One of the nation's biggest net branch operators has seen a possible transaction involving the acquisition of additional branches turn into a public relations nightmare.
The problems started with a deal between Allied Home Mortgage Capital Corp. and NovaStar Home Mortgage where Allied apparently agreed to acquire approximately 77 conforming branches of NovaStar. The transaction was still in the process of negotiation when Allied allegedly began soliciting the NovaStar branches involved without NovaStar's consent.
Those actions immediately led NovaStar to kill the deal and file a lawsuit against Allied -- accusing it of breaking the confidentiality and nondisclosure agreement it had executed in regard to the possible transaction and asking that Allied be prohibited from soliciting its branches.
Last month NovaStar said in its earnings announcement that it would focus on its core nonconforming business. The Kansas City, Mo.-based lender had taken significant additional steps that month "to streamline the branch operation and focus on our core nonconforming business." NovaStar went on to say it had entered into an agreement where 1st Metropolitan Mortgage would pick up the non-core branches by year end.
Allied said those branches were the subject of the business discussions it had with NovaStar. The Texas-based net branch operator pointed out the agreement with 1st Metro was not disclosed at the time NovaStar applied for the temporary restraining order against Allied.
Upon Allied's request, the court held an emergency meeting the day after the 1st Metro agreement was announced. The evidence in NovaStar's earnings announcement prompted Judge Nanette K. Laughrey to dissolve the restraining order, stating, "that way (Allied) will have an opportunity to compete in the marketplace for these branches that, in fact, (NovaStar) no longer is interested in," according to a Nov. 2 press release from Allied.
Allied said in the announcement that "concerned over alleged misrepresentations found in court documents filed by NovaStar Home Mortgage," a judge of the U.S. District Court for the Western District of Missouri dissolved a temporary restraining order, allowing it to solicit NovaStar branches.
Allied President Jim Hodge applauded the court's ruling in the Nov. 2 announcement, adding that "faced with the uncertainty created by NovaStar, their branches should be free to explore the best opportunities for themselves. We believe Allied can provide those opportunities."
On Nov. 3, however, Allied issued a press release stating that it had retracted the Nov. 2 press release and that a revised release would be forthcoming.
As of Nov. 14, a revised release has not been issued.
Allied did not return calls from MortgageDaily.com.