NovaStar Mortgage Inc.'s purchase of an Indiana-based retail lending business will leave some employees out of work.
NovaStar will purchase 21 retail mortgage lending offices and certain other assets from Oak Street Mortgage LLC in a deal expected to close next quarter, the companies jointly announced today.
With the acquisition, the Missouri-based nonprime lender will create a new retail division by expanding beyond the current focus of customer retention programs, which a company spokesman said currently generate monthly production of about $70 million to $80 million.
"We expect this expansion into the retail market to enable us initially to increase loan production by $75 to $100 million a month," said Lance Anderson, chairman of NovaStar Mortgage and chief operating officer of the parent, in the announcement. "While Oak Street's retail channel is already an efficient loan origination operation, the elimination of duplicate overhead should further reduce the cost of production. This is a strategic opportunity for NovaStar to grow a centrally managed retail market channel, while lowering our overall cost of origination."
While the exact numbers have yet to be determined, the expectation is that NovaStar will hire about 500 of the roughly 700 retail employees Oak Street currently has in place, which include loan officers and operations people supporting the retail locations, the NovaStar spokesman said.
Oak Street, which will remain headquartered in Indianapolis, will exit the residential origination market and continue its commercial lending under the Oak Street Funding brand, according to the announcement.
"At a time when the marketplace has become more competitive and challenging, NovaStar offers an opportunity for our retail employees to join a nationwide lender with an excellent reputation and deep expertise in mortgage banking and portfolio management," said Oak Street Chairman and Chief Executive Steve Alonso in the written statement.
Oak Street will reportedly receive a slight premium over the book value of the assets being acquired plus an additional opportunity to earn payments over the next two years contingent upon the performance of the retail division during that period.