An investment firm took a major position in two major mortgage bankers as the acquisition of three other mortgage and banking companies was completed. Meanwhile, mortgage related charges of more than $2.5 billion hurt the earnings of two international financial institutions.
UBS reported a pretax operating loss of $626 million for the third quarter. The main culprit was the $3.6 billion in negative revenues the Swiss investment firm’s fixed income, currencies and commodities business experienced from “substantial losses and writedowns” in trading positions related to the U.S. subprime residential mortgage-backed securities market.
Irwin Financial Corp. announced a third quarter loss of $18.0 million, down from a $5.5 million profit during the second quarter. Over $17 million of the loss was from repurchases in discontinued operations, while ongoing home equity lending operations were hurt from “the collapse of liquidity in the secondary mortgage market.”
Credit Suisse Group said a drop in net income reflected a valuation reduction of about $945 million in residential and commercial mortgages and collateralized debt obligations and another valuation reduction of around $945 million on leveraged loan commitments, net of fees and hedges.
The Securities and Exchange Commission reached a tentative $200,000 settlement former executives and associates of Metropolitan Mortgage & Securities Inc. over alleged fraud that led to the investment firm’s demise, according to documents filed in a Washington U.S. District Court.
An amended 2006 complaint alleges Metropolitan misled investors by trying to hide the company’s deteriorating financial condition through a series of complex real estate sales designed to illegally boost the company’s reported earnings. Metropolitan eventually filed for bankruptcy in February 2004, causing losses of $450 million to some 10,000 investors.
Countrywide Financial Corp. is being sued by Entwistle & Cappucci LLP and Susman Godfrey LLP for alleged violations of federal securities laws and California state law, the law firms announced. The class action suit, which also names top company executives Angelo R. Mozilo, David Sambol and Eric P. Sieracki, is on behalf of purchasers of either or both series A and B debentures from this May 17 through Aug. 9. The lender is accused of artificially inflating the price of debentures through fraudulent statements and omissions that concealed its deteriorating financial condition as a result of increased delinquencies and defaults on subprime loans.
Mozilo and other Countrywide executives are also being sued by the New England Teamsters and Trucking Industry Pension Fund for allegedly improperly using $2 billion in cash to repurchase stock that helped artificially inflate the lender’s stock price and generate improper gains for the executives, Reuters reported. It said the move allowed executives to sell shares of Countrywide worth $842 million at artificially high prices from April 2004 to October 2007, at the expense of ordinary shareholders.
During the third quarter, Brandes Investment Partners LP bought 45.7 million shares of Countrywide and 12.9 million shares of Washington Mutual Inc. for an undisclosed amount, according to a 13F-HR filing Monday with the SEC. A similar filing for the second quarter did not show Brandes had a stake in either of the companies. The third quarter purchases, however, give Brandes a 7.9 percent stake in Countrywide — making it the second-biggest shareholder after Legg Mason Capital Management I — and a 1.5 percent stake in WaMu, the Seattle Post-Intelligencer reported.
Mortgage Assistance Center Corp. announced it received a $50 million investment facility from a large Dallas, Texas-based investment fund with which it will form joint ventures and use the funds to buy pools of distressed residential real estate and mortgages. The companies already formed an initial joint venture and funded and bought a pool of residential assets for $4.3 million. Mortgage Assistance, which focuses on rehabilitating and reselling distressed real estate assets in the secondary market, will service each pool purchased. The investment fund will be granted a warrant to purchase up to one-third of Mortgage Assistance’s common stock, and the warrant will vest in increments as the investment fund provides funds.
Noting that it recently underwent a company and personnel restructuring, Dallas-based Mortgage Assistance added that it is “now financially positioned to take great advantage of the many opportunities in the distressed sub-prime market.”
On Tuesday, a judge approved bankrupt HomeBanc Corp.’s proposed sale of a portion of its mortgage servicing portfolio to EMC Mortgage Corp., HomeBanc attorney Matthew W. Levin told MortgageDaily.com in an e-mail statement. While the purchase price will be fixed at closing, it is estimated the unit of Bear Stearns Cos. will pay $61 million for the deal.
Chittenden Corp. completed acquiring Community Bank & Trust Co. The Vermont-based lender issued about 3.1 million shares of its common stock and paid approximately $31 million in cash for all outstanding shares of Community, which well be merged into Ocean Bank.
Genworth Financial, Inc.-subsidiary Senior Financial Inc. announced it completed the acquisition of Liberty Reverse Mortgage Inc., a reverse mortgage lender. Liberty is based in Rancho Cordova, Calif.
Branch Banking and Trust Co. has closed on the purchase of Collateral Real Estate Capital LLC, parent BB&T Corp. reported. Collateral, a commercial mortgage company, was integrated into Laureate Capital LLC, another BB&T subsidiary, and renamed Grandbridge Real Estate Capital LLC — making it “one of the largest full-service commercial and multifamily mortgage banking companies in the nation.”
Grandbridge has a commercial real estate servicing portfolio of more than $20 billion and projects more than $9 billion in originations this year, the statement said. The Charlotte-based entity will be a Fannie Mae delegated underwriting and servicing lender and a Freddie Mac Program Plus seller and servicer. In addition, it will originate multifamily products insured by the Federal Housing Administration and offer programs including life insurance companies, pension funds, commercial mortgage-backed securities and proprietary products.
“We can now provide both third-party and on-book bridge financing through our subsidiary, Grandbridge Funding LLC, to facilitate and position long-term financing opportunities,” Thomas Dennard, who was appointed as president and CEO of the combined entity, said in the announcement.
The new firm reportedly employs 325 people at 27 loan production offices.
