First Horizon Home Loans - Wholesale

Update - 2008-08-19: In a notice sent to brokers yesterday, it was announced that all business going forward was being assigned to MetLife Home Loans. From the memo:

"Effective September 1, 2008, First Horizon Home Loans has assigned its interest in your Mortgage Broker Agreement to MetLife Home Loans."

This listing will be removed after August 31st, 2008.

Update - 2008-08-12: First Horizon Home Loans will soon disappear completely. Wrote one employee: "We change our name to MetLife Home Loans Sept 1, 2008. The existing FH/First Tennessee bank is not going to have a wholesale division. All First Horizon employees transitioning over have already been assigned MetLife employee numbers, applied for MetLife Benefits, Business cards have been ordered, 401k plans transferred over, MetLife New Hire Employee forms have been signed and being processed, etc. etc."

We will be removing First Horizon Home Loans from the Ailing/Watch list at the end of the month.

Update - 2008-07-30: As reported today in Memphis' CommercialAppeal.com, parent company First Horizon National Corp. is cutting 170 jobs "from its about-to-be-sold mortgage operation."

"The back-office jobs -- processing applications, preparing documents -- won't be needed when the company completes the sale of its national mortgage origination business to MetLife Bank, said Charles Burkett, president of Tennessee and national banking at First Tennessee."

According to the article, MetLife Bank's acquisition of First Horizon Home Loans carries a $400 million price tag. It is expected to be completed by August 31st of this year. CEO Jerry Baker will step down on September 1st.

"First Horizon will continue to operate a mortgage business in Tennessee -- part of the company's strategy to pull in its horns and focus on its First Tennessee Bank franchise. About 50 mortgage operation employees, mostly relationship managers, will keep their jobs, Burkett said."

A total of 2,200 jobs out of over 3,600 in the mortgage unit will be eliminated as previously reported in the Memphis Business Journal.

If the MetLife deal goes through as planned, we may be removing this company from our Ailing/Watch list. During this period of due diligence, we will provide updates on any changes that may be announced. See our Discussion Forum for additional commentary.

Update - 2008-06-05: First Horizon and MetLife made it official yesterday, announcing their agreement on the deal. According to numerous reports, FHN keeps 21 offices in its banking footprint, while Met acquires 230 FHN offices nationwide and all mortgage operations outside of TN.

What was not disclosed is the price. While press releases from both companies (FHN, MET)readily acknowledge Met will take on $20 billion of FHN's current loan portfolio, none of that will be subprime or Alt-A. Bloomberg quotes one analyst:

""They're probably calling a bottom on prices or close to it," Alan Devlin, an analyst with Atlantic Equities LLP in London, said of MetLife in an interview."

FHN anticipates charges of $50 million to $70 million associated with the deal. Please feel free to add comments or visit our Discussion Forum here.

Update - 2008-05-08: Sources have told us an announcement should be coming today or tomorrow regarding MetLife's purchase of First Horizon Home Loans. An insider writes "we had a meeting yesterday to announce the takings place."

Here are some of the details we were given:

• "Metlife to purchase 21b of servicing portfolio.. Heres the Kicker - Met gets to Cherry Pick what they want to service..."
• "Met also gets the Entire Wholesale and Retail division of First horizon home loans inc..." - Another source confirmed "100% of FH, 47 states and servicing."
• "All other servicing portfolio will get sold off in bulk on wall street..." - We're told they're selling off 75% of it.
• "The merger will be 100% finalized by July 31st and the mortgage company will no longer have any affiliation to First Tennessee National Bank."

The last point our tipster mentioned is the most significant: it could be at a fire-sale price. "Met Life gets this Smoking Deal for a Measly 40million dollars."

Rumors about the deal with MetLife have been going on in our Discussion Forum for some time.

Update - 2008-03-21: In a 2008-03-11 guideline update, First Horizon has ceased accepting retail One-time-Close (OTC) construction loans in all but 15 states. Loans in other states must close and fund/disburse by March 31st. There have been rumblings about ongoing layoffs and office closures - we are hoping to get exact numbers from FHHL later today.

In other news, the Law firm of Stember Feinstein Doyle & Payne, LLC announced on 3008-03-06 it is "investigating possible illegal conduct relating to the First Horizon National Corporation Savings Plan (NYSE: FHN), the company's 401(k) plan for its employees." One excerpt:

"Stember Feinstein Doyle & Payne is investigating whether certain fiduciaries of the Plans may have violated the Employee Retirement Income Security Act of 1974 ("ERISA"). The firm's investigation relates to whether certain fiduciaries of the Plans knew or should have known that First Horizon was concealing its loan losses, which has rendered First Horizon common stock inappropriate and risky investments for Plan participants."

The entire document can be viewed here (.pdf).

Update - 2008-02-07: In an email received in the late evening, we learned "First Horizon is announcing tomorrow that are shutting down wholesale OTC. They will stop taking loan apps at the end of February." The info came in an internal conference call with the OTC department. "This accounts for around half their volume so the feeling in this department is they close to closing down the entire OTC department" according to our source.

Original Ailing/Watch List Post: - 2008-02-04:In a 2008-01-28 press release, holding company First Horizon National Corp (NYSE:FHN) announced they were discontinuing home builder and commercial real estate lending. Anthony Hicks, spokesperson for First Horizon Home Loans, told us this would be a gradual phase-out of that portion of their operations. Hicks said about 160 people would be affected and offices would be closed in 40 markets (cities) nationwide.

S&P cut the holding company's rating following losses reported 2008-01-17 by The Memphis Business Journal and Reuters:

"The mortgage division continues to represent a significant drag on consolidated earnings... "

Statements made by CEO Gerald "Jerry" Baker indicate further measures may be taken.

"We will continue to make further significant adjustments to our mortgage and related lending businesses, including pursuing strategic alternatives to further reduce our exposure to these areas," Baker said in a statement.

Baker told analysts the company is considering a sale of its mortgage servicing assets and has not ruled out a "full sale."

As reported in Barron's, he "has abandoned his bank's grand ambition of creating a big, national mortgage business."

From an opinion expressed from 'inside' the company, one tipster wraps up this whole article:

"With the dropping of the Construction Loan business announced last Monday (at least everywhere but in the Southeast) I don't see how they will keep going. The profit margins in construction loans are pretty decent, and with no subprime/alt A to beef up the low margin agency paper, those construction loan margins would have been keeping their offices alive. In my office construction was running about 30-35% of the monthly volume. The company's production technology sucks, they will never be a major player in the new wholesale loan origination landscape (a handful of giants with the technology to run enough Agency paper through to make a profit and stay in the business)."

We have a discussion on First Horizon Home Loans in our Forum here.