MAXEX, LLC (MAXEX), South Street Securities Holdings, Inc. (South Street) and Atlas Merchant Capital, LLC (Atlas) announced a strategic partnership to expand liquidity in the highly fragmented U.S. mortgage secondary market.
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“Recent market volatility emphasized the need for fundamental change in the mortgage secondary market as lenders and investors struggled to adapt to rapidly rising rates, liquidity shortages and the need to operate with more nimble, flexible infrastructure”
MAXEX closed an equity investment, led jointly by South Street and Atlas which also included participation from several of the company’s existing investors including J.P. Morgan and Moore Asset Backed Fund, LP. Additionally, South Street will also provide capital support behind MAXEX’s existing clearinghouse facility, further enhancing MAXEX’s counterparty strength by leveraging South Street’s investment-grade rating and approximately $30 billion balance sheet. Terms of the transaction were not disclosed.
The strategic investments from Atlas and South Street position MAXEX for significant growth and further solidify the company’s position as an independent mortgage market utility. Additionally, MAXEX, South Street and Atlas will collaborate to accelerate industry adoption of MAXEX’s platform while expanding access to MAXEX and South Street’s products and services across the more than 500 market participants currently served by both organizations.
About the parties involved:
- MAXEX is the mortgage industry’s first digital exchange for buying and selling residential mortgage loans through a single, centralized clearinghouse. The company serves a network of mortgage originators, marquee institutional investors and Wall Street dealers.
- South Street is a diversified financial institution offering various financial and technology services through its subsidiaries South Street Securities LLC, Matrix Applications, South Street Capital Management, LLC, and AmeriVet Securities, Inc.
- Atlas is an investment firm headed by Bob Diamond, former CEO of Barclays, with expertise in solving complex challenges in the global financial services industry. Atlas has a minority investment in South Street.
“Recent market volatility emphasized the need for fundamental change in the mortgage secondary market as lenders and investors struggled to adapt to rapidly rising rates, liquidity shortages and the need to operate with more nimble, flexible infrastructure,” said Jim Tabacchi, President and CEO of South Street. “MAXEX expands access to a broad range of non-agency and agency eligible mortgage loan programs. This partnership enhances our offering and TBA pipeline hedging platform by giving clients access to MAXEX’s loan trading exchange.”
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“MAXEX’s mission is to serve as a market utility and liquidity provider for the U.S. mortgage markets,” said Tom Pearce, CEO, Chairman, and co-founder of MAXEX. “As our exchange has grown, our value proposition and the significant operational efficiencies we provide have become increasingly clear to the industry. This partnership enables us to further accelerate our growth, expand our product suite and broaden our network.”
“South Street and MAXEX have established themselves as pioneers of modern infrastructure that is critical to mortgage trading and liquidity,” said David Schamis, Founding Partner and CIO of Atlas. “This partnership is core to our strategy of investing in and growing financial services companies that benefit from our long-term perspective, partnership approach and operating expertise.”
Houlihan Lokey served as exclusive financial advisor to MAXEX in connection with the transactions. Katten Muchin Rosenman served as legal advisors to South Street and Atlas Merchant Capital in connection with these transactions.
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