Asset manager and mortgage servicer Walter Investment Management Corp. (WAC) said Monday that it has agreed to buy $93 billion of Fannie Mae (FNMA)-backed residential servicing assets from Bank of America Corp. (BAC) for $519 million. This includes related advance receivables of about $1 billion.
The deal is part of Bank of America's settlement with mortgage finance company Fannie Mae that was announced earlier in the day. Bank of America said it will pay Fannie Mae about $10.35 billion to settle claims related to the sale and delivery of residential mortgage loans it originated and sold to the mortgage finance company through the end of 2008.
Bank of America also said it has entered into agreements with two different counterparties for the sale of mortgage service rights or MSRs on two million residential mortgage loans totaling $306 billion. Walter Investment is one of the two counterparties.
Meanwhile, Walter Investment also said it has agreed to buy the residential mortgage servicing platform, including certain servicing related technology assets, of Irving, Texas-based MetLife Bank, N.A, a unit of MetLife Inc. (MET).
The assets to be acquired do not include any mortgage loans or mortgage servicing rights. The company did not disclose financial terms of the deal.
Tampa, Florida-based Walter Investment noted that the portfolio of assets being acquired by it from Bank of America consists of over 650,000 loans that are projected to be about 80 percent current at transfer.
The transaction will have an economic closing as of January 31 and the bulk of the servicing transfers will take place during the first and second quarters of 2013.
Walter Investment will fund the purchase with 10 percent paid at signing, while an additional 40 percent will be due with the January 31 economic close. The company will pay the remaining amount on a pro rata basis in conjunction with an agreed-upon transfer schedule.
Walter Investment plans to fund the acquisition using its cash on hand and through the issuance of private and public debt securities, or through transactions with capital partners. The company said it will meet advance obligations under existing facilities.
The company expects the revenues from these MSRs to drive servicing EBITDA margins within its targeted range of 40 percent to 45 percent over the life of the portfolio.
However, Walter Investment anticipates servicing revenues and margins to be modestly lower than these averages in the first year.
In addition to the servicing revenues associated with these MSRs, the pool of assets being acquired by Walter Investment include a significant number of customers that are eligible for the HARP 2.0 refinancing program.
The company expects to utilize the ResCap originations platform to target the estimated 290,000 accounts in the portfolio that are potentially eligible for HARP refinancing.
Mark O'Brien, chairman and CEO of Walter Investment said, "Upon completion of this transaction and the ResCap acquisition, Walter Investment will become one of Fannie Mae's top five servicers by servicing volume and will have more than 2,000,000 units and $225 billion of UPB in its servicing portfolio."
Regarding the transaction with MetLife, Walter Investment anticipates that its wholly-owned subsidiary, Green Tree Credit Solutions, will employ about 300 of MetLife Bank's servicing employees.
The company also expects to continue occupying the premises in Irving, Texas that is currently occupied by the MetLife Bank mortgage servicing business.
MetLife Bank's servicing platform is currently servicing Fannie Mae, Freddie Mac and Ginnie Mae mortgage loans with an approximate principal balance of $70 billion.
The existing servicing portfolio was recently sold by MetLife and the loans will be transferred to the new owner prior to the closing of this transaction, which is projected for March of 2013.
WAC closed Friday's trading at $44.05. In Monday's pre-market, the stock is adding $4.10 or 9.31 percent to $48.15.
by RTT Staff Writer
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