SPS Going to CSFB?(Select Portfolio Servicing Inc.)(Credit Suisse First Boston L.L.C.)

Salt Lake City -- The rise of Wall Street firms as the primary owners of subprime mortgage servicers continues, with Credit Suisse First Boston entering into a deal that may lead to its purchase of Select Portfolio Servicing, formerly known as Fairbanks Capital.

SPS recently entered into a letter of intent with CSFB and its mortgage affiliate, DLJ Mortgage Capital.

One of SPS's principal owners, mortgage insurance giant The PMI Group, said the terms of the proposed transaction give CSFB the option to acquire 100% of the outstanding stock of SPS. If a deal is reached and CSFB buys the firm, the parties expect that the transaction will be consummated within the next six months.

Under the terms of the agreement, CSFB will sell mortgage servicing rights with an aggregate unpaid principal balance of about $3 billion to SPS by June 30, with an additional $3 billion to be sold to SPS by Dec. 31 if CSFB does not exercise the option to purchase SPS.

CSFB is a big player in the MBS and ABS underwriting business. CSFB ranks fourth in MBS underwriting and third in underwriting of home-equity deals, according to Thomson Financial.

Based on the financial terms of the proposed transaction, PMI realized a capital loss relating to its investment in SPS of approximately $13.3 million after tax in the fourth quarter of 2004. Following the recognition of the capital loss, the total value of PMI's investment in SPS is $126.2 million, PMI said.

PMI currently owns 64.9% of the equity in SPS. While terms of the deal were not disclosed, PMI's data suggest that SPS as a whole is valued at about $194 million.