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Article Excerpt
IRVINE, Calif., Feb. 12 /PRNewswire-FirstCall/ -- ECC Capital Corporation today announced the closing on February 9, 2007 of the sale of its mortgage banking business to Bear Stearns.
Under the terms of the sale, Bear Stearns acquired certain assets comprising ECC Capital's subprime wholesale mortgage origination business. As a result of this transaction, ECC Capital has effectively exited the wholesale mortgage banking business. Its remaining operations will consist primarily of managing its residual interests in its securitizations.
The transaction, announced on October 10, 2006, involved the sale of certain operating assets by ECC Capital to Bear Stearns for approximately $26 million in cash and Bear Stearns' assumption of certain lease liabilities (the "Asset Sale"). ECC Capital retained other obligations arising from its subprime wholesale mortgage banking division, including, but not limited to, loan repurchase obligations arising from loan sales prior to October 10, 2007, remaining leases and certain personnel related liabilities.
In connection with the Asset Sale, on October 10, 2006, ECC Capital and Bear Stearns also entered into certain agreements under which Bear Stearns agreed to fund and acquire ECC Capital's loan production (the "Loan Sale") through the date of closing of the Asset Sale. A significant portion of ECC Capital's portfolio of loans held for sale, totaling approximately $1.2 billion, was included in the Loan Sale that also closed on February 9, 2007. Loan sale prices underlying the initial loan sales consideration and the amount of related warehouse advances due on sale were determined, subject to the adjustments discussed below, on February 9, 2007. Loan sale prices were less than had been previously anticipated which required ECC Capital to make payments of $33 million to repay outstanding warehouse advances in excess of the initial loan sales consideration, net of certain reserves, to complete the Loan Sale transaction. These payments were netted against the $26 million...
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