includes servicing for a variety of private investors, who must OK the deal along with regulators and ratings agencies, the release said.

The deal, expected to be completed before June 30, would make KeyCorp the third-largest named servicer of such loans in the U.S. with a servicing portfolio of $205 billion, the release said.

"This acquisition helps to ensure that Key is well-positioned for growth, and represents our willingness to invest in our corporate bank business," Beth Mooney, the chairman and chief executive of Cleveland-based KeyCorp, said in the release.

The price was undisclosed.

The $89-billion-asset KeyCorp has announced several major deals since early last year. It purchased 37 former HSBC branches in western New York from First Niagara Financial Group for $110 million last year, and it agreed in February to sell Victory and its broker-dealer affiliate to Crestview Partners for $246 million.

Analysts were puzzled that KeyCorp would a get rid of a fee generator like Victory at a time of shrinking margins on loans, but Mooney has said it did not fit with Keycorp's focus on building strong relationships with consumers. "There was not a lot of linkage to what we are doing in terms of assets under management in our private bank," she said last month in discussing first-quarter results.

Meanwhile, Bank of America is still try to overcome the crisis-era meltdown in mortgages and has been jettisoning assets as it seeks to comply with stiff capital requirements and right its business.

New York Attorney General Eric Schneiderman this week accused B of A and Wells Fargo of violating the terms of last year's national mortgage settlement and said he intends to sue the two banks over 339 different servicing failures since October.

B of A agreed Monday to pay the bond insurer MBIA $1.6 billion to settle a five-year-old dispute over losses related to soured mortgage-backed securities.

Bank of America reported a steep fall in revenue, weakness in consumer banking and vexing legal costs in the first quarter. Still, it was among the bank stocks that surged this week as part of the overall market advance.

Under the deal with B of A announced Thursday, KeyCorp said Berkadia Commercial Mortgage LLC would act as its subservicer on the primary servicing acquired from Bank of America and that KeyCorp has agreed to acquire Berkadia's CMBS special servicing business.

B of A's total commercial mortgage servicing portfolio was valued at $110.5 billion at March 31, the release said. The deal includes a CMBS special servicing portfolio of about $14 billion, the release said.

The deal would not affect B of A's commercial real estate banking business, the release said.

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