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Corporate Mortgage News
M e r g e r s, a c q u i s i t i o n s and private and public offerings. Other corporate activity including executive appointments, bankruptcies name changes.

Losses, Lawsuits and Solvency

Recent mergers, earnings and corporate activity

July 23, 2008


With earnings season in full force, losses continued to mount, more lawsuits were filed and executive appointments were announced. Meanwhile, other firms are acquiring or investing in mortgage-related companies as solvency is becoming a growing issue.

Bob Caruso left his post overseeing Bank of America Corp.'s servicing operations to become an executive vice president of Lender Processing Services Inc., an announcement last week said.

Brooklyn Federal Bancorp Inc. said in a statement last week that its president, Richard A. Kielty, will also become chief executive officer on Jan. 2, 2009. He replaces retiring Angelo J. Di Lorenzo.

Freddie Mac registered with Securities and Exchange Commission Friday, according to separate announcements from the company and the regulator. The move enables Freddie, formally known as the Federal Home Loan Mortgage Corp., to move forward with a $5.5 billion public offering and requires it to periodically report financial information.

Freddie's regulator, the Office of Federal Housing Enterprise Oversight, immediately issued a statement praising the move.

Franklin Bank Corp. is facing its third investor class-action lawsuit since May. The latest case was filed in U.S. District Court for the Southern District of Texas by Cohen, Milstein, Hausfeld & Toll PLLC on behalf of purchasers of stock April 26, 2007, and May 1, 2008.

Other law firms to file investors class-actions against Franklin since May include the Rosen Law Firm and Eric J. O'Bell LLC.

The American Bankers Association issued a press release supporting a Pennsylvania federal court ruling that found the National Credit Union Administration went too far in establishing a 3,400-square-mile area as well-defined for determining credit union membership.

The Credit Union National Association issued a statement indicating that the 8,500 U.S. credit unions have $90 billion in reserves and "remain a safe harbor for consumers -- with strong financial positions, federal deposit insurance and conservative and prudent management policies that kept credit unions out of the subprime mortgage mess."

Merrill Lynch reported last week a $4.6 billion second-quarter loss, reflecting net losses of $3.5 billion tied to U.S. super senior collateralized-debt obligations, credit valuation adjustments of negative $2.9 billion related to hedges with financial guarantors -- about half of which related to U.S. super senior ABS CDOs, and $1.3 billion from certain residential mortgage exposures.

MGIC Investment Corp. reported a $98 million second-quarter loss as a result of falling home values, a softening economy and elevated delinquencies and foreclosures. Losses during the quarter were $688.1 million.

IAC Interactive Corp. will take a $100 million charge tied to goodwill and intangible assets of its lending segment, which includes LendingTree, according to a filing with the SEC Tuesday. The move was taken as a result of "persistent adverse mortgage and real estate market conditions."

The Federal Deposit Insurance Corporation announced a final covered bond policy statement that provides bondholders expedited access to collateral if the FDIC declines to continue the covered bonds after a bank failure. FDIC Chairman Sheila C. Bair said covered bonds can serve as an additional source of financing for mortgage lending.

An affiliate of Sageview Capital LP has made a $100 million capital investment in EverBank Financial Corp., an announcement yesterday said. Jacksonville, Fla.-based EverBank will use the capital to support growth in its core banking and mortgage business lines. The investment makes Sageview the company's biggest stockholder.

Taylor, Bean & Whitaker Mortgage Corp. announced it acquired a controlling interest in Platinum Bancshares Inc. on July 9. The move enables Ocala, Fla.-based Taylor to pilot offerings that it provides to its community bank customers.

Impac Mortgage Holdings Inc. reported last week that it has executed a letter of intent to acquire the special servicing platform of UBS AG. The deal calls for the contribution of loans to the platform by UBS as part of a strategic alliance with Impac. UBS will receive warrants for up to 2 percent of Impac's outstanding stock.

Impac, a real estate investment trust, said it will combine the platform with its master servicing, default department.

Oxford Funding Corp., which has recently been touting an aggressive campaign to acquire discounted loan portfolios, said last week that it is negotiating the acquisition of a mortgage banking company located on the East Coast. The targeted company is reportedly an FHA approved lender licensed in more than 30 states.

"FHA provides the best way to refinance many of the loans we acquire," Oxford CEO Ron Redd said in the statement. "Currently, we outsource this effort. Operating our own lending platform would allow us better results in terms of the liquidation proceeds on our loan portfolios."

Prospect Mortgage said Monday that it was on track to acquire up to 80 retail branches from IndyMac, which has been taken over by the FDIC and renamed IndyMac Federal Bank. The Northbrook, Ill.-based company announced on July 8 that it would acquire 60 branches.

Prospect, which said the acquisition will make it "of the largest independent retail mortgage companies in the country," noted that the branches are currently funding and originating new loans under the supervision of the FDIC.

Office of Thrift Supervision Director John Reich told attendees at an ABA meeting Monday that recent news reports about ailing financial institutions have shaken public confidence in the banking system. He noted the run on IndyMac Bank deposits drove it into insolvency and added that speculation about further failures eroded public confidence.

"Seemingly oblivious to the fact that they could drive otherwise healthy banks to fail and push troubled institutions away from potential solutions toward ruin, TV reporters staked out banks on these rogue lists, interviewed customers and stoked public fears," Reich said.

The Nevada Division of Mortgage Lending said Tuesday that a bankruptcy trustee was appointed in the Chapter 11 case of Cetus Mortgage Ltd. Earlier this month, the division issued an order to take possession of all property, business and assets of the Reno-based hard-money mortgage broker following the expiration of its mortgage broker last month.

"Based on complaints from investors received beginning in June 2008, the division initiated an investigation of Cetus, and its owner, Marcie Benvin," a July 8 press release from the state said. "Over the next several days, the division will be conducting an extensive review of Cetus' books and records, at which time it will have a better understanding on the number of loans outstanding, the dollar amounts thereof, and the number of investors involved."

The state, which told that no more than 10 people were employed by Cetus, said it would attempt to transfer the ongoing loan functions to other licensed entities.

American Bankers Association et al v. National Credit Union Administration
1:05-cv-02247-YK, Nov. 1, 2005 (U.S. District Court for Middle District of Pennsylvania)

Individually and on Behalf of All Others Similarly Situated vs. Frankline Bank Corp., Anthony Nocella and Russell McCann
Civil Action No. H-08-2196, July 11, 2008 (U.S. District Court, Southern District of Texas)

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of

e-mail: [email protected]

Mortgage Lawsuits News | Mortgage Litigation Index
Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.

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.

FHA News | Government Resources | M o r t g a g e e Letters | FHA Statistics
FHA, VA and HECM mortgage news. HUD and G i n n i e news also. Originations, servicing and FHA approval.

Mortgage REIT news | REIT Directory
Coverage of real estate investments trust companies, litigation and corporate activity.

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