Among the motivators for Bexil American Mortgage to acquire a 90% interest in Castle Mortgage Corp. was the fact that not only was the latter an approved Fannie Mae/Freddie Mac/Ginnie Mae seller/servicer, it had its own platform to service its $100 million portfolio, noted John Robbins, Bexil American’s CEO and president.
The deal was
In an interview with National Mortgage News, Robbins said until now, his company’s secondary market outlets have been whole loan aggregators. Over the past few months there have been a number of issues that make operating in the correspondent channel “problematical in a host of different areas.”
This includes uncertainty about how long certain aggregators will remain in the business. A number of banks had exited the channel citing the impending Basel III regulation (which has since been put on hold). And then there was the question of whether Bexil American was getting the best execution for the product it sells.
“So there was concern about how much flexibility we would have in the future,” Robbins explained.
Besides pricing, he said another benefit is loans remain on the warehouse line for a significantly shorter period of time by having the ability to directly sell to the agencies.
Moreover, the transaction allows Bexil American to accumulate servicing and benefit from the cash flow from mortgage servicing rights generated today which have low coupons (less likely to refinance) and are of high quality.
Castle has a small servicing portfolio, only $100 million, but that was one of the reasons Robbins was attracted to the company. It is not subject to large amounts of repurchase requests from neither the agencies nor any correspondents it might have sold loans to.
Bexil American did not hold any servicing rights prior to the transaction.
Another benefit of hooking up with Castle is that its president George Hawkins is retaining the remaining 10% in the firm. Robbins cited Hawkins 40 years of experience in all aspects of the mortgage business.
While the purchase price was not disclosed, the bulk of the funding is coming from Bexil Corp., the majority owner of Bexil American. Boulderado Group LLC has received an equity stake in Bexil American as part of this transaction.
Boulderado has been an investor in Bexil Corp. and its managing member, Alex Rozek, serves on the boards of both Bexil Corp and Bexil American (even before taking this equity stake in the mortgage company). Bexil American’s management team provided the remainder of the acquisition funding. The purchasers have an option to buy Hawkins 10% stake in Castle.
Bexil American received approvals from Fannie Mae, Freddie Mac and Ginnie Mae prior to the deal closing.
While Castle did retail and wholesale in the past, the company does a small amount of correspondent lending right now, Robbins said. Bexil American and its wholesale arm American Mortgage Network is licensed in 17 states, while Castle is licensed in nine and primarily operates in the southeast. Castle is retaining its own identity and maintaining its own financial statements, in large part to help satisfy the seller/servicer arrangements.
Robbins added this deal pushes Bexil American’s growth plan ahead by a couple of years. It has only
