Magazine article American Banker

GMAC Joins Mortgage Elite with $550M Capstead Deal

Magazine article American Banker

GMAC Joins Mortgage Elite with $550M Capstead Deal

Article excerpt

By HALA HABAL GMAC Mortgage Group Inc. has bought the mortgage operations of Capstead Inc. for $550 million in cash in a transaction that would vault it into the top five mortgage servicers.

Market sources said GMAC edged out the mortgage units of Chase Manhattan Corp. and PNC Bank Corp. for Capstead's $38 billion of mortgage loan servicing rights and a state-of-the-art system.

The deal would give the unit of General Motors Acceptance Corp. $125.9 billion of servicing. That would move it ahead of Fleet Mortgage Group, which had $118.2 billion at Sept. 30, and behind Chase, which had $183.7 billion, in a business where size increasingly matters.

BankAmerica Corp., with $241.9 billion, Norwest Mortgage ($232.7 billion), and Countrywide Credit Services ($194.6 billion) are the top three mortgage servicers.

Capstead, one of a dwindling number of independently owned mortgage banks, was unprepared for declining interest rates this year and put its loan servicing business on the block after reporting an $11.8 million loss for the third quarter.

"The sale reflects the continued uncertainty in the mortgage finance market. It just represents too great a risk for our stockholders," said Andrew Jacobs, chief financial officer of Capstead Mortgage Corp., parent of Capstead Inc.

The deal would lift the number of loans serviced by the GMAC unit by 40%, to about 1.5 million. GMAC Mortgage has a goal of servicing two million customers by 2000 and plans "to continue acquisitions and aggressive growth," said senior vice president Dennis Kirkpatrick. "We are always in the market looking."

About 200,000 loans from Dallas-based Capstead Inc.'s servicing portfolio will be transferred to GMAC Mortgage's Waterloo, Iowa, office by February, GMAC said. The remaining 200,000 loans are expected to be converted to the San Diego center in July or August. …

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