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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.


Mergers, Liquidity and Earnings

Recent mergers, acquisitions and corporate activity

September 14, 2007

By COCO SALAZAR


photo of Coco Salazar

Earnings and liquidity continue to preoccupy executives and boardrooms of mortgage companies -- though some merger activity maintained. But as lenders grapple with unprecedented chaos in the mortgage market, class action attorneys are busy filing numerous lawsuits alleging investors were deceived.

But first, the Office of Thrift Supervision announced two enforcement orders against Gregory S. Cipa, former president of Fox Savings Bank of Hatboro, Pa. He is prohibited from unapproved activity at financial institution and must pay a $10,000 civil penalty. Cipa allegedly benefited from bank fraud.

The Office of Federal Housing and Enterprise Oversight said Fannie Mae and Freddie Ma have implemented the federal bank regulators' Statement on Subprime Mortgage Lending to their mortgage purchases and applied this and the Interagency Guidance on Nontraditional Mortgage Product Risks to the purchase of private-label securities.

Origen Financial Inc. said it obtained a $15 cash infusion to protect its business in the shaky credit market. The financing for the real estate investment trust, which originates and services manufactured housing loans, is secured servicing rights on some of its more than $1 billion portfolio.

Fitch Ratings recently reported that REITs are typically rated one or two notches lower than non-REITs because they need more capital as a result of required dividend distributions of 90 percent of taxable income. One of positive is the ability to meet investor demand for yield-oriented stocks. But revoking REIT status may not necessarily be a credit positive since such a move is usually triggered by a company's inability to operate under REIT parameters.

Meanwhile, Countrywide Financial Corp. announced that it recently arranged for a an additional secured borrowing of $12 billion through new or existing credit facilities. The move is just one of the steps it has taken since August to address its liquidity and funding needs amid the "turbulent conditions in the mortgage and credit markets."

The mortgage sector, led by American Home Mortgage Investment and Countrywide Financial Corp., contributed to a 16 percent downward revision of projected annual earnings at financial firms, Zacks.com's recently announced.

MFA Mortgage Investments Inc. said it expected to net $86.9 million after completing a public offering Monday. Proceeds will be invested in mortgage-backed securities.

U.K.-based Northern Rock plc announced "extreme conditions in global liquidity" will not only contribute to lower-than-anticipated annual pretax earnings but have also prompted it to obtain funding from the Bank of England. The self-described fifth largest mortgage lender in Britain said it has been using its cash and other liquid reserves to support funding, as short-term wholesale debt markets have not allowed it to refinance maturing liabilities and write new business at previous levels.

The agreement with the Bank of England calls to either borrow on a secured basis or enter into repurchase facilities, which would include securities backed by prime residential mortgage assets, Northern Rock said, adding that this additional source of funding reflects that the company remains "solvent, exceeds its regulatory capital requirement and has a good quality loan book."

In a Securities and Exchange Commission filing Wednesday, NovaStar Financial Inc. said creditor Wachovia Bank and its affiliates, which provided a $1.9 billion comprehensive financing facility, eliminated the adjusted tangible net worth to required equity ratio requirements and decreased the minimum net to $150 million from $517 million. The minimum required servicer ratings were also eased, while Wachovia has the right to appoint a back-up servicer.

On Wednesday, a U.S. bankruptcy court approved for TransLand Financial Services Inc. to obtain financing for warehouse lines of credit from new lenders, and for reverse mortgages and construction loan draws.

On Sept. 6, GMAC LLC received a $21.4 billion asset-backed funding facility from Citigroup Inc. to provide funding for U.S. mortgage and other assets, according to an SEC filing. The credit line replaces an existing $10 billion facility and be expanded.

On the commercial side of business, Hunter Wise Financial Group LLC announced it facilitated a $200 million senior line of credit for Commercial Capital Inc., which now has lending capacity of over $350 million.

Luminent Mortgage Capital Inc. said it has sold all but five pending repurchase loans financed on warehouse lines, paid down warehouse lines that financed nearly $600 million in non-securitized whole loans and maintained its interest in its 10 whole loan securitizations.

But that didn't stop Berger & Montague P.C. from comencing a securities class action on behalf of investors purchasing common stock of Luminent from Oct. 10, 2006, through Aug. 6, 2007, the law firm announced. Luminent is accused of failing to disclose or misrepresenting material adverse facts about its financial situation.

Milberg Weiss LLP may be joining Berger and other law firms in this effort, as it announced it began an investigation on Luminent for possible illegal misconduct as alleged by investors of securities over that period.

Allegations of misleading financial statements have also landed Thornburg Mortgage Inc. in class action lawsuits filed by Brodsky & Smith LLC and Abbey Spainier Rodd & Abrams LLP, who respectively represent purchasers of Thornburg common stock and securities between April 19, 2007, and Aug. 14, according to separate announcements.

Similar accusations lead Zwerling, Schachter & Zwerling LLP to file class action against American Home Mortgage Investment Corp. on behalf of all purchasers of the lender's securities between July 26, 2006, and July 27, 2007, and of its shares in the April 30, 2007, secondary public offering.

Mortgage-related casualties continued to mount.

Anworth Mortgage Asset Corp. projected a $143 million impairment charge after determining it is unlikely that its subsidiary Belvedere Trust Mortgage Corp. will obtain alternate financing to pay its loans. The charge consists of its initial $100 million investment in Belvedere and $42.8 million in inter-company loans to Belvedere, according to an SEC filing. Last month, Anworth said Belvedere had received a notice of default from two of its repurchase agreement lenders, in addition to substantial margin requests from several repurchase agreement lenders.

Portellus Inc. said it will wind down its mortgage technology business unit and subsequent sale of the unit's supporting technology assets. However, it has secured arrangements to preserve its multi-purpose Business Rules Management System.

But some merger deals are still making their way through the pipeline.

Lone Star Fund announced it extended its tender offer to buy Accredited Home Lenders Holding Co. until midnight tonight. Lone Star continues to believe that the conditions to closing remain unsatisfied and may extend the offer for additional periods.

CapitalSouth Bancorp said it completed its acquisition of Monticello Bancshares Inc. today, a deal that will expand its presence in the Southeast and increase assets to an estimated $760 million.

Bank of America Corp. expects to soon be the leading banking franchise in Chicago, Ill., and Michigan, as its pending purchase of LaSalle Bank received the final regulatory approval necessary for the deal to close in early October, according to an announcement today.

Commercial mortgage lender Apartment Lending Corp. merged into a division of Colorado Federal Savings Bank -- the second most profitable thrift in the nation, according to a recent statement. The newly merged division, dubbed CoFedBank Commercial Lending, is a direct nationwide permanent lender of multifamily, mixed use, retail, office, and other commercial properties.


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

e-mail: [email protected]


The Mortgage Graveyard
Failed, closed and a c q u i r e d mortgage-related entities.



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.



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


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




Commercial Mortgage News | CRE Lender Directory | CRE Statistics
Stories about commercial lending on multifamily, office, retail and industrial properties.


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