Making its first foray into retail originations, Dallas-based Amresco Inc. announced last week it plans to buy Quality Mortgage USA Inc., a subprime loan originator with a branch network, and its parent company, Calmac Funding Inc. The price is $95.2 million.
Quality, Irvine, Calif., has originated, funded, and sold more than $5 billion in B and C loans since its inception four years ago.
Amresco, which began acquiring residential mortgage portfolios last September, is already one of the top 10 securitizers of mortgage loans for consumers with blemished credit records. It has acquired more than $1.3 billion in loans this year.
The acquisition represents a natural extension of Amresco's overall strategy, said Scott Reading, president of Amresco Residential Funding, the company's home lending arm. "We've already made our splash in portfolio acquisitions. Now it's time to make a splash in retail originations."
Quality Mortgage has been plagued by downgrades of its securitized loan pools throughout the year and runoff of high-level employees. Originations have dropped off, in part because of the lack of capital due to 49% owner DLJ California's desire to pull out of the business, sources say.
But Amresco is confident that it can revive the company.
"Quality has been among the top five (subprime loan) originators in the past, and we believe the infrastructure is there to get them back quickly," Mr. Reading said. "The machine is there, it simply needs some tender, loving care."
Some industry observers and former employees attributed the employee runoff to the management style of its founders Russell and Becky Jedinak, who completely sold their 51% stake to Amresco.
Mr. Reading said that Amresco would most likely bring in a new president for Quality.
Amresco plans to expand their new subsidiary's branch network further in the Midwest and the East, he added.
In addition, Amresco will aggressively expand Quality's telemarketing program, Jet-X, which purchases loans from brokers in areas where it does not have branch offices. Last year, Jet-X brought in $3 million in loans, a number that Mr. Reading expects to expand significantly.
Amresco also acquired the prepayment-penalty rights for loans that Quality has originated since 1992.
The purchase is expected to close during the fourth quarter.