Investors snap up mortgages

WASHINGTON -- A group of private investors including former executives of Countrywide Financial Corp. has purchased $558 million in home mortgages from the government in a deal involving assets of the failed First National Bank of Nevada, the investors announced Wednesday.

The investor group, Private National Mortgage Acceptance Co., known as PennyMac, said the acquisition was the first structured sale by the Federal Deposit Insurance Corp. of residential mortgage holdings other than construction loans. It came less than a week after the FDIC announced a $13.9 billion agreement with another investor group buying the remnants of IndyMac Bank, a big thrift that collapsed in July and became a symbol of the housing boom and bust.

PennyMac said it will modify mortgages to help struggling borrowers at First National Bank of Nevada avoid foreclosure along the lines of the FDIC's plan put into effect at IndyMac and other institutions. Under that plan, at-risk borrowers pay interest rates of about 3 percent for five years. Rates are reduced so that borrowers aren't paying more than 38 percent of their pretax income on housing.

"We are excited about investing in and managing mortgages in this unique transaction where we share in the economics with the FDIC," Stanford Kurland, PennyMac's chairman and CEO, said in a statement.

The FDIC has used such structured arrangements in recent years in selling construction and development loans; this is its first application purely to home mortgages. Under the deal with PennyMac, the FDIC initially will receive 80 percent of the cash flow from the mortgages and the investor group will get the remaining 20 percent.

Over time, as revenue from mortgages reaches a certain threshold, the FDIC/investor split will become 60 percent vs. 40 percent, FDIC spokesman David Barr said. That gives the investors an incentive to extract a larger profit through a viable plan of reworked mortgages in an arrangement that is beneficial for both parties, he said.