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Mortgage Industry Shake Up

Mortgage Industry Shake Up

Recent mergers, acquisitions and other corporate activity

October 18, 2007

By COCO SALAZAR

photo of Coco Salazar
This week, Thornburg Mortgage Inc. reported a massive loss, NovaStar Financial Inc. was booted from the New York Stock Exchange and the top securities regulator opened an investigation into suspicious stock trading by Countrywide Financial Corp.’s founder. On the bright side, a new mortgage conduit was launched for manufactured home financing while a $5 billion servicing portfolio traded hands.

Thornburg reported a third quarter net loss of $1.08 billion, tumbling from a profit of earnings of $0.08 billion a year earlier. The jumbo lender also canceled a quarterly common stock dividend to conserve cash.

E*TRADE Financial Corp. reported a $58 million third quarter loss — attributing the performance to “severe volatility in the credit markets.” The loss was primarily due to a higher provision for loan losses and securities write downs in its institutional segment.

A $1.09 billion loss on the sale of $21.9 billion in adjustable-rate mortgage assets was primarily responsible for the loss, the Santa Fe, N.M.-based company indicated.

NovaStar’s recent decision to abandon its real estate investment trust status for 2006 and avoid any related dividends violated the listing standards of the NYSE — which prompted the exchange to remove it from its trading list, according to a Tuesday announcement. Shares of NovaStar, which must now qualify as a corporation, will continue to be listed until a suspension date is announced.

NovaStar announced it intends to request a review of the NYSE Regulation’s determination and will explore alternative arrangements for the listing or quoting of its common and preferred stock.

Countrywide expects to incur a pre-tax charge of approximately $125 million to $150 million related to its plan to reduce costs and improve operating efficiencies, according to a filing Tuesday with the Securities and Exchange Commission. The restructuring charge, of which about $57 million is expected to be recognized in the third quarter and the rest in the fourth, consists of one-time termination benefits, lease termination costs, fixed asset disposals and other miscellaneous costs.

The SEC has opened an informal investigation into the stock sales of Countrywide Chief Executive Angelo R. Mozilo, the Wall Street Journal reported. New Century Financial Corp. is also among the dozen companies being investigated due to actions by senior executives using executive sales plans known as “10b5-1” plans, which enable executives to sell shares at regular intervals. The SEC is analyzing these plans after a study found some insiders may have abused the plans and started the plans just ahead of big stock drops.

The reported investigation follows a letter North Carolina Treasurer Richard H. Moore submitted to the SEC requesting an investigation of Mozilo’s stock sales and changes to trading plans to see if the CEO manipulated the system to sell the stock before its price fell dramatically.

Midland Loan Services Inc. announced it will service a portfolio of 800 commercial mortgages aggregating $5.2 billion for Cohen Financial LP. Midland will additionally perform a number of back-office servicing activities, including payment processing, bank account reconcilliations, real estate tax escrow and UCC administration. Cohen will remain responsible for customer service, loan, insurance and credit administration, asset management and special servicing activities.

“We have an aggressive growth strategy, so we needed a platform that would allow us to increase our servicing capacity and efficiency without a significant rise in overhead,” Cohen was quoted as saying in the announcement.

American Home Bank announced a new division that establishes joint ventures with manufacturers, builders and dealers of log, modular, panelized and concrete homes. American SystemBuilt Mortgage is a turnkey mortgage company solution that can be up and running in about 30 days and includes over 100 program options for construction to permanent financing, and over 1,000 programs for permanent mortgages.

The Office of the Comptroller of the Currency released a report listing bank mergers that were consummated in the third quarter 2006, when Bank of America acquired MBNA.

In activity of two or more nonaffiliated operating banks, Rancho Bank merged into Vineyard Bank; First National Bank of Mount Vernon merged into First National Bank; Valley State Bank merged into Girard National Bank; West Pointe Bank merged into Commerce Bank; McMullen Bank merged into Stillwater National Bank and Trust Co.; Guarantee State Bank merged into First National Bank and Trust Co.; Legacy Trust Co. merged into First National Trust Co.; The State Bank was acquired by First Tennessee Bank; and First Indiana Trust Co. was acquired by Marshall & Ilsley Trust Co.

In affiliated merger activity, which involves affiliated operating banks, UMB Bank of Colorado acquired Mountain States Bank; Inland Community Bank acquired Western State Bank; Northern Trust Bank of Florida, Northern Trust Bank in Phoenix, Ariz., Northern Trust Bank of California and Northern Trust Bank of Texas merged under the title Northern Trust N.A.; First Community Bank merged into Riverside National Bank of Florida; Century National Bank merged into Seacoast National Bank; Metrobank merged into The National Bank; Mercantile National Bank of Indiana merged into Harris N.A.; State Bank and Trust merged into Mount Prospect National Bank; Peoples State Bank of Mansfield merged into First Mid-Illinois Bank & Trust N.A.; Heritage Bank of Ashland Inc. merged into Citizens National Bank of Paintsville; 1st National Bank & Trust merged into Whitney National Bank; Trustmark National Bank acquired Republic National Bank; Citizens National Bank of Wisner, Bank of Leigh and The First National Bank of Belden merged to become Citizens National Bank; State Bank merged into Amfirst Bank N.A.; Pioneer Bank and Trust Co. and National City Bank of Indiana, Southern Indiana, Pennsylvania, of the Midwest and Kentucky merged under National City Bank in Cleveland; Park National Bank in Florence, Ky., merged into the Park National Bank, Newark; Westar Bank merged into U.S. Bank N.A.; First National Bank in Henryetta merged into First National Bank and Trust Company of Okmulgee; First National Bank of McConnellsburg merged into First National Bank of Greencastle; and Fremont National Bank of Canon City and Centennial Bank of Pueblo merged into Wells Fargo Bank N.A. in Sioux Falls, S.D.

At the time, the only nonaffiliated national bank and savings and loan association merger was that of Elmira Savings and Loan merging into Community Bank N.A., the report said.

 

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


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