Barclays Capital marked its dedication to the home equity ABS market late last month through its plans to acquire HomeEq Servicing Corp. from Wachovia Corp. for $469 million. The acquisition will help ensure that Barclays will have a relatively low servicing cost, aside from pools that are purchased with retained servicing rights, despite the consolidation that is happening within the loan servicing sector.
Barclays co-president Grant Kvalheim said the move is intended not only to grow the investment bank's securitization business, but to improve deal pricing, risk management and expand its list of counterparties. The investment bank - still a relatively small player in the subprime securitization space - has not revealed any plans to purchase a subprime lender as many of its peers have done. A number of investment banks in recent years have acquired subprime lenders in order to cut out middleman costs and have had a direct hand at shaping loan underwriting criteria specifically to suit secondary market appetites. Friedman Billings Ramsey, for example, completed the acquisition of subprime lender First NLC Financial Services last year.
Barclays securitized about $10 billion of subprime collateral in 2005, and has stated its intention to increase that number this year by as much as $5 billion. HomeEq - once a part of home equity lender The Money Store - has a staff of 1,300 and a portfolio of about 30,000 Alt-A and subprime mortgages worth some $43 billion.
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