Bank of Virginia (BOVA) in Midlothian, Va., will invest in Stonegate Mortgage's residential mortgage-loan participation program.

The $180 million-asset bank said Tuesday that it had agreed to a $30 million, short-term mortgage-loan purchase-and-sale agreement with Stonegate. Bank of Virginia will purchase packages of Stonegate loans in an arrangement similar to a reverse-repo agreement 

"We've been looking carefully for high-quality investment opportunities in residential mortgages that can provide attractive returns within our risk parameters," Richard Dickinson, Bank of Virginia's president, said in a press release. Stonegate "has the financial resources, expertise, technology and commitment to quality that will enable our bank to deploy capital in to the residential real estate market in an effective manner."

Stonegate is an Indianapolis mortgage lender and servicer for agency and non-agency loans. It is backed by New York private equity firm Long Ridge Equity Partners.

Stonegate bought warehouse lender Natty Mac from Guggenheim Partners last September. Stonegate, which integrated the Natty Mac platform with its own securitization platform, now offers banks investment services, Cutillo said. Stonegate has had a mortgage-loan participation agreement with Merchants Bank of Indiana in Lynn for about five years, he said.

"We offer community banks ways to employ excess deposits with limited to no deposit risk," Cutillo said. "Our strategy is to offer this to banks that don't want exposure to mortgage servicing rights, but who recognize that they need some exposure to that credit risk."

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