ECC, Others Heading for the Exit?

The exit ramp from the mortgage business is getting a bit crowded these days with two more nonconforming servicers headed for the auction block.

Industry sources say the money-losing ECC Capital Corp., Irvine, Calif., has hired Friedman Billings Ramsey to help it find a buyer, and KeyCorp, Cleveland, recently said it is considering offers for its subprime division, Champion Mortgage.

ECC is the parent of Encore Credit Corp., which ranks 32nd among subprime servicers with $4.6 billion in receivables, according to MSN and the Quarterly Data Report.

It is unclear whether Champion owns any servicing rights because the company does not disclose that information. Key affiliate, Key Consumer Real Estate, services $13.4 billion in home equity and nonprime loans. Both Champion and KCRE are based in Parsippany, N.J.

A handful of other nonconforming lenders are considering offers, investment banking sources told MSN.

ECC Capital did not return telephone calls about the matter.

Even though subprime production volumes remain decent, profit margins in the sector have been slipping for well over a year.

This past summer, Morgan Stanley & Co. agreed to buy Saxon Capital, Glen Allen, Va., and in mid-July, Centex Home Equity, Dallas, was sold to an investment fund by its homebuilder parent. Both are subprime specialists.

Saxon ranks 14th among subprime servicers with a $26 billion portfolio. Centex services about $11 billion.

ECC lost $18.5 million in the second quarter and $24.9 million for the first six months of the year. In the first half of 2005 it lost $46.5 million.

The lender/servicer - which is only a few years old - blamed some of its problems on losses tied to loan repurchase agreements with investors in the secondary market.

Loan buybacks are a key headache for several nonconforming producers who are being asked to repurchase mortgages with "early payment defaults."

In a statement, bank CEO Henry Meyer said Champion "no longer fits our longer-term strategic priorities." For years KeyCorp has refused to disclose production and servicing information on its subprime operations.

In a statement, it would only say that Champion has a $2.5 billion "loan portfolio." (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com

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