THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, February 25, 1995 TAG: 9502250219
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Short : 47 lines
In the latest expansion of its mortgage-banking activity, NationsBank Corp. is buying $25 billion of residential-mortgage servicing rights from KeyCorp, a Cleveland-based bank holding company.
The transaction will boost the size of NationsBank's servicing portfolio to about $75 billion and place it among the five largest mortgage servicers in the country.
The Charlotte-based banking company said it will pay $350 million for the KeyCorp portfolio and a servicing operation in Buffalo, N.Y. Also, it will pay KeyCorp. $150 million for receivables, advances and other assets related to mortgage servicing, NationsBank said.
The KeyCorp portfolio includes a mix of 390,000 government loans and conventional residential loans.
Mortgage-servicers gather payments from borrowers, handle delinquencies and defaults, and make sure that taxes are paid and that insurance is in force. In exchange for this work, mortgage-servicers collect fee income from mortgage holders.
KeyCorp said it decided to sell its servicing business because it would have required a significant investment to provide the level of returns that the banking company earns from other lines of businesses.
The transaction with KeyCorp is part of a broader effort by NationsBank to expand its residential mortgage origination and servicing, said Mary Alice Rogers, a NationsBank spokeswoman.
On Tuesday, NationsBank announced an agreement to buy $10 billion of servicing rights from Source One Mortgage Servicing Corp. That transaction includes 115,000 loans, most of them in California, Washington, Texas and Florida.
NationsBank said it expects to complete both transaction by the end of March.
NationsBank's Rogers said that the KeyCorp and Source One portfolios were attractive because of their relatively low average interest rates: 7.95 percent for the KeyCorp mortgages and 7.72 percent for the Source One mortgages. At those interest rates, the mortgages are less likely to be repaid earlier than scheduled, she said. by CNB