Billionaire steel and auto parts investor Wilbur L. Ross Jr. has formed a new company, AH Mortgage Acquisition, in the hopes of snatching up American Home Mortgage’s $57 billion servicing unit.
Ross, who made his fortune investing in bankrupt steel companies back in 2002, sees similar opportunity among the carcasses of defunct mortgage lenders.
“We feel that the mortgage industry is a very fundamental industry to America,” Ross said in an interview. “We felt the key starting place would be servicing.”
Loan servicing units are typically the few valuable assets that remain after mortgage lenders close, as they’re relatively low-risk and high-profit.
Ross did point out that the mortgage industry had its share of problems, but was quick to mention that it was a core industry in the United States.
“It’s a big business, it’s not going to go away,” he said. “We just think it was implemented badly.”
Ross intends to use the servicing acquisition as a springboard to delve into all things mortgage, saying that he would get into home lending after “a while”, and pursue additional opportunities as well.
The acquisition is not final, and is still subject to a court-sanctioned auction next month, though Ross has already offered to pay at least $435 million for the seemingly valuable unit.
Recently Ross’s WL Ross & Co. agreed to provide American Home Mortgage with $50 million in financing to help the lender operate while in bankruptcy proceedings.
American Home Mortgage and Freddie Mac recently settled their servicing dispute after the lender agreed to hand over information needed to help Freddie continue to service $800 million in mortgages.
A month earlier, American Home won the right to continue servicing $5.2 billion in agency-backed loans Fannie Mae had tried to recapture after the lender went bankrupt.