Merrill Lynch to Buy Subprime Lender for $1.3 billion

Merrill Lynch today announced an agreement to acquire the First Franklin mortgage origination franchise and related servicing platform from National City Corporation. Under terms of the agreement, Merrill Lynch will pay a $1.3 billion purchase price for San Jose, Calif.-based First Franklin Financial Corporation, and affiliated business units National City Home Loan Services, Inc., and NationPoint.

First Franklin is one of the nation’s leading originators of non-prime residential mortgage loans through a wholesale network. Lake Forest, Calif.-based NationPoint is engaged in online direct-to-consumer mortgage lending. First Franklin and NationPoint together originated more than $29 billion in loans in 2005. Home Loan Services, headquartered in Pittsburgh, together with Merrill Lynch’s existing Beaverton, Ore.-based Wilshire Credit Corporation servicing platform, will have a total servicing portfolio of approximately $70 billion.

“These leading mortgage origination and servicing franchises will add scale to our platform and create meaningful synergies with our securitization and trading operations,” said Dow Kim, president of Merrill Lynch’s Global Markets and Investment Banking Group. “This transaction accelerates our vertical integration in mortgages, complementing the three other acquisitions we have made in this area and enhancing our ability to drive growth and returns. We look forward to working with the experienced teams at these companies to serve their clients and leverage our broad range of mortgage products and services.”

These companies will be included in Merrill Lynch’s global mortgage platform, which is a division of the Firm’s Global Structured Finance & Investments (GSFI) Group.

“This acquisition, and the origination platforms in particular, fills an important gap for us domestically providing a significant presence in both the wholesale and online retail channels,” said Michael Blum, Managing Director and head of Merrill Lynch’s GSFI Group. “Home Loan Services adds scale to our existing servicing platform and allows us to enhance our special servicing and risk management of mortgage products. In addition, we believe the acquisition will complement our existing third party client business, which has grown significantly in the past few years.”

Andrew Pollock, First Franklin President and Chief Executive Officer, said: “We are excited about the opportunity to join a leading financial services firm such as Merrill Lynch. We look forward to working with Merrill Lynch to build a premier mortgage banking franchise.”

Merrill Lynch expects to operate the acquired businesses under their current names, as distinct units. The new businesses will be part of a global mortgage platform that includes existing origination and servicing businesses in the U.S., Asia and Europe. The transaction is expected to close in the fourth quarter of 2006 and is subject to regulatory approvals. Merrill Lynch expects the acquisition to be accretive to its net earnings and earnings per share by the end of 2007.