While mortgage-related casualties showed no sign of abating in the latest week of mergers and corporate activity, a hard money lender expanded with its acquisition of a subprime lender.
But first, the Mortgage Bankers Association commended Securities and Exchange Commission Chairman Christopher Cox for the letter he sent to House Financial Services Committee Chairman Barney Frank, according to a news release. The letter affirms that lenders can make loan modifications when a default is reasonably foreseeable, rather than waiting until the loan is in default, and that these would not result in a requirement for servicers to account for those securitized assets on their balance sheets.
“This interpretation clears the way for our members to use all the tools at their disposal to help borrowers in trouble,” MBA said in the announcement.
The board of Central Pacific Financial Corp. authorized a new stock repurchase authorization of up to an additional 1.5 million shares or about 4.9 percent of its outstanding common stock.
Meanwhile, ECC Capital Corp. said it will deregister its common stock on or about July 30 with the SEC due to the incremental cost of compliance with the Sarbanes-Oxley Act and other public company reporting requirements. ECC, which earlier this year sold its wholesale mortgage operations to Bear Stearns, is eligible to deregister because it has fewer than 300 common stock holders of record.
Bear Stearns Cos., which previously provided a $1.6 billion facility to its High-Grade Structured Credit Strategies Fund, seized assets of the hedge fund because the fund failed to maintain its margin obligations as part of the loan agreement, MarketWatch reported Thursday, adding that $1.3 billion of the loan remained.
Bear might be sued by investors who lost money in that hedge fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund. Law firm Klayman & Toskes P.A. announced that it launched an investigation on the possibility of taking legal action after Bear’s July 18 announcement that “there is effectively no value left for the investors in the Enhanced Leverage Fund and very little value left for the investors in the High-Grade Fund.”
With more than $1.5 billion in investments “and additional leverage taken out on the capital, Bear Stearns bet heavily on the market for subprime mortgages and invested in thinly traded collateralized debt obligations,” the law firm said. “As a result of the slumping U.S. housing market, the Bear Funds have collapsed within a very short period of time, and investors have lost about $1.9 billion.”
Absolute Capital Limited, an Australian structured credit fund manager, announced it temporarily suspended withdrawals from two of its funds due to the current lack of liquidity in global structured credit markets. The suspension affects the Absolute Capital Yield Strategies Fund and the Absolute Capital Yield Strategies Fund NZD, which together have about A$200 million in funds invested or reportedly $177 million. The funds have investment exposure to structured credit assets, including Collateralized Debt Obligations, while exposure to U.S. subprime has been less than 5 percent “and we use little leverage,” the company noted in an announcement.
Orchid Island TRS LLC will be selling substantially all of its remaining mortgage servicing portfolio in a deal expected to close by Sept. 4, parent Opteum Inc. announced. The aggregate unpaid principal balance of the loans underlying the servicing rights sold was approximately $2.97 billion as of June 30. The proceeds will be used to repay debt that is currently secured by the portfolio and for other general corporate purposes.
In a $130.8 million stock-and-cash deal, United Community Financial Corp. will acquire PVF Capital Corp. Upon merging, Park View Federal Savings Bank offices will become branches of The Home Savings and Loan Co., giving Home “considerable presence” in the Greater Cleveland market. The merger of the two Ohio-based companies is expected to close at or near yearend.
Quality Homes Loans, which claims it is the nation’s leading hard money lender, acquired subprime lender Bankers Express Mortgage Inc., according to an announcement. The merger adds 50 employees to Quality’s 130-person workforce and consolidates operations of Bankers Express from a Calabasas, Calif., location in Quality’s nearby Agoura Hills headquarters.
“This transaction will allow us to offer a broader array of residential hard money loans and builds on our strength in California with a strong presence in Florida” — the nation’s two most important geographic areas for nonconforming lending, Quality CEO John Gaiser said in the announcement.
Simultaneous with the acquisition, Quality reportedly obtained a $40 credit facility from hedge fund Pacificor LLC.
First Mariner Bancorp has exited the wholesale lending market in conjunction with a second quarter net loss of $3.865 million associated to problems with wholesale Alt-A loans, according to an announcement.
“We have been aggressive in identifying the potential loss in our wholesale-originated mortgage products, specifically Alt-A financing, which have been repurchased under recourse provisions,” First Mariner Chairman and Chief Executive Edwin F. Hale Sr. said in the written statement. “Further value declines in residential real estate, particularly in the Northern Virginia region, resulted in the recognition of additional loan loss provisions, valuation reserves, and write-downs on foreclosed real estate totaling $5.0 million for the quarter.”
The additional loss provision was the result of falling property values, Hale added.
