In order to set benchmarks for prime, subprime, jumbo and home-equity loan performance, San Francisco-based LoanPerformance tracks 46 million individual mortgage payments each month. At the same time, the company provides loan-level information on more than $1 trillion in non-agency mortgage and asset-backed securities (ABS) in another database.
Its proprietary databases and suite of predictive prepayment and risk-modeling solutions enable clients to make informed business decisions about credit risk, loss mitigation, customer retention, securitization and investment. Those assets also enabled First American Real Estate Solutions (RES), Anaheim, California, to make one of its most important announcements of the year when it acquired the firm.
The First American Corporation, Santa Ana, California, is a Fortune 500 company that traces its history back to 1889. It claims to be the nation's largest data provider. The company operates within the title insurance and services, specialty insurance, mortgage information, property information, credit information and screen information businesses. With revenues of $6.72 billion in 2004, First American claims its databases cover 95 percent of all property transactions.
RES fits into the company's property-information business. Sister companies in that sector include Data Tree LLC, Santa Ana, California; Data Trace LLC, Santa Ana, California; and eAppraiseIT, Poway, California. In all, there are nearly 40 separate companies in the First American family.
RES announced in April 2005 that it had come to an agreement to acquire LoanPerformance, but did not disclose terms of the deal. At a symposium held in New York later that month, LoanPerformance President and Chief Executive Officer Daniel Feshbach said that part of the deal was that he remain at the head of the company for a period of four more years.
In that April announcement, RES pointed to two reasons the acquisition made sense. The first had to do with the company's brain trust. LoanPerformance has a highly trained staff of analysts, including two doctorate-level economists, a bioinformatics Ph.D., and a full complement of mathematicians and computer scientists.
But there was another reason RES found LoanPerformance an ideal target for acquisition. In addition to powerful analytics, the company brought with it a book of business that included ratings agencies, mortgage-backed securities (MBS) investors, major Wall Street investment banks, the country's largest mortgage lenders and servicers, and the government-sponsored enterprises (GSEs).
Looking for a good match
Feshbach would not deny that it was nice to have a larger company want to acquire his firm. He also admitted that four years from now, it could offer him a nice exit strategy from the business, if he was inclined to exit. But he also says it was the product-related reasons that made this deal so good.
"What's exciting about the First American situation for me is that clients are asking us to do new things because we're in a more secure environment," says Feshbach. "For example, you know we have second-mortgage customers. Now those customers want to monitor the status of the first liens."
LoanPerformance tracks what the company claims to be the only home-equity loan and home-equity line of credit (HELOC) database in the industry, consisting of more than 5 million loans. Benchmarking loan-level characteristics that can be used to predict when a second lien will go into default is...