ABN Amro North America Inc. said Friday that it has agreed to buy Atlantic Mortgage and Investment Corp. from Pitney Bowes Inc. in a deal that would thrust the Dutch-owned Chicago banking company into the top ranks of home loan servicers.
Adding Atlantic, which administers $20 billion of quirky loans, would boost ABN's portfolio to $90 billion, making it the 10th-largest servicer, behind First Nationwide Mortgage of Frederick, Md., which services $92 billion, and ahead of Citicorp Mortgage of St. Louis, which services $88 billion.
Terms were not disclosed, but sources said ABN Amro probably agreed to pay somewhere between $330 million and $380 million. The deal is expected to close later this year or early next year.
ABN Amro is also a leading originator of mortgages. It was No. 8 last year, with $29 billion, according to National Mortgage News, a sister publication of American Banker. ABN Amro's Interfirst Wholesale Lending division is the second-biggest acquirer of mortgages from brokers.
"We've seen ABN Amro jump to the list of the top producers. They're a notable competitor," said Walter C. "Terry" Klein Jr., president and chief executive of First Nationwide. "They've become a major player in the mortgage business."
Friday's announcement marked the conclusion of a protracted saga that has been the talk of mortgage banking mergers-and-acquisitions specialists for much of this year.
Pitney Bowes, a leading maker of postage meters, owns a financial services subsidiary, Pitney Bowes Credit Corp., that offers financing and leasing for its office and mailing equipment. It bought Jacksonville, Fla.-based Atlantic Mortgage in 1992. In one published report from that year, an executive of the Stamford, Conn.-based manufacturer said it found the fee income of the servicing business attractive.
Under Pitney's auspices, Atlantic's servicing portfolio grew exponentially, from $2.7 billion in 1991 to $20 billion this year. It has low loan balances, very seasoned loans, and high delinquencies.
The portfolio is unusual in that it includes a high proportion of Ginnie Mae loans. The delinquency rate on the loans is somewhat higher than average, but the loans have low balances and are less likely to be prepaid.
But the servicing business is vulnerable to falling interest rates, because accounts are lost when consumers refinance their loans. After the historic refinance boom of 1998, Pitney cooled to the business, and in the first quarter it put the mortgage subsidiary up for sale.
At that time, several companies, including the mortgage units of Fleet Financial Group, PNC Bank, and Bank United of Houston, were said to have considered buying Atlantic. But Pitney Bowes was unable to find a price to its liking, and by May it had shelved its plans to sell Atlantic.
Then interest rates started to rise. That was bad news for originators, but mortgage servicing rights gained in value.
Around July, Pitney decided to try to sell Atlantic again, using different advisors. The team of Countrywide Servicing Exchange (a unit of Countrywide Credit Industries) and Wasserstein Perella & Co. replaced Warburg Dillon Read LLC, which had represented Pitney in its first attempt to sell Atlantic.
PNC, Wells Fargo & Co.'s Norwest Mortgage, and First Nationwide were said to have been among the bidders in the second round. Mr. Klein, the First Nationwide CEO, declined to comment on whether his company looked at Atlantic. PNC and Norwest did not return calls.
Mr. Klein would say, however, that Atlantic was probably appealing to so many heavyweights because "it's the biggest block of servicing we've seen for a while."
With higher interest rates depressing production volumes this year, big mortgage companies need to find other ways to build their businesses, Mr. Klein said. They can enter into "flow" arrangements, in which they agree to buy servicing from lenders as loans are originated, or buy servicing rights in bulk. Atlantic was a "super-bulk" transaction, he said.
Others said the change in interest rates helped Pitney find an acceptable price. "There's no way that ABN, with all the lending Interfirst was doing, could have looked at this deal" when Atlantic was up for sale the first time, one servicing broker said.
Neither ABN Amro nor Pitney Bowes made executives available for interviews. In a statement, Scott K. Heitmann, ABN's head of Midwest retail banking, said Atlantic's management would join the new parent. The deal "will result in increased scale ... and provide management depth and additional capacity," he said.
The statement quoted Pitney's chief financial officer, Murray Reichenstein, saying the sale fit with its strategy of focusing on core businesses.
Mr. Klein said that "the marketplace found a more efficient owner" for Atlantic. "To me, it's very natural."