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Citigroup Bigger in Texas

Citigroup Bigger in TexasRecent mergers and acquisitions activity

March 30, 2005

By COCO SALAZAR

Mortgage-related mergers and acquisitions this week include the governments’ approval of Citigroup’s big expansion in Texas.

In Kenosha, Wis., last week, MasterCraft Builders announced the formation of its new full-service mortgage company Signature Banc.

“The partnership with Signature Banc allows MasterCraft to serve every aspect of our customers’ home-building needs,” said MasterCraft general manager Mike Lawrence in the prepared statement.”

Signature says it allows interest only payments during construction time, and interest rates are locked for up to 18 months. Building costs and land purchases are financed up to 100 percent LTV under the lender’s program.

The removal of third party mortgage financing reportedly reduces costs and time for borrowers. “Because Signature Banc is the exclusive lender to MasterCraft Builders, the customer can complete the necessary paperwork and close on-site following the walk-through,” the builder said.

The Federal Reserve Board recently approved Citigroup’s acquisition of First American Bank, a transaction structured as a cash purchase of the outstanding shares of First American, according to the order of approval.

The acquisition would occur immediately after the conversion of First American to a national bank. The Texas bank will relocate its main office, currently in Bryan, to Dallas and change its name to Citibank Texas, the order said.

In the public comment period regarding Citigroup’s proposal to acquire, a commenter alleged that the New York-based lender engaged in discriminatory lending by directing minority customers to its subprime lending subsidiaries, rather than to its prime lending channels. The commenter also alleged that 2003 HMDA data showed that the denial disparity ratios of some of the Citigroup’s prime lenders in certain markets indicated they disproportionately denied African-American or Hispanic applicants for mortgages, according to the order.

The Fed said HMDA data did not support the commenter’s first claim. Also, although the data indicated Citigroup prime lenders’ denial disparity ratios for the infirmities in the markets reviewed were generally higher than the ratios for all lenders that report HMDA data, the prime units had higher originations rates for loans made to African-American and Hispanic borrowers than all lenders in all but one of the areas reviewed and generally made more loans to minorities than the subprime channels.

The acquisition must be consummated before the end of the second quarter, the Fed said.

In Green Bay, Wis., Associated Banc-Corp announced it will acquire State Financial Services Corp in an all-stock transaction valued at $278 million. The companies anticipate closing the transaction in the fall of this year.

State Financial, of Milwaukee, provides commercial and retail banking products, mortgage loan originations and investment brokerage activities throughout its locations in Southeastern Wisconsin and Northeastern Illinois.

Upon completion of the merger, the parent of mortgage-providing Associated Bank will reportedly have grown more than six-fold over the last 10 years.

General Motors Corp. is in talks with a number of private-equity and other financial firms about selling a stake in its GMAC Commercial Mortgage subsidiary in a deal that could be valued at $1 billion to $2 billion, people familiar with the matter reportedly told the Wall Street Journal. Should outside investors take as much as a 50% stake, the deal could raise as much as $1 billion for the car maker.

The deal’s possible proceeds are minuscule compared to the $300 billion in debt the parent company has outstanding, but would be a step against the threat of a credit downgrade for GM, the publication noted.

GM reportedly said the intention of GMAC, which originates and services mortgages in sectors ranging from health care to golf courses, is to maintain a significant equity interest in the business.

The auto giant said that while the deal is not definitive, an equity partner is a source of funding, according to the Journal.

First Advantage Corp. has executed a letter of intent to acquire the Credit Information Group from First American Corp. in all-stock deal expected to take place by the third quarter, according to a press release.

Following the transaction’s closing, First Advantage’s business solutions will expand to include the mortgage/home equity credit, automotive finance and direct-to-consumer credit markets currently dominated by Credit Information Group, the company said.

First American, a data provider, reportedly owns 69 percent of First Advantage, but will increase its interest in First Advantage to approximately 80 percent upon completion of the acquisition.

Senior management of the acquired company will join the executive management team at First Advantage, according to the announcement, and its new president will be Anand Nallathambi, currently president of Credit Information.


Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.email: s3celeste@aol.com

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