March 6, 2013

AIG Back in the Mortgage Business

The insurance giant will buy residential whole loan mortgages as investments

AIG headquarters in New York. (Photo: AP) AIG headquarters in New York. (Photo: AP)

This could get ugly. In a stark reversal of “no second acts in American lives,” AIG announced on Wednesday it’s decided to rejoin the mortgage world.

The insurance and investment giant said it had launched a new business unit called Connective Mortgage Advisory Co. The new company, which recently made its first correspondent mortgage purchase, “draws upon AIG’s investment expertise and the experience of its mortgage insurance subsidiary, United Guaranty Corp., to identify and buy residential whole loan mortgages as investments.”

The company notes “all purchases will be subject to rigorous underwriting and risk management standards,” and there no plans for Connective to conduct any direct lending or securitization.

Connective is focused on identifying residential first-mortgage loans to be purchased as long-term investments for AIG. For loans purchased as investments, AIG will manage the loan-servicing component.

“Direct investment in residential mortgage loans offers attractive investment returns and enables a proactive approach to managing mortgage risk,” William Dooley, AIG executive vice president of investments and financial services, said.

Connective will establish correspondent relationships with lenders, underwrite loans and provide support throughout the loan purchase process.

United Guaranty was established in Greensboro, N.C., in 1963 and is a company of American International Group.

The Treasury Department sold its remaining 16% of AIG's common shares for $7.6 billion in December, putting an end to the government’s 50-month shotgun financial tryst with the global insurer. 

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