An investment banker has agreed to buy the subprime wholesale assets of a troubled mortgage banker.
ECC Capital Corp. announced it will sell certain operating assets used in its subprime wholesale mortgage unit to Bear Stearns Residential Mortgage Corp. for about $26 million.
The Irvine, Calif.-based lender said the sale of the assets and the "resulting reduction in operating losses that have continued with the division, represents the best course of action for our stockholders."
With the transaction, expected to close by yearend, ECC will exit the subprime wholesale lending market, according to the announcement.
ECC has been struggling to become profitable. This year alone, ECC eliminated 170 employees, significantly reduced executive compensation and canceled dividends payments.
Bear launched its own nonconforming wholesale unit, Scottsdale, Ariz.-based Bear Stearns Residential Mortgage Corp., during April 2005. Bear also owns and operates mortgage servicer EMC Mortgage Corp.
Among the obligations ECC will retain from the division are loan repurchase obligations, remaining leases and personnel related liabilities, as well as the majority of its core assets, including residual interests in mortgage-backed securities and associated servicing rights.
However, to maximize the value of its remaining assets as a means to provide additional distributions to stockholders and satisfy its remaining liabilities, ECC said it is considering alternatives such as the "sale of remaining operating assets, the residual interests and associated servicing rights or, in the case of the residuals, collection of remaining cash flows through 2010."
Any further sale could stretch total distributions to ECC stockholders to at least $1.60 per share, which includes the initial distribution of 80 cents the announced sale to Bear will generate, according to the announcement.