Will Aegis Mortgage Sell its Servicing Business?
Aegis Mortgage Corp. here -- which is controlled by hedge fund giant Cerberus Capital- has placed its servicing platform on the auction block and is winding down its home-equity division, industry sources told Mortgage Servicing News in July.
But a few weeks later, those plans seemed uncertain, as the company announced in August that it would "terminate a "substantial number of its employees" effective immediately. On August 6, the company stopped originating loans through its only remaining channel, wholesale. Aegis has lending operations in 50 states and offices in 24. No employee head count was available, but sources say it once employed 5,000.
But despite the downsizing, the nondepository said it is maintaining its servicing business.
Cerberus -- which also controls GMAC Mortgage -- is in the process of buying subprime giant Option One Mortgage Corp., Irvine, Calif., but there is speculation that the hedge fund may seek to renegotiate that transaction. In a statement, Aegis chief executive Dan Gilbert said, "The change in market conditions, coupled with the rapid decline in the secondary mortgage market, has forced Aegis to take this action, despite the best efforts of our management team and hard-working employees."
Meanwhile, an internal memo provided to this newspaper says Aegis is plagued by $100 million in early payment defaults.
A source close to the company also said there is speculation inside of Aegis that once Cerberus buys Option One Mortgage of Irvine, Calif., it will merge the Houston lender into it. (The OOMC deal is slated to close in the fall under certain conditions.)
"The only thing Aegis will have left is its wholesale platform which will focus solely on alt-A and prime," said the source.
Currently, Aegis ranks among the top 15 subprime funders in the U.S. Little is known about its servicing platform, which is housed in Houston. "It services in the billions," said one executive.
At press time, a spokeswoman for Aegis had not returned telephone calls and Cerberus declined comment.
Over the past six months, Cerberus has been cutting Aegis' operations. It recently closed its entire retail division and is winding down the home-equity division, which funded second liens through loan brokers. (The home equity division is based in Mesa, Ariz.)
In late June, newly appointed Aegis CEO Dan Gilbert told Aegis employees that the mortgage industry is in a down cycle and that to avoid the fate of other failed non-depositories the company would focus all its efforts on alt-A and prime wholesaling.
Cerberus also is being sued by its founder and former CEO, Rick Thompson. Mr. Thompson is suing the hedge fund, claiming that it mismanaged the nonprime lender and hurt its chances of going public.
At one time, Aegis was valued at close to $1 billion. Mr. Thompson still owns about 15% of the company. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.bondbuyer.com/ http://www.sourcemedia.com/