Wider Interest for Bulk Sales
WASHINGTON-Investors appear to be lining up to buy several large bulk servicing packages that are currently on the market, but investment bankers are giving few hints about the identity of these bidders.
Before the credit crisis, three mega-banks with large servicing operations - Wells Fargo, JPMorgan Chase and Citigroup - were the usual suspects when it came to "who's going to buy it" rumors, but that was 18 months ago before the housing bubble exploded.
At press time, the three largest bulk deals garnering the most attention included $20 billion in receivables once controlled by AmTrust, an $11 billion package being sold out of bankruptcy by the Thornburg Mortgage trustee and a $10 billion pool belonging to Flagstar Bancorp.
Of the three, it appeared the Thornburg portfolio was closest to changing hands with a sale pending to Select Portfolio Services, Salt Lake City. The advisor to the bankruptcy trustee, Interactive Mortgage Advisors of Denver, declined to provide much in the way of specifics.
A source close to IMA said at least five bidders had made solid offers and a winner was anticipated shortly. "The bids and interest in this package are solid," said the source, requesting anonymity. At least 20 investors initially expressed interest in the package which includes servicing rights on jumbo and super jumbo mortgages.
Wells, JPM and Citigroup, as a rule, don't discuss M&A activity in regard to servicing rights. Citigroup is believed to be out of the market entirely because of its troubled condition, but the other two are selectively interested at times, depending on the quality of the underlying receivables, according to servicing brokers.
Rumors abound that several hedge funds are eyeing the servicing business and plan to use subservicing firms to process their loans should they actually enter the space. Also, W.L. Ross & Co., which owns American Home Mortgage Servicing, Irving, Texas, has been mentioned, at times, as being a possible buyer of portfolios.
The AmTrust receivables are being offered by the Milestone Merchant Partners on behalf of the Federal Deposit Insurance Corp. To date, Milestone and the FDIC have declined to discuss the matter.
Flagstar, which recently posted another large quarterly loss, but also raised new outside capital, is saying little about its $10 billion offering. The broker on its sale is IMA which would not comment.
The largest potential bulk deal out there is Residential Capital Corp., the nation's fifth largest servicer with $380 billion in receivables. A spokeswoman for GMAC Financial Services, which owns ResCap, said the mortgage division isn't necessarily for sale - only that GMAC is exploring its "strategic" options concerning the company. Usually when an owner says it is exploring strategic options or "alternatives" it means a sale is a likely outcome.