Weyerhaeuser Mortgage Co. thinks it has broken the consolidation mold in the mortgage banking industry.
In the last few years, smaller mortgage companies have been gobbled up by banks seeking to bolster their home lending operations.
But Weyerhaeuser said Tuesday it would be bought by an entity called WMC Acquisition Co., a joint venture of Spring Mountain Escrow Inc. and Apollo Funds. Apollo, an investment firm, is managed by Leon Black, who headed mergers and acquisitions at the now-moribund junk bond powerhouse Drexel Burnham Lambert.
Donald E. Lange, Weyerhaeuser Mortgage's president and chief executive officer, said no major operational changes were expected for the Woodland Hills, Calif.-based mortgage bank.
In addition to its escrow business, Spring Mountain, the largest independent escrow firm in California, also has an insurance company. Mr. Lange said the hope is to strategically bundle loan, escrow, insurance products, and other mortgage-related offerings such as title services.
Weyerhaeuser Mortgage has about $4 billion in servicing. Based on recent transactions, the servicing rights could be worth between $60 million and $70 million. Mr. Lange said the mortgage bank, which will drop the Weyerhaeuser name on completion of the deal, is looking to increase its servicing portfolio, especially on the subprime side of the business.
Mr. Lange said Apollo and Spring Mountain were attracted to Weyerhaeuser's origination network, which is also beefing up its subprime capabilities and featuring strong relationships with home builders. According to Mr. Lange, Irvine, Calif.-based Spring Mountain and Weyerhaeuser share several builder customers.
Gerry Risi, senior vice president of CoreStates Capital Markets in Fort Lauderdale, Fla., said the deal was intriguing because it is another example of the increased interest in mortgage banking by private investment firms. HomeSide Inc., for example, is jointly owned by Bank of Boston Corp., Barnett Banks Inc., and two venture capital firms. HomeSide went public last month.
Mr. Lange said a public offering for Weyerhaeuser Mortgage is not out of the realm of possibility. Some of Apollo's other real estate investments, most notably Vail Resorts, have gone public recently.
Representatives of Apollo and Spring Mountain could not be reached for comment.