The Business Journal spoke with Stan Kurland, chairman and chief executive officer of Calabasas-based Private National Mortgage Acceptance Company, or PennyMac, as it is commonly called. The start-up was announced on March 24, as a joint venture with BlackRock and Highlands Capital Management. Kurland is a former Countrywide employee. Question: PennyMac was announced to the world on March 24. How are things going? What have you been up to since then? Answer: Things are coming along very well. We’re building out all of the capabilities at PennyMac not only the operations to acquire and manage troubled mortgage portfolios but also the restructuring and modification programs and the servicing platform. We’ve spent really the last nine months doing that even though we just announced the venture publicly in March. Q: Are there a lot of regulatory issues to deal with? A: Well, we have to get licensed with all of the states that we’re going to do business in. That’s a tedious process. We also have to get SEC approval. So there are a lot of regulations and hoops to jump through. We’ve been bidding on mortgage packages and we’re looking forward to taking on mortgages in the next 30 days. Q: So where is the money coming from to purchase the loans? A: We’re looking at closing the first fund very shortly. We are raising money from investors in the form of an opportunity fund that will invest in troubled mortgages that we manage. Q: What is the fund called and how much money do you expect to raise? A: It’s the Private National Mortgage Acceptance Company Opportunity Fund. I can’t release information on the fund’s value. (Reporter’s note: financial pundits have estimated the number somewhere around $2 billion.) Q: Who is investing in the fund? A: The sponsors of PennyMac are BlackRock and Highlands Capital Management. We’re not giving out names of the fund investors. Q: Do you think you’ll be picking up some loans from IndyMac? A: Indymac is a good example of where our mortgage product comes from. They have large pools of loans that are sub-prime and Alt-A mortgages that are the type of loans we are looking to acquire and restructure. Q: Tell me about what you’ll be doing once you acquire these loans. A: We are going to work with borrowers and try to keep them in their homes, helping them to avoid delinquency and foreclosure. Typically what we’re acquiring are loans that, for a combination of reasons, are viewed as having a higher likelihood of going into default; from sub-prime to Alt-A, even some prime mortgages. A high percentage will be adjustable rate mortgages but we will have fixed mortgages as well. Our basic thesis is that people want to stay in their homes and they are either issues with the loan adjusting or problems in the underlying value of the property that may cause the borrowers to have an ability issue, combined with a waning willingness to stay with a property, given that the loan may be greater than the property value. We are looking to coordinate with the borrower to address their issues, make adjustments in the underlying terms of their mortgage such that we increase the likelihood that they will stay with the property and keep the restructured mortgage current. That generates value. One way to think about it is that it’s very costly to go through foreclosure to repossess a home and prepare and resell it in a market like this so by working with the existing homeowner and keeping them in place we are enhancing the value of the investment. It’s a very beneficial solution, or partial solution, to the mortgage crisis we have. Q: That sounds like a very people-intensive process, working with each borrower individually. How do you plan to go about doing that? A: We’ve developed technology to assist in the analytics so that we have a decision system and viable workout programs designed for each loan. As we’re acquiring portfolios, we’ll add the staff here in Calabasas. We have the facilities in place to take on additional employees but also, Southern California has a really good pool of mortgage talent, so we feel very good about that. Also, most of these activities can be done telephonically, although we have plans where we have a concentration of problem loans to open some satellite counseling offices. Q: How many employees do you have now? A: We now have about 52 employees in Calabasas. Q: You and many of your management team are former Countrywide employees, a company that is generally considered to have been one of the prime contributors to the current mortgage crisis. What do you say to those who contend that you’re taking advantage of a situation that you may have actually had some part in causing? A: First, it takes people with mortgage lending expertise to actually perform these types of services and activities appropriately. Secondly, bringing capital to bear on this issue and reworking the mortgages is, in my view, a very important part of getting through and correcting the problems in the market and so I think it’s a very worthwhile activity. Bringing capital to invest in these mortgages is clearly necessary all the issues you’re seeing around banking and capital deficiencies is because capital isn’t flowing into banks and the only way you can attract capital is that it have an appropriate return otherwise there will be no capital flowing and so I think that’s important. Lastly, with respect to the team of people that are here I left Countrywide in 2006 and it was before a lot of the huge problems that evolved in the market and at Countrywide. Prior to that, I was with Countrywide for 27 years, and in that time it was a very admired corporate citizen that played an important role in providing home ownership and, you know, what happened in the industry and at Countrywide after I left is not something I should be saddled with. I honestly believe it’s just an incredible opportunity to help people because to go through a foreclosure process causes a lot of damage in a community. To the extent we can play an important role in reducing those negative activities, I think that will be very positive for the consumer as well as for the economy.