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Fannie Fine Tops Corporate Mortgage News

Fannie Fine Tops Corporate Mortgage News

Recent mergers, acquisitions and corporate transactions

May 23, 2006

By COCO SALAZAR

photo of Coco Salazar
A nonprime lender is among recent mortgage and banking acquisitions, while word is Fannie Mae may pay a $400 million fine.

Hawaii-based Finance Factors said its is considering becoming a bank. Shareholders are expected to take action at a June 7 meeting, according to an announcement Wednesday.

The current charter as a “depository financial services loan company” prevents Finance Factors from meeting the changing needs of its customers, whereas conversion to a Hawaii state bank would enable it to expand its menu of products and services, according to the announcement.

The company noted that “discussions are still very preliminary and we have many decisions to make about what the “new” Finance Factors Bank will look like and what specific products and services we will offer.”

The Illinois Department of Financial and Professional Regulation approved Midwest Banc Holdings Inc. acquisition of Royal American Bank for $133.3 million in stock and cash, according to an announcement Friday.

Royal American shareholders must approve transaction, which is expected to be complete at the end of June, the announcement said. The deal will create a $2.9 billion bank with 24 Chicago-area branches.

First Republic Bank announced today it agreed to acquire BWC Financial Corp. and subsidiary Bank of Walnut Creek in a deal expected to close in the fourth quarter.

The acquisition will extend Bank of Walnut Creek’s home mortgage offerings, according to an announcement, though the majority interest in BWC Mortgage Services was sold to BWC president Scott Simonich. The mortgage services company will continue to be headquartered in San Ramon, Calif.

Meanwhile, PHH Corp. said in a May 11 filing with the Securities and Exchange Commission that it expects to miss its deadline to file first quarter financials and its extended deadline to file its 2005 annual report because its audit “was and is ongoing.”

In March, PHH explained the filing would be late for reasons primarily related to the documentation and analysis of certain spin-off, including the allocation and valuation of certain tax assets, the valuation of goodwill and intangibles, the consolidation of PHH Home Loans LLC, and the assessment of other tax items.

As it continues its evaluation, other accounting issues, individually or in the aggregate, “may result in material impairments to assets and/or material adjustments to or restatements of our financial statements for prior periods or prior fiscal years,” PHH said in the May filing.

Deutsche Bank AG, of Germany, said Wednesday it will acquire Chapel Funding LLC, a California-based mortgage originator, according to an announcement Wednesday.

“This transaction is an important step for Deutsche Bank as we continue to develop a vertically integrated residential mortgage-backed securities business,” said Phil Weingord, managing director and head of global markets for the Americas, in the announcement. “The integration of a mortgage originator will provide significant competitive advantages, such as access to a steady source of product for our securitization program.”

Chapel Mortgage Corp. has ceased doing business under the names Chapel Funding Corp. and Consumer First, Deutsche reported.

Fannie Mae announced Friday Dennis R. Beresford will replace Thomas P. Gerrity as chairman of the board of directors’ audit committee.

Gerrity, a board director since 1991 who has played a “critical” role over the past 18 months in the progress Fannie has made in improving its internal audit department, bringing on board a new external audit firm, and making strides forward in the restatement process, will step down from the chairman position and leave the board by the end of 2006.

“Denny’s significant financial accounting and board experience will provide valuable expertise to Fannie Mae’s board and its Audit Committee as the company works toward completion of our financial restatement and return to timely filings, and completes building its new finance, controller’s, audit and compliance organizations,” Fannie said.

Beresford experience reportedly includes directorial positions with Ernst & Young LLP, the Financial Accounting Standards Board and Legg Mason Inc.

The announcement came days prior to Tuesday’s expected release of a major report on an extensive examination of Fannie by its regulator, the Office of Federal Housing and Enterprise Oversight, that was prompted by accounting problems.

Published reports Monday indicated the secondary mortgage behemoth could pay a fine of between $400 to $500 million dollars.


Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.e-mail: MortgageWriter@aol.com

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