Gleacher Dumps Wholesale After Failing to Get Agency Approvals

Gleacher & Co., a New York-based investment banking firm, has placed its ClearPoint wholesale mortgage origination unit up for sale after failing to use the division to create agency MBS that it could sell to clients.

The company first acquired ClearPoint in January 2011, hoping the company would give it a competitive edge for its MBS business. The goal was for ClearPoint to originate loans based on MBS investor criteria for delivery to Fannie Mae, Freddie Mac or Ginnie Mae to be securitized.

Gleacher’s MBS unit would then purchase the securities for resale to its customers.

In August 2011, Gleacher said it planned to concentrate on growing the origination platform following a strategic review of its businesses.

However, ClearPoint has been unable to obtain agency seller/servicer approvals and instead was forced to upstream its originations to correspondent aggregators. Thus, there is no benefit to its MBS customers, Gleacher said.

Combined with representations and warranty risk, Gleacher said it determined “the commercial prospects for its mortgage origination activity have greatly diminished.”

The sale could result in a loss to Gleacher of between $1.5 million and $6 million. This consists of the remaining payment obligations to the former stockholder of ClearPoint, the write-off of certain assets, including intangible assets, and the termination of certain other contractual obligations.

But Gleacher said it ultimately would recapture a substantial portion of the approximately $30 million of cash currently held in the ClearPoint business.

For the third quarter, ClearPoint lost $524,000 on a pretax basis, versus a loss of $2.5 million in 2Q12 and a loss of $335,000 for 3Q11.

The improvement between 2Q12 and 3Q12 is due to higher revenues, coupled with a rightsizing plan implemented in the second quarter to better align origination with distribution capabilities, Gleacher said.