Feb. 16 (Bloomberg) -- Credit-Based Asset Servicing and Securitization LLC, a New York-based firm that collects mortgage payments and buys troubled home loans, offered about $259 million to buy subprime lender Fieldstone Investment Corp.

C-Bass will pay $5.53 a share for Columbia, Maryland-based Fieldstone, according to a statement. That's more than double yesterday's $2.60 closing price. C-Bass plans to use its billing and collections unit to improve the value of Fieldstone's $5.7 billion loan portfolio. Mortgage insurers MGIC Investment Corp. and Radian Group Inc. own 92 percent of closely held C-Bass.

Fieldstone's stock had lost more than 40 percent of its value this year and 78 percent in the past 12 months. Shares of mortgage lenders have tumbled since the start of 2006 as late payments and defaults on new subprime loans in the U.S. reached their highest level ever, according to Bear Stearns Cos.

``It's a signal that there are some pockets of value'' among subprime mortgage companies, said Bose George, an analyst at Keefe Bruyette & Woods in New York who covers home lenders and doesn't have a rating on Fieldstone. ``They're not all going to liquidate to zero.''

Fieldstone's stock climbed $2.38 to $4.98 today in Nasdaq Stock Market trading. Other subprime mortgage lenders also rose, with Accredited Home Lenders Holding Co. surging as much as 7.8 percent after Second Curve Capital LLC, run by former banking analyst Thomas Brown, disclosed an 8.5 percent stake.

Losses

Subprime loans, a term applied to some of the riskiest home mortgages, are made to borrowers with poor credit ratings or high debt burdens, often with adjustable interest rates. Fieldstone was the 23rd-largest subprime lender based on new loan volume in 2006, according to newsletter Inside B&C Lending.

As more subprime loans soured last year, lenders including Fieldstone and New Century Financial Corp. of Irvine, California have been losing money. About a dozen including Saxon Capital Inc. and ResMae Mortgage Corp. have sought buyers since 2005. A dozen more including Mortgage Lenders Network USA Inc. and Ownit Mortgage Solutions Inc. failed in the past three months.

``The significant premium to the market price that C-Bass is offering to our stockholders is the best opportunity for our stockholders to recognize value in this very challenging time in the non-prime mortgage industry,'' Michael Sonnenfeld, Fieldstone's chief executive officer, said in the statement.

The price may be cut 20 cents a share if Fieldstone doesn't settle pending litigation before the merger, the statement said.

A Subprime Player

Fieldstone lost $45 million in the third quarter of 2006, or 97 cents a share, as delinquencies rose on its most recent loans, the company said in November. Fieldstone had 46.9 million shares outstanding as of Sept. 30, 2006.

MGIC, based in Milwaukee, and Radian, based in Philadelphia, each own 46 percent of C-Bass. The two insurers, ranked No. 1 and No. 3 respectively in their industry, announced a merger Feb. 6.

C-Bass already is involved in the subprime mortgage business through its Litton Loan Servicing unit, which handles billing and collections. Houston-based Litton was the 10th-biggest servicer of subprime home loans as of Sept. 30, according to the industry newsletter National Mortgage News.

Fieldstone's ``lack of a servicing platform adversely affected franchise value,'' Friedman Billings Ramsey analyst Scott Valentin wrote in a note to clients. C-Bass can ``generate additional value through more effective servicing.''

Citigroup and Goldman

C-Bass was formed in 1996 by former mortgage-bond traders from Citigroup Inc. with their own savings and investments from MGIC and Enhance Financial Services Inc., according to the company's Web site. Radian acquired Enhance in February 2001.

Bruce Williams, C-Bass's chief executive, once headed mortgage-backed securities at Paine Webber and ran mortgage sales and trading at Citicorp Securities Inc. from 1995 to 1996. President Saul Sanders was a vice president of mortgage trading at Goldman Sachs Group Inc. and worked at Citicorp Securities from 1988 to 1996.

C-Bass spokeswoman Lisa Brzezinski didn't return a call seeking comment.

To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net or Jody Shenn in New York at jshenn@bloomberg.net.

Last Updated: February 16, 2007 17:12 EST