WMC Mortgage Co. has sold off the majority of its conventional servicing portfolio, confirming that the former Weyerhaeuser Mortgage Co. intends to focus on the more lucrative subprime originations market.
First Nationwide Mortgage Corp. chief executive Walter C. Klein Jr. said his company bought about $3.3 billion in servicing from WMC at the end of last month. WMC had about $4 billion in servicing before this sale.
The selloff came days after the sale of Weyerhaeuser Mortgage closed. Weyerhaeuser Co., the paper and forest products giant based in Federal Way, Wash., announced in February that it had agreed to sell the mortgage company to WMC Acquisition Corp.
WMC Acquisition is a joint venture of Spring Mountain Escrow Inc. and Apollo Advisors LP, an investment firm run by former Drexel Burnham Lambert mergers and acquisitions chief Leon Black.
Scott A. McAfee, a veteran mortgage banker and chief executive of Spring Mountain Escrow, took over as chief executive of WMC Mortgage once the deal closed, replacing Donald Lange. Mr. Lange remained with Weyerhaeuser Co.
Soon after the Weyerhaeuser Mortgage sale was announced, investment bankers said Apollo would look to speed the company's exit from the servicing business and focus on its growing subprime operations. Many said Mr. Black would look to bring the company public.
Last year, Weyerhaeuser sold about $5 billion in servicing. Its subprime division originated $500 million last year, volume that is expected to double this year.
Subprime lending is more profitable than the conventional loan business, because consumers with poor credit histories are charged higher rates. But greater risk can offset the higher margin.
Overall, the company originated $3.5 billion last year, making it the 40th-largest originator. But one investment banker said it would not be a surprise if WMC sold off its conforming loan production capability now that it has gotten rid of most of its servicing.
WMC officials did not return calls seeking comment.
First Nationwide was the only company that made a bid for WMC's servicing.
Apollo and First Nationwide hammered out the deal without the help of Wall Street firms or servicing brokers.
Mr. Klein said First Nationwide, a subsidiary of California Federal Bank, was approached by Apollo to buy the servicing soon after the WMC transaction closed. Mr. Klein said First Nationwide had sought to purchase all of Weyerhaeuser Mortgage but was outbid by the Apollo-led group.
When the deal for WMC closed last month, Weyerhaeuser Co. disclosed that WMC Acquisition Corp. paid $192 million for the mortgage company. At that time, several investment bankers estimated that the servicing was probably worth between $45 and $60 million.
First Nationwide, based in Frederick, Md., was the nation's 10th-largest servicer at the end of last year. Following the purchase of servicing from WMC, First Nationwide's portfolio exceeds $65 billion, Mr. Klein said.
First Nationwide Bank acquired CalFed earlier this year but retained the CalFed name for the thrift parent. CalFed is owned by MacAndrews & Forbes Holdings, the investment firm run by well-known financier and former Revlon chairman Ronald Perelman.
