Though no longer one of the company's primary focuses, Tennessee-based Union Planters will likely securitize at least one more pool of reperforming loans this year, said newly appointed Chief Operating Officer, Mark E. Mosteller.
"I hate to speculate," Mosteller said. "It might be the fourth quarter. It would probably be in the $100 million range, a smaller deal which just reflects a smaller inventory."
Union Planters, currently moving toward traditional mortgage-type banking, has twice previously sold reperforming portfolios, both structured as whole loan transactions. In 1998, the company arranged a real estate mortgage investment conduit (Remic) with Morgan Stanley Dean Witter, and shortly after did its first deal, worth $380 million.
Last February, off the same shelf, Union Planters sold $130 million worth of loans. The transaction was structured in 13 parts, with average lives ranging from 0.08-years to 12.6-years.
Morgan Stanley had been lead manager on both transactions and will likely lead the next one as well, Mosteller said.
Though Union Planters has never been a serious player in the reperforming loan sector, in early 1997 Planters acquired an entity called Leader Federal Bank, which had a vested interest in the asset class.
"They were sort of out in front of the pack acquiring a lot of [reperforming] loans," Mosteller said. "But in the last three years, the inventory of those kinds of loans and assets that are available has diminished, and there's a lot of other players in the market now who have driven the price of those up significantly, and the margins have really narrowed."
The reperforming portfolio that Union Planters acquired was a pool of loans originally financed through Ginnie Mae, which the servicer had declared delinquent. The servicer then bought out the delinquent loans because the cost was significantly less than the coupon rate owed to Ginnie Mae, Mosteller said.
"But either way, if you bought it out or not, you would have performed the loss mitigation efforts and it would have gone to foreclosure bankruptcy," he said. "At least this way the servicer reduces its loss of having to pass through to the Ginnie Mae investor at the higher coupon rate."
Union Planter also recently named Doug R. Miller as president and chief executive officer, replacing Joel R. Katz, who moved on to Salomon Smith Barney, where he will work as a director in the company's mortgage finance group.