SAN FRANCISCO -- The Mortgage Acquisition Corp. is helping some major servicers rid their portfolios of nickel and dime investors in nonsecuritized mortgages.
Agreements with such bigname services as Banc One Mortgage Co. and NationsBanc-Mortgage Corp., allow the San Francisco investment bank access to lists of investors whose loans the companies service.
The bank approaches small holders of whole loans or loan participations, usually thrifts, and offers to buy them out. The company than securitizes the product through Fannie Mae or Freddie Mac. "Our clients are frequently able to turn large amounts of unprofitable private investor servicing into agency servicing that is both cost effective and valuable in the real market," said David Solomon, the bank's president.
|A Win-Win Situation'
Because small lots of private investor servicing are expensive to handle, their value in the bulk servicing market is low in comparison to agency servicing.
Mortgage Acquisition is attractive to servicers because it culls from their portfolio costly-to-service, low-payoff investors. "We think its a win-win situation," said Terry L. Gentry, executive vice president of Banc One Mortgage. "We eliminate labor intensive private investor servicing while our investors are able to cut down on the number of remittance reports."
Companies such as Banc One often see their number of private investors grow to unmanageable proportions.
In buying out small holders of whole loans and participations, Mortgage Acquisition seeks to profit from the wide margin between what it has to pay for the loans and their value once securitized into conforming paper.
Though it wouldn't cite volume figures for the year, the bank did say its mortgages or participations had face values from $1,000 to $22 million.