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Mergers, Acquisitions & Lawsuits

Recent corporate activity in mortgage lending

September 4, 2007

By COCO SALAZAR


photo of Coco Salazar

Corporate activity in the mortgage sector continues to by clouded by litigation -- though some mergers progressed.

Freddie Mac reported second quarter credit-related expenses rose to $336 million from $63 million a year earlier, partly reflecting a $320 million provision for credit losses related to higher transition rates from delinquency to foreclosure on 2006 and 2007 loan originations. The secondary lender also reported non-interest expense included losses of $205 million on loans, largely due to an increase in non-performing loan purchase volume and a decline in the air value prices of non-performing loans purchased out of participation certificate pools.

H&R Block Inc. announced that $192.8 billion of its overall $302.6 million net loss for the fiscal 2008 first quarter came from discontinued operations, including Option One Mortgage Corp. The subprime unit is on the block -- though liquidation of all but the servicing division is being considered.

Australian hedge-fund manager Basis Capital Group sought U.S. bankruptcy protection under Chapter 15 for its Basis Yield Alpha Fund (Master). The operation invests primarily in collateralized debt obligations.

Susman Heffner & Hurst LLP announced it filed a class action on behalf of investors who purchased American Home Mortgage Investment Corp.'s common stock in an April 30, 2007, secondary offering. The suit, filed in New York, alleges that American Home provided overstated financial results and concealed the credit risk it faced up until the end of July, when it announced its inability to fund its lending obligations.

Another firm representing buyers of that secondary offering is Murray, Frank & Sailer LLP, according to a separate announcement.

American Home is also being sued by Glancy Binkow & Goldberg, on behalf of investors who acquired shares between April 26, 2006, and July 30, 2007, and Lockridge Grindal Nauen PLLP, on behalf of shareholders between July 26, 2006, and July 27, 2007.

MFA Mortgage Investments Inc. today said it plans to make a public offering of 10 million common stock shares with an additional 1.5 million shares for underwriters to cover over-allotments. MFA expects to use most of the proceeds to acquire high quality mortgage-backed securities and also for working capital, which may include repayment of repurchase agreements.

Accredited Home Lenders Holding Co. rebuffed a lower $8.50 bid from Lone Star Fund V, which originally offered $15.10 per share. In a press release filed with the Securities and Exchange Commission, the subprime lender said it will continue to pursue the original price through its ongoing lawsuit against Lone Star and two of its affiliates.

The Office of Thrift Supervision recently approved for Fox Chase MHC and unit Fox Chase Bancorp Inc. to buy the common shares of Philadelphia Mortgage Advisors Inc. and for Fox Chase Bank to make a pass-through investment in Philadelphia Mortgage. The transactions must occur within 120 days from Aug. 15.

Today, Fox Chase Bancorp today said it authorized the funding of a trust that will purchase up to 287,500, or almost 2 percent, of its outstanding common stock. The shares acquired by the trust will be used to fund restricted stock awards under the company's 2007 Equity Incentive Plan.

SCBT Financial Corp. said it will create the largest community bank operation in North and South Carolina through its acquisition of TSB Financial Corp., with approximately $2.6 billion in combined assets. The $43.4 million stock-and-cash deal is anticipated to close in the fourth quarter.

Meanwhile, National City Corp. gained retail entry into Milwaukee, Wis., through its acquisition of MAF Bancorp and its subsidiary MidAmerica Bank. The merger deal was completed Saturday.


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

e-mail: [email protected]


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