Fremont Investment & Loan Bank has entered into a definitive agreement to sell the mortgage servicing rights to mortgage loans currently held in certain securitization trusts sponsored by an affiliate of Carrington Capital Management to its wholly owned subsidiary, Carrington Mortgage Services.
An affiliate of Carrington Capital Management (CCM) previously acquired these mortgage loans from the bank prior to the securitizations being completed. The mortgage servicing rights to be sold are associated with underlying mortgage loans with a total remaining principal balance of approximately $1.9 billion, which represents approximately 13% of the total remaining mortgage loan principal balance currently serviced by the bank.
The transaction is expected to close on April 1, 2008, subject to the satisfaction of various closing conditions, including the receipt of certain third party consents. In addition to the purchase price for the mortgage servicing rights, the bank will be reimbursed over a twelve month period for outstanding advances previously made by the bank up to the closing date pursuant to the terms of the definitive agreement.
Carrington Mortgage Services (CMS) is not acquiring the bank’s servicing platform or any other asset, nor is it assuming any of the bank’s pre-closing liabilities. The mortgage servicing rights being acquired are an asset representing the present value of expected fees that are paid out of the securitized loan pools for activities such as loan collection, customer service and loss mitigation.
According to the bank, the sale of these mortgage servicing rights to CMS means the collection, customer service and loss mitigation activities on the related loans that the bank currently services will transition to CMS upon closing.