American International Group Inc. plans to sell about $300 million in residential mortgage-backed securities from the bank it’s winding down, according to a person familiar with the matter.
About $180 million in home loans at the bank will probably be retained by other units of AIG, said the person, who asked not to be identified because the decisions aren’t public. The New York-based insurer said last month it was closing deposit accounts and returning funds to clients as it converts AIG Federal Savings Bank to a trust-only thrift.
AIG Chief Executive Officer Robert Benmosche, 69, has been increasing bets on the U.S. housing market. Keeping the mortgages contrasts with plans at insurer Principal Financial Group Inc., which is working to sell its bank’s commercial-loan portfolio. Benmosche has said AIG’s mortgage guarantor gives insight into real estate as he seeks investments to back insurance policies.
“The improving U.S. mortgage market has resulted in increasing levels of mortgage originations, house value appreciation and tight mortgage underwriting standards,” AIG said of its mortgage-guaranty business in a filing this month.
Insurers have been retreating from banking as the Dodd- Frank Act places limits on firms with deposit-taking units. AIG’s bank had 30 employees as of March 31, according to Federal Deposit Insurance Corp. data. The Wilmington, Delaware-based unit offered products including mortgages and certificates of deposit through its website and over the phone.
The lender had about $129.8 million in first-lien loans for one- to four-family homes and $72.8 million in home-equity loans as of March 31, the FDIC data show. Total loans fell to about $180 million as of June 30, as customers made payments and AIG sold some of the assets, the person said.
AIG’s bank is “undergoing an orderly transition” to a trust only thrift, Jon Diat, an AIG spokesman, said in a statement yesterday, reiterating remarks from July when the bank told clients they would get their funds back.
The insurer said in March that it started a unit to draw on data from its mortgage guarantor to evaluate and purchase loans made by other firms. The company bought its first residential whole loan through the venture in February.
Insurers are searching for higher-yielding investments to increase portfolio income, Moody’s Investors Service said in a research report yesterday.
“Private placements, commercial mortgage loans, and alternative investments are being sourced to improve investment returns,” Moody’s analyst Rokhaya Cisse said in the report. “Insurers will need to carefully balance the benefits of increased yield with the impact of greater risk and/or less liquidity.”
The mortgage-linked securities being sold by AIG are backed by government firms such as Fannie Mae, said the person familiar with the portfolio.
Principal said in June it was working to divest the bank’s commercial-loan portfolio after agreeing to sell $200 million of deposits to San Diego-based BofI Holding Inc. Principal formally filed this month to deregister as a savings and loan holding company, Sonja Sorrel, a spokeswoman for the Des Moines, Iowa- based insurer, said in an e-mail.
MetLife Inc., the largest U.S. life insurer, reached deals to sell bank deposits to General Electric Co. and a mortgage- servicing portfolio to JPMorgan Chase & Co. as it retreated from deposit-taking. Nationstar Mortgage Holdings Inc. agreed to buy MetLife’s reverse mortgages last year. The New York-based insurer no longer carries any of the residential loans from the bank on its books, Fred Pieretti, a MetLife spokesman, said in an e-mail.
Editors: Dan Kraut, Dan Reichl