B of A Seeking Shearson Mortgage Unit
BankAmerica Corp. is one of a handful of companies negotiating to purchase Shearson Lehman Mortgage, one of the nation’s largest mortgage bankers and loan servicers, a source close to the negotiations said Monday.
The San Francisco holding company for Bank of America would triple its loan service operations by acquiring the Irvine-based mortgage banker from its parent firm, Shearson Lehman Bros., a New York brokerage and investment banker.
Among “four or five” other bidders for the mortgage unit are General Electric Capital Corp. and Sears, Roebuck & Co., said the source, who did not want to be identified.
In addition, another source said a management buyout of the profitable subsidiary also is being considered. The biggest roadblock to a buyout, though, would be obtaining financing.
“Several parties have expressed an interest, and talks are continuing,” Steven Faigen, a spokesman for the brokerage, said Monday. He declined to identify the bidders and would say only that negotiations with all bidders are in preliminary stages. BankAmerica executives would not comment.
Walter Blass, chairman of the unit, also would not comment on any pending sale. But Blass said Shearson Lehman Mortgage has been on the block before and the parent company would sell it only if it can get the price it wants.
No sale price has been mentioned for the subsidiary, which has more than 500 employees and took in $92 million in revenue last year, according to Standard & Poor’s Corp., a business rating and information firm.
Bank of America has been stepping up its mortgage lending operations in the last year or so, but the acquisition of the Shearson unit would add to its effort significantly.
Shearson Lehman Mortgage expects to fund $2 billion to $2.5 billion in loans this year, with its big seller being a home-equity loan offered at the prime rate--what banks give their best customers--and geared mainly to more affluent borrowers, who could tolerate market-driven mortgage adjustments.
It also operates one of the more highly efficient servicing operations, which bills borrowers and collects payments on loans for both itself and other lenders. That portfolio now manages more than $20 billion in loans.
At the end of last year, Shearson Lehman Mortgage’s servicing portfolio stood at $18 billion, ranking it as the ninth-largest servicer in the nation. Bank of America, with $9.5 billion in loan servicing, wasn’t on the list of the top 25.
