Long Beach Mortgage Plans to Take Lending Unit Public

Long Beach Mortgage Co. plans to spin off its wholesale mortgage lending division into a separate public company.

The Orange-based company, which makes and sells high-risk loans, plans to sell 21.75 million shares in a public offering, according to papers filed Wednesday with the Securities and Exchange Commission. It expects shares to sell for $10 to $12.

A new company, Long Beach Financial Corp., will be formed at the time of the offering to be headed by Jack Mayesh, president of Long Beach Mortgage, and Edward Resendez, who now heads up its broker-sourced lending division.

Long Beach Mortgage will trade the assets of that division plus $40 million in cash for 25 million shares of stock in the new company, according to the filing. Of these, it will sell 21.75 million shares to the public and keep 3.25 million for a 13% stake.

The former parent, Long Beach Mortgage, will change its name but it plans to keep its retail mortgage lending business, as well as its loan servicing operations, intact, said the company’s counsel, Joseph Salamunovick.

The prospectus did not disclose what the owners of Long Beach Mortgage intend to do with the proceeds of the sale, which could total almost $239 million at a price of $11 a share. Company officials also declined to comment.

Last year, Long Beach Mortgage originated or purchased $1.1 billion in high-risk loans in 43 states. It sells these loans through a network of 7,500 independent brokers in 43 states. Several times a quarter, it sells these loans to institutional purchasers, whom it declined to name, for a profit.

The company made headlines last September when it paid $4 million to settle a Department of Justice lawsuit, which accused it of overcharging 1,200 minority, female and elderly customers.

Friedman Billings Ramsey & Co. Inc. is underwriting the stock offering, which will trade on the Nasdaq market under the symbol LBFC.