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Billionaire offers to buy American Home unit

September 22, 2007|From Bloomberg News

Wilbur L. Ross Jr., who became a billionaire by investing in distressed steel companies, offered to pay at least $435 million for a unit of American Home Mortgage Investment Corp. and said he planned to "get into all aspects of the mortgage industry."

Ross formed AH Mortgage Acquisition Co. to buy bankrupt American Home's servicing unit that collects payments and maintains escrow accounts for about $57 billion in home loans. To complete the purchase, he must win a court-sanctioned auction for the unit next month.

"We feel that the mortgage industry is a very fundamental industry to America," Ross said Friday. "We felt the key starting place would be servicing."

Ross, 69, compared the state of the mortgage industry to the opportunities he saw in steel and auto parts five years ago. Starting in 2002, Ross bought four bankrupt steel companies and merged them to create North America's second-largest steel producer. He sold the company, International Steel Group Inc., to Indian billionaire Lakshmi Mittal for $4.7 billion in 2005.

Last year, Ross received $685 million in funding from Goldman Sachs Group Inc. to pursue larger buyouts of bankrupt companies.

Ross expects default rates to rise to 3% in early 2008, and to 4% to 5% by the end of next year.

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