Credit Suisse acquires option to buy Select portfolio
By MortgageDaily.com staff
1/25/2005

Investment bankers have purchased an option to acquire the company formerly known as Fairbanks Capital.

PMI Group Inc. announced Friday that the U.S. operations of Credit Suisse First Boston Inc. and its affiliate, DLJ Mortgage Capital Inc., acquired the option to buy Select Portfolio Servicing Inc. The option is open to Credit Suisse until July 31, 2005.

Under the terms of the proposed transaction, if the option is exercised, Credit Suisse would reportedly acquire 100% of the outstanding stock of Select Portfolio from PMI shareholders.

It is expected that Salt Lake City-based Select Portfolio will purchase from Credit Suisse the servicing rights of $3 billion in mortgage loans by June 30 and an additional $3 billion by Dec. 31 if Credit Suisse decides not to buy Select Portfolio, according to the announcement.

PMI, which currently owns about 65% equity of Servicing Portfolio, did not disclose the financial terms of the deal. However, the California-based mortgage insurer did say it recognized a realized capital loss relating to its investment in Select Portfolio of approximately $13.3 million after-tax in the fourth quarter of 2004. With capital loss, the total value of PMI's investment in Servicing Portfolio is $126.2 million.

In late 2003, Select Portfolio, which last July changed its name from Fairbanks Capital Corp., agreed to pay $40 million in a settlement with the Federal Trade Commission and the U.S. Department of Housing and Urban Development to resolve charges regarding its loan servicing. The payment was for a redress fund to benefit consumers Fairbanks allegedly harmed through practices such as charging excess fees, misapplying mortgage payments and inappropriately threatening borrowers with foreclosure by using inaccurate or false information.

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