US-based Flagstar Bank has agreed to divest its residential mortgage servicing business to Mr. Cooper, a non-bank mortgage originator and servicer, in a deal worth about $1.4bn.
The transaction involves mortgage servicing rights (MSRs), advances, sub servicing contracts, and a third-party origination platform.
Flagstar Bank is the bank subsidiary of New York Community Bancorp (NYCB)
According to Flagstar Bank, the completion of the deal will add around 60 basis points to its CET1 capital ratio and will expedite its transition to a diversified, full-service regional bank.
NYCB chairman, president, and CEO Joseph Otting said: “The Flagstar mortgage servicing platform is well-respected throughout the industry, which we believe is reflected in the premium we received.
“While the mortgage servicing business has made significant contributions to the Bank, we also recognize the inherent financial and operational risk in a volatile interest rate environment, along with increased regulatory oversight for such businesses.”
Mr. Cooper intends to fund the acquisition through available cash and drawdowns of existing mortgage servicing right lines.
Upon the closing of the deal, the non-bank mortgage originator and servicer aims to add 1.3 million customers. The proposed transaction is also expected to add close to $356bn in unpaid principal balance (UPB).
Mr. Cooper has also reported its financial results for the second quarter of 2024 (Q2 2024) with a net income of $204m. In Q1 2024, the company’s net income was $181m.
The American firm’s Q2 2024 total revenue stands at $583m for the reported quarter.
Mr. Cooper chairman and CEO Jay Bray said: “We have the operational capacity to onboard Flagstar’s customers with a smooth and positive experience, which will be our top priority.
“We also look forward to welcoming Flagstar team members to the Mr. Cooper family. We have long respected Flagstar as a mortgage servicer, and we feel very closely aligned with their cultural values.”
Subject to customary conditions, the deal is anticipated to be completed in Q4 2024.
For New York Community Bancorp, Jefferies served as the exclusive financial adviser.
