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Success Contrasts Mess

Recent mergers, acquisitions & corporate activity

May 18, 2007


photo of Coco Salazar

As banks and lenders struggle to survive amid a mortgage market mess, one nonprime mortgage company is boasting about its success. Meanwhile, there was no shortage of restructurings, delisting warnings or acquisitions in the latest mortgage-related mergers, acquisitions and corporate activity.

In California, following the annual shareholder meeting Thursday, The PMI Group Inc.'s board elected Chief Executive Officer L. Stephen Smith as chairman, replacing Roger Haughton, who retired, a press release stated.

LendingTree named C.D. Davies as its new chief executive officer and Bob Harris as its president and chief operating officer, parent IAC announced Monday. Davies succeeds Tom Reddin, who resigned and exited his position about six weeks later on May 4, a LendingTree spokeswoman said in an e-mail statement.

Home Federal Bancorp Inc. will reorganize into a chartered stock company when it converts Home Federal MHC to stock form and then acquires it. The stock holding company structure and the second step conversion and stock offering should increase the liquidity in common stock and provide additional capital for future growth. The transactions are expected to be completed late in the third quarter or early in the fourth quarter.

In Midland, Mich., Chemical Financial Corp. said it was going to reorganize its retail banking operations into four distinct regions and consolidate support operations while eliminating approximately 50 positions bankwide after its first quarter net income fell to "unacceptable" levels due to decreased net interest income coupled with an increase in loan loss provisions and operating expenses.

NetBank Inc. announced it received an additional notice from the NASDAQ Stock Market stating that the company's inability to timely file its first quarter financial report on Form 10-Q serves as another basis for the company's common stock to be subject to delisting. NetBank previously received a similar notice due to its delinquency of filing its 2006 annual report. The lender anticipates it will have both of these reports filed before June's end, and will request continued listing but "no assurance can be given" either of these will occur.

Accredited Home Lenders Holding Co. also received a delisting warning from the NASDAQ due to the delay of its first quarter financial report filing after also having received a notice for the untimely filing of its 2006 annual report. Like NetBank, Accredited engaged in a hearing with the NASDAQ regarding its plan for complying with listing rules, but awaits a decision on this. Accredited plans to respond to the quarterly filing-related notice.

MGIC Investment Corp. could owe $188 million to the Internal Revenue Service because the agency does not agree with MGIC's treatment income and loss from an investment in a portfolio of the residual interests of real estate mortgage investment conduits, according to a filing with the Securities and Exchange Commission. The IRS's proposed adjustments apply to years 2000 through 2004.

The IRS indicated MGIC did not establish sufficient tax basis in the REMIC residual interests to deduct the losses from taxable income, but the mortgage insurer believes it properly reported the income and loss from the investment and intends to appeal the adjustments, the filing stated.

New York Mortgage Trust Inc., which in the first quarter completed the sale of its wholesale mortgage lending platform assets to Tribeca Lending Corp. and its retail mortgage lending platform assets to IndyMac Bank, reported a first quarter loss of $3.8 million from discontinued operations. The exit from mortgage lending resulted in headcount reductions to 35 from 616 as of Dec. 31, 2006 as a result, a press release indicated.

"For the first quarter 2007, we repurchased a total of $5.5 million mortgage loans that were originated in either 2005 or 2006 and we have approximately $14 million of additional repurchase requests pending, against which the company has taken a reserve of $1.7 million," New York Mortgage said. "Proceeds from the origination platform assets sales are expected to cover any repurchase requests and we continue to believe that, for us, a majority of the EPD impact will be substantially behind us by the end of the third quarter."

NovaStar Financial Inc. announced it received a $1.9 billion line of credit from Wachovia Capital Markets LLC. The comprehensive financing facility will expand and replace whole-loan and securities repurchase agreements currently existing between the two companies, other than the $100 million facility Wachovia issued to NovaStar in April, which used servicing rights and residual securities as collateral.

Carrington Capital Management LLC and Carrington Mortgage Services LLC won a bankruptcy bid to acquire New Century Financial Corp.'s loan servicing operations, according to an announcement. Carrington will pay $188 million -- approximately 35 higher than they initially offered when New Century filed for chapter 11 protection on April 2. The deal is expected to close by the end of June, after a May 21 hearing for the court's approval of the sale.

"We have been working diligently to maximize the value of the bankruptcy estate for the benefit of all New Century stakeholders, and we are pleased with the outcome of the auction for one of the company's core assets," said Brad A. Morrice, New Century's president and CEO, in the statement.

Highlands Bancorp Inc. will open Highlands Bank with an initial banking center scheduled to open in June in Dallas. Leading the new Dallas-based bank that will be Thomas R. Yenne as chief executive officer and chairman and Robert D. Butler as president and chief operating officer.

AmericasBank Corp. announced that it plans expand its community banking model in central Maryland with up to five new banking centers in the next five years. The centers will each have a mortgage banking office, be promoted under a unique trade name, and independently-operated and managed as a division of AmericasBank.

Southside Bancshares Inc. will buy Fort Worth Bancshares Inc. in a cash deal valued at $36.5 million expected to be consummated in the third quarter, according to an announcement. Fort Worth Bancshares will be merged into a subsidiary of Southside.

CapitalSource Inc. has agreed to acquire federally chartered savings bank TierOne Corp. in a $652 million stock-and-cash deal expected to close in the fourth quarter. CapitalSource says it is a commercial lending, investment and asset management business and that its managed portfolio also included $5.6 billion in its residential mortgage investment business.

Rubicon Financial Inc. said it closed Wednesday on its acquisition of Rubicon Real Estate and Mortgages Inc., a provider of professional assistance in residential and commercial real estate sales and mortgage originations in California that anticipates it will establish modular units in mortgage banking, among other things.

At its annual shareholder meeting Thursday, nonprime lender Delta Financial Corp. attributed its success to the origination of mostly fixed-rate mortgages, its avoidance of riskier mortgage products and a balance between direct and broker origination channels. The company also said its retention of most of its originations is also a factor.

"Rather than attempt to quickly gain market share, 'we maintained our guidelines and originated loan products that made sense for us and our borrowers,' which precluded Delta from having to significantly contract its product offerings," Delta said in an announcement.

Delta's achievements include growth in annual origination volume and on-balance sheet loan portfolio, as well as its record low 2006 full-year cost to originate of 2 percent, according to an announcement.

Coco Salazar is an associate editor and staff writer for MortgageDaily.com.

e-mail: [email protected]

Nonprime and Subprime News | Subprime Statistics
Stories about non-QM products. Coverage of subprime, Alt-A and
hard money lending. Home-equity loans and home-equity lines of credit.

Secondary Marketing News | Correspondent Lender Directory
Mortgage portfolio trades and forward commitments. Correspondent lending, r e p u r c h a s e s and warehouse news. Secondary marketing statistics and lawsuits.

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