In a move that will more than double its loan-servicing portfolio but could cost Orange County as many as 40 jobs, Plaza Home Mortgage Corp. said Monday it plans to acquire a large loan-servicing operation in New Mexico.
Plaza, holding company for Plaza Savings & Loan Assn., said it has agreed to pay $6.5 million in cash and as many as 600,000 shares of its stock to acquire Sandia Mortgage Corp. in Albuquerque.
At Monday's closing price of $7.63 a share, the NASDAQ-traded stock would be worth more than $4.5 million. The final value of the deal will depend on fluctuations in the stock's price from now until June and the overall performance of Sandia's loan portfolio through the end of the year. The purchase is scheduled to close late next month, subject to Plaza obtaining about $15 million in bank financing to cover a portion of the $40 million in Sandia debt that Plaza will assume.
If the sale goes through--Plaza general counsel Brad Morrice said that bank financing is being arranged--Plaza would merge its Santa Ana-based loan servicing department, which has about 40 employees, with the 70-employee Sandia servicing center in Albuquerque.
Morrice said Plaza would offer transfers to as many of its mortgage servicing employees as possible but was unable to say how many of the Santa Ana jobs would be shifted to New Mexico and how many would be cut because of duplication. The merger is to be completed in September, he said.
Plaza will consolidate both operations under one roof in New Mexico, Morrice said, "because it is a lot cheaper to operate there--lower pay scales, lower occupancy cost" for rent and utilities "and lower state taxes."
A mortgage servicing operation is a largely clerical operation that handles processing of home buyers' monthly mortgage payments for dozens of large lenders, taking a small fee--typically about three-eighths of a percent--from each monthly payment.
That's only $3.75 for a $1,000 mortgage payment, but it adds up: Sandia, which represents lenders in 48 states, now services $3.3 billion in loans, and Plaza, which has 25 loan offices in eight states, services about $3 billion in loans. Together, that makes a $6.3-billion portfolio; the annual service fees would total about $24 million.
In addition to Sandia's loan portfolio, Plaza will acquire about $3 million in other assets in the purchase, including about $2 million of accounts receivables--payments due Sandia from various clients.
The deal also calls for Plaza to assume responsibility for about $40 million in debt--$13 million of corporate notes that mature in 1998, $12 million in existing bank debt that Sandia used to help finance the acquisition of its loan servicing portfolio, and $15 million in portfolio acquisition debt that Sandia owes directly to the companies from which it acquired servicing rights. It is that last batch that must be converted to new bank debt to satisfy terms of the purchase agreement.