Company to buy off people’s mortgages

LOS ANGELES – Stanford Kurland spent nearly three decades helping build Countrywide Financial Corp. into the nation’s largest mortgage lender.

Now, the former president of the troubled company and several key colleagues hope to cash in as the housing market collapses.

Kurland, 55, will serve as chairman and chief executive officer of a new company unveiled Monday that will acquire and restructure distressed mortgages.

Private National Mortgage Acceptance Co. LLC, also known as PennyMac, intends to help borrowers restructure loans so they can avoid foreclosure and maintain payments.

“We’ll look to restructure mortgages, and as soon as the loans are reperforming, and if there’s the capability and the market liquidity, we’ll look to sell,” Kurland said. “Other properties that may take longer, we’re prepared to hold five to seven years.”

Backed by prominent investment management firms BlackRock Inc. and Highfields Capital Management, PennyMac has even set up shop in Calabasas, Calif., about six miles from the offices of Countrywide.

The irony was not lost on analysts.

“He won’t be the first or the last person trying to make money on both sides of a trade,” said Frederick Cannon, an analyst at Keefe, Bruyette & Woods Inc. who covers Countrywide. “Is it fair? Hard to say.”

Countrywide, the nation’s largest mortgage lender and servicer, lost about $1.6 billion in the last six months of 2007 as higher defaults forced the lender to boost its provisions for anticipated losses.

Earlier this year, Bank of America Corp. agreed to acquire Countrywide for about $4 billion in stock.

Kurland, who left Countrywide in late 2006, said he wasn’t to blame for problems faced by the company as a result of subprime loans made to people with shaky credit histories.

“My leaving Countrywide has a lot to do with having a different strategic view,” Kurland said. “I have a reputation in the market that, unfortunately, is tainted by things that transpired after I was gone.”

Mortgage delinquency and default rates have risen rapidly since the middle of 2007, leading to a growing number of foreclosures.

PennyMac is one of several companies attempting to profit from the downfall.

Kurland will lead a team that is heavy with executives from Countrywide and its subsidiary, Countrywide Bank, including chief investment officer David Spector, previously a senior managing director at Countrywide.

Kurland declined to specify how much capital the firm intends to raise to buy distressed mortgage loans. He estimated the total value of such loans could reach $1 trillion in the U.S. over the next couple of years.

He contended that an infusion of private capital was essential to help resolve the nation’s mortgage woes, as lawmakers prepare a plan to guarantee up to $300 billion in refinanced mortgages and the Federal Reserve continued to slash interest rates.

Laurence D. Fink, BlackRock chairman and CEO, said in a statement that the fund was pleased to sponsor PennyMac, “a company that seeks to bring patient capital to the unprecedented distress in residential mortgages.”

BlackRock manages more than $500 billion in fixed income assets, including about $175 billion related to the mortgage market.

Jonathon S. Jacobson, Highfields co-founder and senior managing director, said he expects the volume of bank-held, nonperforming mortgages will grow dramatically over the next three years.