$6B Servicer Aames Is up for Auction

Los Angeles-Aames Financial, one of the nation's oldest subprime firms, is on the auction block and hopes to have new owners by the end of summer. A $6 billion subprime servicer, Aames reported a loss for the second quarter, disclosing that it is in negotiations with "several parties" regarding a sale.

Among subprime servicers, Aames ranks 29th with $6.1 billion in housing receivables. A publicly traded non-depository, the company said in a statement that while there is "no assurance" a deal might get done, "there is a significant probability" a definitive sale or merger agreement will be struck in the next month or two. Credit Suisse is acting as its investment banker.

As Mortgage Servicing News went to press this month, its shares were trading up slightly at $5.78, compared to a 52-week low of $4.97 and a high of $10.35. It posted a $6 million loss in the first quarter but is forecasting positive core earnings in the second.

For tax purposes, Aames is a real estate investment trust, which requires it to pay out a large percentage of its earnings each quarter to shareholders. The lender/servicer is in the process of eliminating its REIT status.

At least two other publicly traded nonconforming REITs are on the auction block, including Impac Mortgage Holdings, Newport Beach, Calif. An alt-A specialist, Impac services $28 billion in loans. At press time, Tania Jernigan, Impac's vice president for investor relations, could not be reached for comment.

The mortgage industry has been undergoing a correction of sorts the past six months and some publicly traded mortgage REITs have seen their share prices drop dramatically, Impac included.

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