An affiliate of WL Ross & Co. has offered $435 million (€309 million) for the loan servicing division of bankrupt home lender American Home Mortgage, The New York Times reported.
The distressed-focussed private equity firm plans this to be the first of several acquisitions in the troubled mortgage industry, founder Wilbur Ross told the newspaper.
“The problems of the industry aren’t going to go away immediately, but we are private equity investors, so we have a very long-term investment horizon,” Ross said. “While we are a bit early, our hope is we are not too early.”
Ross isn’t the only private equity firm planning to profit from struggling mortgage companies and related divisions. Sun Capital invested $60 million in subprime mortgage originator First NLC Financial Services in July, while JC Flowers and Cerberus Capital Management are reportedly part of a consortium keen to bid for the mortgage business of UK bank Northern Rock, according Reuters.
Cerberus’ mortgage industry exposure is mixed, however. In July, it agreed to pay $800 million for H&R Block’s mortgage unit, Option One, though the sale’s completion remains in doubt as the tax firm may not be able to meet the agreement’s original terms. Cerberus’ lending arm, Madeleine, is also owed roughly $178 million in unsecured subordinated debt stemming from the bankruptcy of Aegis Mortgage Company, in which it purchased an 81 percent stake in 1999.