American Home Mortgage Servicing Inc., owned by billionaire investor Wilbur Ross, has picked up a sizeable servicing portfolio from Citigroup, Inc. (C); the acquisition will make the Irving, Tex.-based servicing platform the largest third-party servicer in the nation. Ross broke the news of the acquisition on CNBC's Squawkbox program early Thursday morning, although industry sources have been buzzing privately about the deal for well over a month now. Specifically, the acquisition entails what's known as the Citi Residential Lending servicing portfolio, or Citi Res for short; the portfolio was acquired in 2007 from now-defunct subprime lending giant Ameriquest under terms that have not been disclosed. WL Ross & Co.'s AHMSI acquired the servicing rights to some 185,000 residential mortgages for $1.5 billion, an estimated $37 billion servicing portfolio. The purchase price includes receivables at the Citi Res platform, Ross told HousingWire. Most servicers advance mortgage payments on delinquent loans, pay insurance, taxes and the like, and are reimbursed when the loan becomes re-performing or is pushed out of foreclosure; the receivables in this area are often substantial, and in this case are by far the lion's share of the deal price, an estimated $1.1 billion if you assume a servicing strip worth 100 basis points of the portfolio. Ross also suggested to HW his firm is aggressively looking for further acquisition in the servicing space. "We make no bones about the fact that we are in the market for servicing," he said. He also suggested that AMHSI will look to aggressively cut deals with troubled borrowers, and signaled that American Home has had incredible success in loan modification thus far. In particular, he said that the servicer modified almost 15 percent of its portfolio in the last year, and that AMHSI's six-month recidivism rate -- that's the number of loans that re-default within six months of a completed modification -- was hovering around just 15 to 20 percent of modified loans. Which is an incredible number. Most analysts have found recidivism rates near 50 percent for most loan portfolios, and sources have suggested that even the FDIC saw similar redefault rates on its much-ballyhooed IndyMac loan modification program while it was managing the servicing portfolio for the failed California thrift. "We really think we have the best team in the business at American Home," he said. The primary Citi Res location in Rancho Cucamonga is slated to close on March 1, sources have suggested, a move that is estimated to affect some 500 to 600 employees there; and American Home has recently closed a deal on a large new facility in the Dallas-Fort Worth area, according to publicly available records, suggesting that the Ross-owned company intends to bring the servicing of the old Ameriquest loans in-house rather than maintaining a satellite operation. The acquisition moves American Home's servicing portfolio to some 760,000 loans, given that the Dallas-area servicer managed roughly 575,000 loans at the end of last year. "I really feel that we're not going to get out of this terrible economic environment until housing prices are stabilized," Ross told CNBC. "This whole credit crunch really started with the housing problem, and I think until we end the housing problem, we're not going to end the credit crunch, either." Write to Paul Jackson at paul.jackson@housingwire.com.