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Turnaround Specialist Hopeful of Mortgage-Market Revival
Wilbur Ross Jr., chief executive of WL Ross, recently won an auction for the home-loan servicing unit of American Home Mortgage Investment.
(By Mark Lennihan -- Associated Press)
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Ross turned an $80 million stake in steelmaker LTV into $4.5 billion in 2004 after he sold International Steel Group to Indian billionaire investor Lakshmi Mittal. He has not always been so successful.
He bought into the coal industry in 2005, assembling International Coal Group from the mines of bankrupt Anker Coal Group and Coalquest Development. He paid $275 million in stock and then raised about $250 million in an initial public offering. Since April 2006, the company has lost more than 40 percent of its value.
Ross said he has the means and desire to expand American Home's business. His company, AH Mortgage Acquisition, would pay cash and has room to borrow, he said.
"The servicing platform that we're getting at American Home is capable of handling any kind of home mortgage product," Ross said. With little additional expense, the company could process up to three times its current volume, he said.
Default rates of Alt-A mortgages are difficult to predict because they are a new product, said Steve Moyer, a director at Tennenbaum Capital Partners, which oversees about $7 billion. The same is true of adjustable-rate mortgages, he said.
Almost half the home loans made during the past two years were adjustable, according to Inside Mortgage Finance, a trade newsletter. That means borrowers pay a lower interest rate the first two or three years and higher rates later.
"It will be a brave new world now for all of us, how those loans will perform with declining home prices," Moyer said.
Falling prices make it difficult for borrowers to sell or refinance mortgages because they may owe more than their houses are worth.
Ross's pattern has been to acquire one bankrupt company in an industry and augment it by buying similarly distressed companies.
In textiles, Ross began with Burlington Industries and Cone Mills, creating International Textile Group. Then he expanded with joint ventures in places such as Turkey and India.
In the mortgage business, Ross said, he will eventually expand into lending.
"If you want a growing business, you need to be in some form of originations," he said. "It could be jumbos, it could be subprime, it could be whatever."
