Another Bad Credit Home Loan Lender Sold
A bad credit home loan lender that had dodged the shutdowns and takeovers that gradually wiped out independent rivals in the mortgage business this year joined the list Monday by agreeing to sell itself to a private equity fund, the Los Angeles Times reports.
San Diego-based Accredited Home Lenders Holding Co. had been viewed as one of the best-managed specialists in loans to risky borrowers. But battered by losses, the company agreed to be acquired by Lone Star Funds, which has been buying distressed real estate and financial companies.
The $400-million price is approximately the value on Accredited’s balance sheet of the cash, mortgage loans, office equipment and other assets, with little or no premium for the experience and talent of the employees, said Roth Capital analyst Rich Eckert in Newport Beach.
But the price beat those fetched by rivals such as New Century Financial Corp. and Option One Mortgage Corp. Option One, which hedge fund Cerberus Capital Management acquired from H&R Block, sold for about 75 percent of book value, Eckert said.
New Century, which is being liquidated in bankruptcy, “couldn’t even give away its loan origination business,” he added, although the home mortgage company found buyers for its loans and customer-service arm.
The bad credit mortgage loan lenders, many of them thinly capitalized, had been relying on Wall Street to fund them and buy their loans. They ran out of money this year amid a barrage of demands that they buy back defaulted mortgages.
With $5 billion in capital, the Lone Star fund acquiring Accredited “will let the home loan business stabilize and ultimately sell it to a commercial bank or an investment bank,” Eckert said.
Representatives of Accredited couldn’t be reached for comment.
In a statement, Len Allen, Lone Star’s president of U.S. operations, said, “With our additional experience and capital, we are confident Accredited can successfully manage through the current industry dynamics.”
Sub-prime business is now dominated by diversified home loan lender institutions such as Countrywide Financial Corp. and San Francisco-based Wells Fargo & Co., which issue the majority of their mortgages to customers with good credit.
Accredited originated $15.8 billion in sub-prime mortgages last year, the 18th most in the nation, said Friedman Billings Ramsey analyst Mike Youngblood.
The home mortgage company said in April it was considering a sale. Last month it failed to file its first-quarter report with the SEC, warning of a “significant loss,” compared with a $35.8-million profit a year earlier.
Orange-based ACC Capital Holdings, the leading independent sub-prime lender in 2004 and 2005, downsized sharply but stayed in business after Citigroup provided it with new capital in return for an option to buy ACC’s Argent Mortgage and the servicing arm of its affiliate Ameriquest Mortgage Co.
Fremont General Corp was forced out of the sub-prime business this year by the FDIC, and recently ceded management control to an investor group headed by a banking veteran who promised to return the company to traditional lending.
The sub-prime crunch has been especially hard in Orange County because it is home to so many California mortgage lenders, many of which issue sub-prime loans.
Employment in the county at mortgage originators fell 8.9 percent to 20,500 jobs in April from a year earlier, according to the L.A. County Economic Development Corp. Statewide, the drop was 5.1 percent to 89,500 jobs.
SOURCE: Los Angeles Times