A sale of the mortgage subsidiaries of ACC Capital Holdings, for which bids reportedly are now being sought, could happen “shortly,” according to one industry insider.
“It’s imminent,” Matthew Howlett told MortgageDaily.com. “I would expect it to happen maybe before the year is out — that early. I think we’re getting close. They have received initial bids.”
Such an intended sale fits in with current consolidation trends in the mortgage industry, the Fox-Pitt Kelton vice president explained.
“We’re going to see continued consolidation, even with some of the top five players, with Option One already being sold,” he noted. “We would expect the other remaining independent players to be sold at some point over the next year.”
A spokesperson for the Orange, Calif.-based national financial services company declined to comment on the reports.
ACC mortgage subsidiaries include Ameriquest Mortgage Co., AMC Mortgage Services Inc., Argent Mortgage and Town & Country Credit Corp., all of which focus on nonprime lending. As of July 31, 2005, according to a report by Fitch Ratings, AMC serviced more than 515,000 loans totaling $78.6 billion.
Argent, said Howlett, has been “shopped around probably since the middle of last year. Now we think the entire servicing and retail properties are going to go as well.”
Any sale still could involve only Argent, he admitted, but added, “In our view, it’s going to be the entire [mortgage] organization. But that’s just pure speculation on our part.”
ACC Capital’s reported plans are, said Peter DiMartino, an analyst at RBS Greenwich Capital, “symptomatic of the bigger picture, which is an industry that’s evolving.” A sale that would include Ameriquest, he pointed out, is “important because they have a significant presence in this [ABS] market. They are important issuers in the home equity market and probably one of the longest standing and largest issuers in this market. So it’s certainly newsworthy.”
Investors want to know about any sale activity, he added, but a sale would not change the value of the securities backed by Ameriquest loans because “the structure of ABS isolates them from many events.” Thus any sale would “not cause a big ripple in the ABS market.”
But how the company and its assets, excluding the securities it has issued, will look post any acquisition, DiMartino said, as well as how the industry will look post any acquisition, will depend on who acquires Ameriquest and any of the other ACC Capital mortgage subsidiaries.
Any sale of Ameriquest and the other ACC Capital mortgage companies, Howlett explained, would occur in a cycle of the mortgage industry that is very competitive, with margins that are very thin and smaller companies too thinly capitalized.
“A lot of these smaller guys are looking for partners right now with the investment bankers who have the bigger balance sheets and can get them through this part of the cycle,” he said. “We think the days of the independent specialty finance company in mortgage lending is probably gone.”
Ameriquest and the other companies are now in a better position for a sale than they were a year ago, said Howlett, pointing to the agreement parent ACC Capital reached last January with a committee of state attorneys general and financial regulators resolving questions about its lending practices and to the launching, in May, by Ameriquest and Town and Country Credit of a new business model that included a workforce reduction of approximately 3,800 associates and the immediate closing of 229 retail branch offices. Those offices, said the company, were closed in favor of a cost-cutting strategy utilizing four regional mortgage production centers and the Internet.
