Several high-level alumni of Countrywide Financial joined the caravan of start-ups looking to profit by picking through the mortgage market's rubble.
At least 10 former Countrywide employees, led by ex-president Stanford Kurland, have formed Private National Mortgage Acceptance Company LLC, or PennyMac. The venture will acquire and restructure distressed residential mortgage loans, according to its main backers, money managers BlackRock Inc. and Highfields Capital Management.
"PennyMac will raise capital from private investors, acquire loans from financial institutions seeking to reduce their mortgage exposures, and seek to create value for both borrowers and investors through distinctive loan servicing," the companies said.
At Countrywide, Kurland had been expected to succeed Angelo Mozilo as chief executive. Instead, he left in October 2006 because "Kurland wanted the CEO post on terms the board couldn't accept," Mozilo told Bloomberg News at the time.
Last week, Bloomberg named other Countrywide alumni following Kurland to PennyMac. (Like Countrywide, the company is headquartered in Calabasas, Calif.) They include:
- David Spector, chief investment officer, who is also a former co-head of global residential mortgages at Morgan Stanley.
- Farzad Abolfathi, chief technology officer of the new firm.
- James S. Furash, chief development officer.
- Michael L. Muir, chief capital markets officer
- Mark P. Suter, chief portfolio strategy officer.
- David M. Walker, chief credit officer.
- Lior Ofir, director of technology.
- Aratha M. Johnson, chief administrative officer.
- Adal Bisharat, director of strategic planning, who also headed sales and production for IndyMac Bank's home equity division.
Non-Performing Mortgages Expected to Mushroom
More than 70 distressed-investing funds have sprung up to pursue opportunities from bargain-priced mortgage assets, Bloomberg says. Marquee names in the space include Blackstone Group, Pacific Investment Management Co. (Pimco) and Goldman Sachs. WL Ross & Co., controlled by billionaire investor Wilbur Ross, is actively buying mortgage servicing companies, another area PennyMac plans to target.
Housing market turmoil has washed away traditional sources of demand for so-called private-label mortgage securities, created by banks from loans whose repayment isn't guaranteed by Fannie Mae or Freddie Mac. Still, despite widely publicized write-downs of mortgage assets by banks and investment firms, "whole loan losses have barely begun to materialize," said Jonathon S. Jacobson, co-founder and senior managing director of Highfields Capital Management, in announcing PennyMac's launch. "Over the next two to three years, we anticipate that the volume of bank-held non-performing mortgages will grow dramatically."
Kurland said the company's strategy is to avoid foreclosures, and instead restructure the loans of struggling borrowers.