The mortgage unit of a forest products giant wants to originate and service more home loans for other companies.
The aim is to generate enough business for Tacoma, Wash.-based Weyerhaeuser Co. to remain in the mortgage business.
Thomas Grainger, chief operating officer of Weyerhaeuser Mortgage Co., said it has sold $5 billion of servicing rights this year, cutting its portfolio in half.
Many companies of similar size have left the business in the last two years through merger or sale. For example, Accubanc Mortgage Corp. bought Medallion Mortgage Co. and its $2 billion of servicing early last year, and ABN-Amro Holding bought Metropolitan Service Corp. and its $2.4 billion of servicing.
But Mr. Grainger said that, despite a published report, Weyerhaeuser Co. is not offering the mortgage unit, based in Woodland Hills, Calif., for sale.
"We are committed to the business," he said. "We have no plans to spin off the mortgage unit, and there is no investment banker looking to sell it."
For the last year, Weyerhaeuser has originated loans for three small banks and savings and loans, Mr. Grainger said. It has also started signing subservicing clients, he said.
Industry observers say the parent company has grappled for years with whether to leave the mortgage business, and repeatedly decided to stay.
Weyerhaeuser Mortgage faces stiff competition from the large companies that dominate the scene.
"It would be difficult to sell the idea of an initial public offering to investors for a $5 billion servicer in a world of $100 billion servicers," said an investment banker.
Other industry insiders wondered aloud why Weyerhaeuser is in the mortgage business at all, since it offers no other financial services and does not sell homes. Observers agree the sale of half its servicing portfolio reduced its bargaining power and options.
Mr. Grainger said the sale was made to take advantage of a good servicing market. The deal should not be seen as an indication that Weyerhauser's interest in mortgage lending is waning.
Under accounting rules, he noted, the $5 billion of servicing sold was subject to writedowns. "Rather than hedge it, we sold it," he said. "We retained what wasn't subject to writedown. The selling price for servicing was outstanding, and we couldn't justify keeping it."
