Subprime lender ResMAE Mortgage Corp., which made nearly $8 billion in loans in 2006, has filed for Chapter 11 bankruptcy protection and will sell its assets to Credit Suisse Group Inc. for $19 million.
Like other lenders that have run into financial difficulties in recent weeks, the Brea, Calif.-based company was hit by a rise in early defaults, which forced it to take back loans it had sold to investors, the Associated Press reported, citing court records.
Merrill Lynch & Co., the largest purchaser of ResMAE loans, in December demanded that the company buy back $308 million in loans, the Orange County Register reported, citing the same bankruptcy filing. ResMAE argues the buyback period had expired on many of the loans.
ResMAE employs 1,037 and hopes the sale to Credit Suisse — which must be approved by the bankruptcy court — will preserve more than 800 jobs.
ResMAE President and Chief Executive Officer Ed Resendez said in a statement that the company’s offices will remain open and that ResMAE will continue originating loans.
“Credit Suisse is providing us with post-petition warehouse financing and operating funds that we anticipate will enable us to operate in a normal manner during the reorganization,” Resendez said. “Our offices shall remain open as usual with loan originations and the associated transactions proceeding in the ordinary course of business. Our customers should see no disruption in our service and delivery commitments.”
ResMae is among at least 20 mortgage lenders who have closed or been sold in recent weeks, Bloomberg reports.
In acquiring ResMAE, Credit Suisse is following in the footsteps of competing banks who securitize and sell mortgage loans and who have bought mortgage originators to boost profits. Morgan Stanley, Merrill Lynch & Co., Barclays Plc and Deutsche Bank AG have all made similar acquisitions.