Will Aegis Mortgage Sell its Servicing Business?

HOUSTON -- Aegis Mortgage Corp. here -- which is controlled by hedge fund giant Cerberus Capital- has placed its servicing platform on the auction block and is winding down its home-equity division, industry sources told Mortgage Servicing News in July.

But a few weeks later, those plans seemed uncertain, as the company announced in August that it would "terminate a "substantial number of its employees" effective immediately. On August 6, the company stopped originating loans through its only remaining channel, wholesale. Aegis has lending operations in 50 states and offices in 24. No employee head count was available, but sources say it once employed 5,000.

But despite the downsizing, the nondepository said it is maintaining its servicing business.

Cerberus -- which also controls GMAC Mortgage -- is in the process of buying subprime giant Option One Mortgage Corp., Irvine, Calif., but there is speculation that the hedge fund may seek to renegotiate that transaction. In a statement, Aegis chief executive Dan Gilbert said, "The change in market conditions, coupled with the rapid decline in the secondary mortgage market, has forced Aegis to take this action, despite the best efforts of our management team and hard-working employees."

Meanwhile, an internal memo provided to this newspaper says Aegis is plagued by $100 million in early payment defaults.

A source close to the company also said there is speculation inside of Aegis that once Cerberus buys Option One Mortgage of Irvine, ...