Bank-Aided REIT to Offer Loans

Pacific National Bank said Thursday that a mortgage-based real estate investment trust it helped create last summer will start providing financing for home loans next week.

The REIT, called Alta Residential Mortgage Inc., will buy mortgages from the Newport Beach bank and other lenders, said Allen Barbieri, the bank’s president. Barbieri also serves as chairman and chief executive of Alta.

Alta was formed as a privately held company with $21 million from the bank, its shareholders and Lehman Brothers Inc., a New York investment banking firm.

Lehman put in $10 million. The bank put in $1 million and issued a $1.5-million loan that is expected to be converted to Alta shares once the REIT issues more stock. The bank, which now owns 4.7% of Alta, is prohibited from owning more than 5%, Barbieri said.

Alta is expected to use its initial stake as leverage to borrow as much as $200 million on Wall Street to buy mortgages, Barbieri said. As a REIT, he said, Alta will provide substantial income tax savings. Nearly all pretax earnings will pass through directly to shareholders as dividends.