LOS ANGELES (AP) - Stanford Kurland spent nearly three decades helping build
Countrywide Financial Corp. into the nation's largest mortgage lender.
Now, the former president of the troubled company and several key colleagues
hope to cash in as the housing market collapses.
Kurland, 55, will serve as chairman and chief executive officer of a new
company unveiled Monday that will acquire and restructure distressed mortgages.
Private National Mortgage Acceptance Co. LLC, also known as PennyMac,
intends to help borrowers restructure loans so they can avoid foreclosure and
maintain payments.
"We'll look to restructure mortgages, and as soon as the loans are
reperforming, and if there's the capability and the market liquidity, we'll look
to sell," Kurland told The Associated Press. "Other properties that may take
longer, we're prepared to hold five to seven years."
Backed by prominent investment management firms BlackRock Inc. and
Highfields Capital Management, PennyMac has even set up shop in Calabasas,
Calif., about six miles from the offices of Countrywide.
The irony was not lost on analysts.
"He won't be the first or the last person trying to make money on both sides
of a trade," said Frederick Cannon, an analyst at Keefe, Bruyette & Woods Inc.
who covers Countrywide.
"On the one hand you could make the case that he was (with) the company that
made all these loans. On the other hand, what we need right now is to find some
buyers for these assets," Cannon said. "Is it fair? Hard to say."
Countrywide, the nation's largest mortgage lender and servicer, lost about
$1.6 billion in the last six months of 2007 as higher defaults forced the lender
to boost its provisions for anticipated losses.
Earlier this year, Bank of America Corp. agreed to acquire Countrywide for
about $4 billion in stock.
Kurland, who left Countrywide in late 2006, said he wasn't to blame for
problems faced by the company as a result of subprime loans made to people with
shaky credit histories.
"My leaving Countrywide has a lot to do with having a different strategic
view," Kurland said. "I have a reputation in the market that, unfortunately, is
tainted by things that transpired after I was gone."
Mortgage delinquency and default rates have risen rapidly since the middle
of 2007, leading to a growing number of foreclosures.
PennyMac is one of several companies attempting to profit from the downfall.
Kurland will lead a team that is heavy with executives from Countrywide and
its subsidiary, Countrywide Bank, including chief investment officer David
Spector, previously a senior managing director at Countrywide, and chief
technology officer Farzad Abolfathi, Countrywide's former managing director of
production technologies.
The director of strategic planning will be Adal Bisharat, Countrywide's
former senior vice president of strategic planning.
Kurland declined to specify how much capital the firm intends to raise to
buy distressed mortgage loans. He estimated the total value of such loans could
reach $1 trillion in the U.S. over the next couple of years.
He contended that an infusion of private capital was essential to help
resolve the nation's mortgage woes, as lawmakers prepare a plan to guarantee up
to $300 billion in refinanced mortgages and the Federal Reserve continued to
slash interest rates.
Laurence D. Fink, BlackRock chairman and CEO, said in a statement that the
fund was pleased to sponsor PennyMac, "a company that seeks to bring patient
capital to the unprecedented distress in residential mortgages."
BlackRock manages more than $500 billion in fixed income assets, including
about $175 billion related to the mortgage market.
Jonathon S. Jacobson, Highfields co-founder and senior managing director,
said he expects the volume of bank-held, non-performing mortgages will grow
dramatically over the next three years.
"PennyMac will be extraordinarily well-positioned as both a buyer and
servicer of these assets," he said.
Kurland said the new company will have an advantage because it's unburdened
by a legacy portfolio and has the flexibility to offer unique solutions to
individual borrowers.
In addition, the company is targeting whole loans that aren't tied up in
asset-backed securities. Such loans offer increased flexibility for lenders to
work out new payment plans for borrowers, he said.
BlackRock's shares were up $18.81, or 9 percent, to $224.91 in afternoon
trading.
Countrywide gained 40 cents, or 7 percent, to $6.18, while Bank of America
rose 59 cents, or 1.4 percent, to $42.45.
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