Mr. Cooper is adding the residential mortgage servicing operation of Flagstar Bank for some $1.4 billion, the companies have announced.
The assets to be acquired by Mr. Cooper include subservicing contracts, advances, Flagstar’s third-party origination platform and $356 billion in mortgage servicing rights (MSRs). Mr. Cooper will fund the buy with cash on hand and drawdowns of existing MSR lines.
The transaction is expected to close in the fourth quarter, upon which a projected 1.3 million customers and roughly $356 billion in unpaid principal balances will be transferred to Mr. Cooper.
“We have the operational capacity to onboard Flagstar’s customers with a smooth and positive experience, which will be our top priority,” Mr. Cooper chairman and CEO Jay Bray said. “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.”
Flagstar president and CEO Joseph M. Otting cited the difficult rate landscape and growing regulations as an impetus for the sale from his company’s standpoint.
“The Flagstar mortgage servicing platform is well-respected throughout the industry, which we believe is reflected in the premium we received,” he said. “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.”
Back in May, Otting said that the “the mortgage business remains an important business” for Flagstar after the company sold approximately $5 billion in warehouse loans to JPMorgan Chase. He noted in a statement after the sale to Mr. Cooper that Flagstar will continue to offer mortgage loans to retail and private wealth customers.
“This was not a decision we took lightly, and I want to thank our teammates in mortgage servicing and third-party mortgage originations and all of the support teams who deliver high-quality service day-in and day-out,” Otting said. “Mr. Cooper is a major player in the mortgage origination and servicing business. It was important to us that we commit to a buyer with strong mortgage expertise and reputation, and a shared commitment to customer service excellence and employee values.”
The sale continues a turbulent 2024 for Flagstar and parent company New York Community Bancorp (NYCB). NYCB announced a dividend cut and an unexpected loss in January, with Moody’s downgrading its long-term issuer rating one month later and the aforementioned warehouse loan offload in May. Prior to that, NYCB had been perceived as having a position of strength by investors and observers, having acquired $38 billion in assets (and assumed $36 billion in liabilities) from Signature Bank after the regional depository failed during the regional banking crisis of 2023.
