Servicing

A vulture firm founded by former Countrywide Financial Corp. president Stanford Kurland filed Friday to raise as much as $750 million in an initial public offering. According to Securities and Exchange Commission documents, the fund is telling investors that there are "unique" market opportunities in the distressed mortgage market whose size it estimates is at least $1 trillion. As a technical matter, the unit going public is called PennyMac Mortgage Investment Trust (a REIT) which will be managed by Private National Mortgage Acceptance Co., a Calabasas-based company that Mr. Kurland formed about two years ago with backing from BlackRock Inc. and Highfields Capital Investments. To date, PennyMac has made only one sizeable investment, a $558 million portfolio of 2,800 residential loans where it has a cash flow sharing arrangement with the government. PennyMac's chief investment officer is David Spector, former co-head of residential mortgages for Morgan Stanley. According to PMMIT's S-11 filing, its business plan is to invest mostly in residential loans and provide "attractive risk-adjusted returns to our investors over the long-term, primarily through dividends and secondarily through capital appreciation." It notes that $750 million is the maximum amount it hopes to raise.

A vulture firm founded by former Countrywide Financial Corp. president Stanford Kurland filed Friday to raise as much as $750 million in stock through an initial public offering. The company, PennyMac Mortgage Investment Trust, is a unit of the Kurland-led Private National Mortgage Acceptance Corp., or PennyMac, which invests in distressed mortgage assets. To date, though, PennyMac had made only one significant investment.

A Taylor, Bean & Whitaker-led rescue of Colonial Bancgroup -- the nation's largest warehouse lender -- was set to be finalized by Friday evening, according to TBW chairman Lee Farkas. In an interview with National Mortgage News Mr. Farkas said "it looks like it's going to go through, yes." TBW is waiting on final signed documents from some of its partners. He noted that Colonial was preparing a press release about the deal and that TBW's other investors in the $300 million capital infusion would be revealed. With the cash infusion finalized, Colonial will then be eligible for $550 million in Troubled Asset Relief Funds from the Treasury Department. At the end of March Colonial was the nation's largest warehouse provider with $4 billion in commitments, according to NMN. Mr. Farkas likely will sit on Colonial's board. He noted that the bank will most definitely continue as a warehouse provider. "It's a good business for them," he said. "They made good money on it last year." Colonial also is a warehouse lender to TBW, the nation's eighth largest residential funder, according to the Quarterly Data Report. Over the past few weeks some analysts that follow the bank raised concerns that the deal might not go through. The Alabama-based bank reported a net loss of $168 million for the quarter ended March 31. Late this past week its shares were trading at $1.36 compared to a 52-week high of $10. It has been burned by a severe downturn in the commercial construction lending, especially in the southeast.

The first quarter financial improvements at U.S. banks, in large part driven by mortgage origination activity, will be difficult to maintain as credit losses continue to rise, a report from Fitch Ratings, New York declared. The increases in what Fitch called "market-driven revenues" that come from mortgage originations and fixed income trading are not likely to persist. "It appears that the industry is poised for another strong quarter in mortgage originations, although revenues from this business are presently expected to slow, possibly materially, in the second half of 2009," Fitch said. The rating agency added banks are likely to see continued increases in loan delinquencies, non-performing assets and net charge-offs for several quarters to come because of the uncertain economy.

A group of private equity investors led by former North Fork Bank chief John Kanas bought ailing payment option ARM investor BankUnited of Florida in a federally assisted transaction where the government could share in losses on up to 84% of its assets. Several different private equity funds are part of the investor group including one headed by Wilbur Ross, who has already bought two large residential servicing companies, both on the cheap. One investment banking source said BU's $4.9 billion in payment option ARMs might eventually be serviced by Mr. Ross' American Home Mortgage in Irving, Texas. Another investor in the consortium is Centerbridge Capital Partners, which owns Green Tree Servicing of Minneapolis. The Kanas group bought the $12.8 billion asset BankUnited FSB of Coral Gables (along with $8.3 billion in non-brokered deposits) Thursday night for $900 million. Other investors in the Kanas group include: Carlyle Investment Management, Blackstone Capital, the LeFrak Organization, The Wellcome Trust, Greenaap Investments, and East Rock Endowment Fund. The Federal Deposit Insurance Corp. had been entertaining bids on BankUnited for several weeks. On Thursday night the Office of Thrift Supervision officially took control of the thrift and handed it over to the FDIC. Its failure will cost the government insurance fund at least $5 billion. Two other investors bidding for the thrift included J.C. Flowers & Co., and Toronto-Dominion Bank of Canada. North Fork Bank was sold to credit card giant Capital One three years ago.

Fannie Mae plans to put in place a new head of its single-family mortgage business on June 1 ahead of a retirement set to take place at the end of the month. The government-sponsored enterprise said Karen Pallotta, Fannie's senior vice president, product acquisition strategy and support, is slated to take the post at that time. Thomas A. Lund, executive vice president, single-family mortgage business, plans to retire from the company on June 30.

President Barack Obama has signed two housing bills that will provide relief for troubled homeowners that need to refinance, and will crack down on mortgage fraud. The Helping Families Save Their Homes Act addresses the "administrative and technical hurdles" that make it difficult for families with underwater mortgages to use the Hope for Homeowners program and refinance into Federal Housing Administration loans, according to the President. "This bill removes those hurdles, getting folks into sustainable and affordable mortgages, and more importantly, keeping them in their homes," he said at a White House signing ceremony. The bill (S. 896) also shields mortgage servicers that modify loans from investor lawsuits. The President also praised the mortgage fraud bill (S. 386), which doubles the resources of the FBI to pursue mortgage fraud and other financial crimes. He noted the bill expands the federal bank fraud and false claims statutes to cover independent mortgage companies and mortgage brokers. "It expands the Department of Justice's authority to prosecute fraud that takes place in many of the private institutions not covered under current federal bank fraud criminal statutes - institutions where more than half of all subprime mortgages came from as recently as four years ago," Pres. Obama said.

The Treasury Department is prepared to lend roughly $7 billion to GMAC Financial Services, the parent company of the nation's sixth largest residential servicer, according to published reports. At press time both Treasury and GMAC officials were not commenting on the matter. Wire reports say such a loan would be a step toward making GMAC a quasi-federal company. GMAC has already received $5 billion in TARP funds and needs to raise an additional $11.5 billion in equity within six months. GMAC is a bank holding company. It recently changed the name of its depository to Ally Bank from GMAC Bank. Ally makes warehouse lines of credit to non-depository mortgage firms. Over the past year GMAC has closed the retail branch arm of its Residential Capital Corp. affiliate and exited the wholesale channel. Over the past year ResCap's owned servicing portfolio has fallen by 20% to $365 billion in housing receivables, according to the Quarterly Data Report. The government now owns 5 million shares of GMAC and recently told the lender that it must extend financing to bankrupt Chrysler Corp.

Fannie Mae plans to put in place a new head of its single-family mortgage business on June 1 ahead of a retirement set to take place at the end of the month. The government-sponsored enterprise said Karen Pallotta, Fannie's senior vice president, product acquisition strategy and support, is slated to take the post at that time. Thomas A. Lund, executive vice president, single-family mortgage business, plans to retire from the company on June 30.

The Senate has approved a housing bill that revamps the FHA Hope for Homeowners program and strengthens federal deposit insurance, clearing the measure for the President's signature. As MortgageWire went to press, President Obama was scheduled to sign the housing/FDIC bill at a White House ceremony along with a separate bill (S. 386) that clamps down on mortgage fraud and other financial crimes. The House passed the bill (S. 896) Tuesday afternoon and the Senate followed very quickly to approve the measure, which does not include a controversial bankruptcy cramdown provision. Senate leaders stressed during discussions to reconcile the House and Senate versions of the bill that they can't get a cramdown provision through the Senate. The new Department of Housing and Urban Development secretary has been waiting for Congress to act so the Federal Housing Administration can make the H4H program a viable option for underwater homeowners to refinance into a FHA loan. However, HUD secretary Shaun Donovan has warned that the H4H program is dependent on the willingness of investors to write down the principal amount of the mortgages. "I do believe, frankly — given the drop in values, given what we have seen terms in foreclosures — we are starting to see some willingness of the investors" to take writedowns, he said recently. The housing bill also gives HUD new powers to police the FHA mortgage insurance program and penalize and debar lenders. It shields mortgage servicers from investor lawsuits and provides the Federal Deposit Insurance Corp. with more borrowing authority to deal with the rising bank failures. "S 896 will increase the FDIC's borrowing authority to $100 billion, enabling the agency to reduce the proposed special premium assessment on all banks," said Floyd Stoner, the American Bankers Association's chief lobbyist.