First Bank of America (BAC) took a stake in Countrywide (CFC) and now Ameriquest Mortgage Co., once the "Proud Sponsor of the American Dream," is closing and Citigroup (C) said Friday that it would buy the remnants of the business from ACC Capital Holdings in Orange.
Ameriquest shuttered its 229 retail offices months ago and as recently as 2005, Ameriquest and its sister company, Argent Mortgage, were together the No. 1 sub-prime mortgage lender in the world.
New York-based Citigroup, the nation's largest bank, obtained an option in February to buy Ameriquest's loan-servicing arm, which handles collections on $45 billion in loans and distributions of the principal and interest payments to investors in mortgage bonds. It also obtained an option to buy Argent, a lender that makes loans through independent brokers rather than directly to consumers.
Ameriquest's end mirrors the fortunes of a slew of independent sub-prime lenders that have closed or sold themselves off amid a rising rate of loan defaults. Unlike banks or S&L's, which have deposits to lend and can hold many loans for investment, the pure sub-prime firms relied on Wall Street to finance their operations and buy their loans, services that are no longer available in the sub-prime market currently.
Citigroup described the deal as a way to acquire "operational and pricing efficiencies" in a line of business that is currently "undergoing significant change." The terms of the deal weren't disclosed but Citigroup and Arnall reportedly had poured hundreds of millions of dollars into Argent's operations in February to beef up its business. Like other sub-prime lenders, Argent has shrunk in volume because investors will no longer buy sub-prime loans or the securities backed by them.
Although the wholesale lending business in sub-prime currently at a standstill, the purchase of what remains of Argent will position Citigroup to reenter the market when it revives, Citigroup spokeswoman Danielle Romero-Apsilos said. "We will restart the origination business slowly, under new management and a new brand, and do everything in accordance with federal, state and local law," she said.
Last month I posted, "The past week has seen a slew of mortgage lender close the door or dramatically scale back operations due to tightening credit markets. So, who will benefit? Citigroup (C), Bank of America (BAC) and Wells Fargo (WFC) look to be the best bets."
The big banks are buying up cheap assets that once mortgage markets settle, and yes the eventually will, will make them tons of money and solidify their dominance in the mortgage industry.