MLN, Other B&C Servicers Find Selves in Hot Water

The struggling Mortgage Lenders Network of Connecticut is auctioning off a $5 billion chunk of servicing rights in an effort to raise money, sources confirmed to Mortgage Servicing News.

At press time, no information was available on the sale, but MLN - a $17 billion servicer of mostly nonconforming loans - was in the processing of closing its entire wholesale network, a platform that accounts for 90% of its originations.

Meanwhile, the entire subprime sector - including servicers - is in the throes of a correction that some say could eliminate 20 of the nation's top 100 firms.

As already reported, many shops are testing the M&A waters, placing their shops on the auction block.

Large subprime servicers that are entertaining offers include Option One Mortgage, Orange, Calif. ($74.5 billion in servicing rights), and Ameriquest Mortgage, Orange, Calif. ($74 billion). (Option One is owned by tax services giant H&R Block.)

Smaller lender/servicers for sale include Encore Credit Corp., Irvine, Calif., which has $2.7 billion in servicing rights. Encore's production unit is slated for sale to Bear Stearns, but the deal has been delayed.

Investment banking sources say Lehman Brothers is looking at Option One, but both parties declined to comment. Investment bankers told Mortgage Servicing News that foreign banks and private-equity funds are beginning to express interest in the sector, but are looking for bargains.

The carnage in the subprime sector was brought on by declining production volumes, razor-thin profit margins and major concerns about credit quality. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com

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