Servicing

Fidelity National Financial Inc., Irvine, Calif., has announced an agreement to acquire the flood insurance business of Omaha Property and Casualty Insurance Co., a subsidiary of Mutual of Omaha.The terms of the agreement were not disclosed. The transaction involves more than 220,000 flood insurance policies originated through 6,000 independent agents under the National Flood Insurance Program. "This acquisition expands our penetration in the flood insurance business and makes us the nation's largest flood insurance company," said William P. Foley II, FNF's chairman and chief executive officer. "Flood insurance provides a recurring stream of revenue and earnings that is not solely dependent on the mortgage origination cycle, and the federal government retains the risk associated with potential claims." In addition to the flood insurance business, FNF said it obtained the rights to offer renewal to OPAC's personal lines policyholders. FNF can be found online at http://www.fnf.com.

The refi boom is continuing to cause problems for Cendant Mortgage, Mt. Laurel, N.J. In the first quarter, the nondepository's parent reported that it took a $196 million servicing impairment charge.In the same quarter a year ago, the company took a $124 million impairment charge. But even with the charge, Cendant reported strong revenue growth in its mortgage division (up 86%) compared with the level recorded in the same quarter last year. With $115 billion in servicing rights on its books, Cendant is the ninth-largest residential servicer in the United States, according to figures compiled by the Quarterly Data Report, a MortgageWire affiliate. Like most major servicers, Cendant has had to contend with servicing "runoff," a byproduct of the never-ending refinancing boom. Cendant officials could not be reached for comment by MW's deadline. (See the April 28 issue of National Mortgage News for more details.)

Royal Bank of Scotland subsidiary RBS Greenwich Capital has reported the expansion of its mortgage- and asset-backed securities department.The Greenwich, Conn.-based company said it has hired a total of eight experienced institutional salespeople in the past two years, most recently Scott Auker and Kevin Blaney. Both were previously vice presidents in the mortgage division at J.P. Morgan Chase. RBS Greenwich Capital can be found online at http://www.greenwichcapital.com.

The Bank of New York Co. Inc. has reported that BNY Trust Co. of Missouri, an indirect subsidiary based in St. Louis, has agreed to acquire the corporate trust business of Intrust Bank NA, Wichita, Kan.The terms of the agreement were not disclosed. The transaction involves the transfer of more than 300 bond trust and agency appointments for corporations and municipalities in Kansas and surrounding states. The Bank of New York provides trust services for a variety of debt products, including mortgage- and asset-backed securities.

AmeriServ Financial Inc., Johnstown, Pa., which recently sold the servicing rights on $450 million of mortgage loans, has been downgraded by Fitch Ratings, along with its banking subsidiary, AmeriServ Financial Bank.The long-term debt rating of the parent company was lowered from BB to B and the long-term debt and long-term deposit ratings of the bank were lowered from BB-plus to BB-minus. Their individual ratings were lowered from C/D to D. The ratings actions were "driven by the increased uncertainty regarding the company's ability to meet future financial obligations, particularly with respect to its trust preferred debt," Fitch said. The rating agency cited the sale of the mortgage servicing rights and other strategic initiatives as "steps in the right direction. However, the Rating Outlook Negative reflects execution risk in improving the company's financial and credit profile, heightened by minimal financial flexibility."

New Jersey-based Garden State Mortgage Corp. has announced the establishment of a corporate employee stock ownership plan, making it the first mortgage company in the United States to do so.Arthur Aranda, Garden State's president and chief executive officer, said the move will bring increased productivity and personal financial benefits for company employees. More than 10,000 companies nationwide have ESOPs covering over 10 million employees.

Hibernia Corp., New Orleans, has reported net income of $56.2 million ($0.36 per share) for the first quarter, down 5% from $59.2 million ($0.37 per share) a year earlier, citing a temporary impairment of its mortgage servicing rights as a factor in the decline.The company said the $14.5 million noncash expense for the MSR impairment was due chiefly to an increase in the expected prepayment rate on the mortgage loans. Without the charge, net income would have totaled $65.6 million in the first quarter, up 11% from that of a year earlier, Hibernia said. "Management believes that net income excluding the mortgage impairment charge is a useful measure of operating results, because the impairment expense is a temporary noncash charge that may be recaptured in future periods if interest rates rise and prepayment speeds slow down," the company said. Hibernia can be found online at http://www.hibernia.com.

Six classes of CNC's series 1994-1 pass-through certificates, secured in part by Kmart Corp. leases, have been downgraded by Fitch Ratings and removed from Rating Watch Negative.Classes A-1, A-2, and A-3 were downgraded from BB-plus to BB-minus; class B from CCC to CC; class C from CC to C; and class D from CC to C. Fitch attributed the downgrades to "further deterioration in the credit ratings of the largest tenant concentration, Kmart, which comprises 51% of the pool, as well as limited information on the underlying collateral." The rating agency said it withdrew the corporate ratings of the bankrupt retailer in March and "will closely monitor Kmart's decision to affirm or reject any more leases, and the further effect that decision may have on this transaction."

Silverado Financial Inc., Campbell, Calif., has announced the adoption of a new business model focused on the acquisition of established, profitable mortgage brokerage and banking operations in Northern California.The company said the move was linked to the transfer of real estate licenses from Realty Capital Corp. in conjunction with a binding letter of intent signed on April 9. The acquisition model calls for buying the companies for a low multiple of free cash flow, with the seller carrying a note that will typically be paid over a 12-month period from the acquisition's own cash flow, Silverado said. The company said prospective changes in the Real Estate Settlement Procedures Act "will force the relationship between the mortgage broker and the mortgage banker to change," making it "more important than ever" that the brokerage community have "immediate access to pertinent information from its lending sources." Silverado's principal business consists of investing in, originating, and servicing mortgage loans, primarily those secured by first trust deeds to residential and commercial properties.

Washington Mutual Inc., Seattle, has reported record earnings of $1.0 million ($1.07 per share) for the first quarter, up from $956 million ($0.99 per share) a year earlier.Originations of single-family residential loans totaled $97.47 billion for the quarter, up from $58.97 billion a year earlier. Home equity loans and lines of credit and multifamily loans totaled $38.72 billion as of March 31, up $6.73 billion, or 21%, from a year earlier, WaMu reported. The company said it is on schedule to open approximately 250 financial center stores and 70 home loan stores this year. WaMu can be found online at http://www.wamu.com.