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To sell or not to sell?

Mortgage commentators are predicting 2008 to be a year of consolidation and it seems some players are already looking to offload certain parts of their business.

The most recent rumour in the market is that Merrill Lynch is looking to sell its niche subsidiary lender Wave, after having only just bought it from Freedom Finance 17 months ago for a price reckoned to be around £25m.

It has been alleged – by several senior sources in the mortgage industry – that the investment bank is open to listening to offers for Wave but that it wants a good price for it.

Money Marketing understands that although Merrill Lynch likes the strategy of Wave, following the impact of the credit crunch it is finding it harder to fund.

There is clearly a lot of speculation in the market on who will be bought by who and which lender is planning to sell up – obviously some rumours may just well be that, but the current market conditions are creating a great deal of volatility and worry.

When asked about whether the lender was up for sale, Wave chief executive Colin Snowdon declined to comment, noting that he does not respond to market speculation.

Another lender which could be on the brink of being bought is buy-to-let specialist Paragon. The lender has had a tough week of it after it saw its shares drop dramatically by as much as 38 per cent on Monday on the back of revealing it might have to carry out an emergency rights issue because of funding problems in the market.

The lender has seen its share price drop by over 80 per cent from the year high of 681p to 103.50p this morning.

Mortgage experts believe the lender could be picked up at a bargain price noting that this price level for the stock undervalues the quality of the assets held by the company.

Northern Rock also continues to have a bad time of it. Its share price fell to an all-time low this week after the firm said on Monday that potential bids valued it at “materially below” its market price. Its price fell to 60p on Tuesday but has since rallied to 80p.

Other news this week saw Vertex announce up to 55 jobs could be at risk on its DB Mortgages account.

It has been claimed by several sources that as DB Mortgages outsourced most of its employees to Vertex they now only have a very small skeletal team.

Sources close to DB Mortgages claim that parent company Deutsche Bank employs eight people directly and that it originally outsourced around a 100 jobs through Vertex, yet none of this has as of yet been confirmed or denied by the lender or Vertex.

A Deutsche Bank spokeswoman stressed to me this week that it is still doing business and that is why it is not shutting DB Mortgages down. How much business it actually does remains to be seen.

If you’d like to comment on this story or know of any other lenders or brokers looking to sell up email me at tanya.powley@centaur.co.uk.

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