PNC Bank Corp., redoubling its push into mortgage banking, plans to buy a $10 million serving portfolio from a Ford Motor Co.unit for about $117 million.
The deal, announced Tuesday, would mark the largest mortgage servicing acquisition ever, experts said. It would increase PNC's servicing portfolio by more than 25%, to $46 billion, making the company one of the top 10 servicers in the country.
Last summer, PNC burst onto the national mortgage scene by purchasing the mortgage unit of Sears, Roebuck and Co. for $328 million.
Eye on Fee Income
The latest move comes as commercial banks around the country have been snapping up mortgage banking assets, in efforts to forge closer ties with consumers and to boost fee income.
Most major acquisitions have entailed entire mortgage companies. In Ford's Associates Corporation of America, PNC is buying a stand-alone servicing portfolio.
PNC will gain the rights to earn fees by processing monthly payments on the $10 billion of loans.
Servicing is often the most profitable part of mortgage banking, particularly when loan originations slump, as the have this year.
PNC bought the portfolio to be able to "provide additional products and services to these new mortgage customers," said James E. Rohr, president of PNC Bank Corp.
The acquisition will increase PNC's economies of scale in servicing, added Walter C. Klein, chief executive of the mortgage unit.
The rights comprise "substantially all" of the loans in Associates' portfolio, according to a spokesman for the Dallas-based unit. Associates plans to wind down its servicing operations there, resulting in the loss of about 120 jobs.
Associates will continue to originate and service mortgages, but principally as a complement to its relocation business.
A huge industrywide slowdown in the number of loans originated has led to a torrid pace of servicing sales since the beginning of the year, according to William Curley, a managing director at Cohane Rafferty Securities, a large servicing broker.
PNC's deal calls for the banking company to pay Associates 1.17% of the face value of the servicing portfolio at the time the deal closes.
