One Buyer Is Still Eyeing B&C Deals
New York-American Home Mortgage Servicing Inc., the servicing platform of a failed subprime lender that was acquired by turnaround specialist WL Ross in 2007, is buying servicing rights on 185,000 loans from Citi Residential Lending.
Wilbur L. Ross told Mortgage Servicing News that the average loan size in the portfolio is about $200,000. The aggregate unpaid principal balance for the portfolio is about $37 billion, he said.
"We feel that there are substantial economies of scale from adding a large block of mortgages to our existing platform, and we believe that our team has developed an excellent record in making modifications and dealing with REO," Mr. Ross said, explaining the rationale for the purchase of the servicing rights.
In a television interview with CNBC, Mr. Ross said the transaction cost his firm roughly $1.5 billion, though some of those funds go into trusts and do not directly benefit Citi, a spokesperson for AHMSI said. Mr. Ross said his company will integrate the Citi portfolio before considering additional acquisitions.
"With this acquisition, we have increased the number of loans we service to approximately 575,000, an increase of 45%," said David Friedman, CEO of WL Ross, in a news release.
AHMSI was established in April 2008 and is based in Irving, Texas. The firm also acquired the servicing assets of Option One, a subprime lender, in 2008.
At the end of 2008, the firm serviced more than $85 billion of mostly alt-A, home equity and subprime loans.
WL Ross is a private equity firm founded by Mr. Ross. The firm currently oversees more than $8 billion in private investments.
Citigroup earlier announced plans to realign into two businesses, with the focus on tightly managing risks and maximizing the value of certain "non-core" assets, including much of its subprime mortgage business. At the time of the announcement, Citi said the businesses being moved into its Citi Holdings unit "do not sufficiently enhance" Citi's core businesses and compete with those more favorable businesses for resources.
Commenting on the Citi Move, Fitch Ratings said market conditions had forced Citi to embark upon a more radical downsizing and restructuring of its business than originally planned.
Most of Citi's consumer finance operations have been placed in the Citi Holdings unit for noncore assets.
Fitch speculated that Citi might benefit from entering into joint ventures with other parties to share ownership of soome of the Citi Holdings units, specifically mentioning CitiFinancial and CitiMortgage as candidates ripe for a JV strategy.
Those JVs would potentially help Citi book some accounting gains that would relieve some financial pressure.