Sept. 25 (Bloomberg) -- Wilbur L. Ross Jr., the billionaire investor who's going into the mortgage business, was named lead bidder for the loan-servicing unit of bankrupt American Home Mortgage Investment Corp. with a $435 million purchase offer.
U.S. Bankruptcy Judge Christopher Sontchi in Wilmington, Delaware, today approved a request by American Home to auction its servicing unit, which collects payments and maintains escrow accounts for about $45.3 billion in home loans, naming Ross's AH Mortgage Acquisition Co. as the so-called stalking horse bidder.
``Ross is a very well-respected investor,'' said Eugene Weil, the company's financial adviser. Having him as the lead bidder ``sends a very strong message to the broader buyer community.''
Ross, 69, who made much of his fortune investing in bankrupt steel and coal companies, is betting on a rebound in the mortgage industry after investors drove at least 16 lenders, including American Home, into bankruptcy by refusing to buy loans they made to people with poor or incomplete credit histories.
American Home, based in Melville, New York, filed for bankruptcy Aug. 6 and is among 90 mortgage companies that have quit making loans, closed or sold themselves this year.
If a rival outbids AH Mortgage at the court-sanctioned auction on Oct. 5, Ross would pocket as much as $7 million for a breakup fee and expenses. The company is hoping Ross's involvement will boost participation in the auction, American Home attorney Pauline Morgan said. Competing bids are due Oct. 2 and the company will ask Sontchi to approve a sale to whoever wins on Oct. 9.
`Bank Error'
Immediately after winning approval to name Ross as the lead bidder, American Home issued a statement blaming a ``bank error'' for bouncing about 500 checks that were supposed to pay the property taxes for some of its customers.
Weil testified that the proposed sale has three major pieces: $6 million for the physical assets of the company, including computers and offices; about $90 million to $100 million for the loan-servicing advances the company uses to pay its customers' taxes and insurance premiums; and about $400 million for the servicing rights themselves.
Ross will pay for the unit and take control by the end of October at the earliest, but he won't have final, legal title until AH Mortgage gets licenses from government regulators, Weil said. That could take about 10 months, he added.
AH Mortgage will run the day-to-day operations of the unit as soon as payment is made, Weil said.
The right to service part of American Home's portfolio has been challenged in bankruptcy court by the investment banks and government-chartered mortgage buyers that own many of the loans.
Lost Rights
Ginnie Mae, Freddie Mac, and affiliates of Bear Stearns Cos., Credit Suisse Group and Deutsche Bank AG have argued that American Home lost the servicing rights to billions of dollars of loans in the portfolio about the time it declared bankruptcy.
Ross said he expects to buy the right to service at least $38 billion in loans. If that figure climbs to $41 billion, he will pay $462 million for the company, he said.
American Home shares were up one cent to 48 cents in over- the-counter trading today.
The case is In re American Home Mortgage Holdings Inc., 07- 11047, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment