Bankrupt American Home Mortgage's servicing unit is being sought by a billionaire investor.
Wilbur N. Ross Jr. intends to bid $435 million for the business.
Ross, who specializes in turnarounds of distressed businesses through his WL Ross & Co., has formed a separate company, AH Mortgage Acquisition Co., to purchase the servicing unit.
"We have filed in bankruptcy court," Ross told MortgageDaily.com. "The stalking horse proposal is before the court tomorrow and, if other bidders show up then, the auction would be Oct. 5."
He said he feels that now is the time to start his planned entry into the mortgage business with the acquisition of a servicing business.
Since American Home filed for bankruptcy on Aug. 6, it has been involved in lawsuits and other attempts to obtain its servicing records by Freddie Mac, Ginnie Mae, Deutsche Bank, Credit Suisse, Morgan Stanley, EMC Mortgage and Bear, Stearns. Settlements have been negotiated in most if not all of those cases.
Last week, Freddie, which had filed a complaint against American Home in U.S. Bankruptcy Court in Delaware seeking the servicing records for more than 4,500 mortgages, negotiated, with the approval of bankruptcy court, an agreement with the Melville, N.Y.-based company in which servicing records will be transferred to Bank of America on an interim basis, according to spokesman Brad German.
In exchange, Freddie would release to BoA $2.4 million to bring borrower taxes and insurance up to date. Those funds come from some $7 million in custodial account funds Freddie secured on Aug. 1.
Whoever successfully bids on AHM's servicing portfolio will have to meet with Freddie's approval under terms of the agreement, as well as meet the bankruptcy court's approval, according to German.
Ross said he had been studying the mortgage business for more than a year before making the move to acquire American Home's servicing business.