Magazine article American Banker

Source One, Shifting Focus, Will Sell $19B of Its Servicing

Magazine article American Banker

Source One, Shifting Focus, Will Sell $19B of Its Servicing

Article excerpt

Source One Mortgage Services has decided to sell $19 billion of its servicing rights to focus on subservicing.

Terry Baxter, chairman of Farmington Hills, Mich.-based Source One, said the buyer would be announced later this week and that the transaction was expected to be completed in early 1997. Terms were not disclosed.

But Source One is not exiting the servicing business. The company will retain subservicing on the loans for the next three years. Subservicers perform the servicing functions for lenders on a contractual basis but do not own the servicing rights. As a result, Source One will no longer have to include these loans on their books for accounting purposes.

"This is more a reflection of our desire to reduce the interest rate risk in the portfolio," Mr. Baxter said.

In addition, Source One will retain some of its servicing assets. After the sale is completed, Source One will still have between $10 billion and $12 billion in servicing rights.

The company is the latest in a string of midsize mortgage banks to announce the sale of servicing rights.

Citizens Mortgage Corp. is apparently close to announcing that it has found a buyer for all $12 billion of its servicing while Weyerhaeuser Co. is looking for a buyer for its entire mortgage division, which includes about $4.4 billion in servicing rights.

Mr. Baxter said that Source One has been reviewing strategic options for the last six months. The company already subservices about $4 billion in loans for New York-based CDC Servicing Inc. and Mr. Baxter said the company sought to expand its subservicing business. …

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