Citi Buys Bulk MSRs

Citigroup has agreed to purchase $19 billion in residential servicing rights from Waterfield Mortgage, Ft. Wayne, Ind., investment banking officials told Mortgage Servicing News.

The sale is part of Waterfield's plan to exit the residential business, a strategy that also may involve the sale of its thrift affiliate, Union Federal Bank of Indianapolis.

At press time, CitiMortgage chief Bill Beckmann could not be reached for comment. A subsidiary of Citigroup, CitiMortgage ranks fifth among all residential servicers in the U.S. with $386 billion in housing receivables. (The rankings represent assets at the end of the third quarter.)

A spokeswoman for Waterfield declined to identify the buyer of its servicing portfolio. Phoenix Capital of Denver is believed to be the broker on the deal.

By purchasing the servicing rights CitiMortgage will not move up in the rankings. The number four ranked servicer is Chase Home Finance, Iselin, N.J., with $587 billion in receivables.

However, CitiMortgage has been one of the more acquisition-minded mortgage firms the past few years, buying such franchises as Principal Residential and Golden State Bancorp.

About 10 days ago American Home Mortgage, Melville, N.Y., said it had agreed to purchase Waterfield's production operation, which includes retail, wholesale, and correspondent locations. It has 46 branches in total, covering 16 states.

Waterfield Mortgage - which is the parent of Union Federal Bank - is the nation's 33rd largest servicer and ranks 46th among funders.

No purchase price was disclosed. Investment bankers say the production network was sold at book value.

A REIT, American Home announced the Waterfield purchase a day after disclosing that its fourth quarter earnings would be smaller than originally expected.

AHM CEO Michael Strauss apologized for the timing of the acquisition being so close to the earnings news, saying purchase talks had been underway "for some time."

Waterfield Mortgage is the last of a dying breed of mid-sized, privately held mortgage franchises.

In the mid-1990s, it toyed with the idea of selling, but according to one investment banker, the asking price "was too high - they thought they could get $500 million."

Waterfield is owned by the Waterfield family of Indianapolis. "I never thought they would sell," said one advisor familiar with the company, "but I guess the economics turned against them."

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