Flagstar Bancorp Inc. (FBC:US), the Michigan lender rescued by MatlinPatterson Global Advisers LLC in 2009, will sell servicing rights on $40.7 billion of mortgages to a unit of Two Harbors Investment Corp. (TWO:US)
The sum represents 55 percent of mortgages that Flagstar was servicing for other firms as of Sept. 30, the Troy-based company said today in a statement. Flagstar will continue to act as a sub-servicer for the loans and the deal is expected to be completed by year-end, according to the statement.
“We periodically evaluate the sale of MSRs as a way to reduce the concentration of the asset and strengthen the quality of our capital,” Chief Executive Officer Alessandro DiNello said in the statement. “Today’s transaction is an important step in our continued effort to augment our mortgage origination business.”
Banks are scaling back from the almost $10 trillion market for mortgage-servicing rights, or MSRs, amid looming Basel III regulations. That’s attracting private-equity firms and hedge funds to assets that can increase in value when borrowing costs rise and giving them increased control over the rights to collect Americans’ monthly mortgage payments.
Two Harbors is a real estate investment trust based in Minnetonka, Minnesota, that invests in bonds backed by residential mortgages. The firm has dropped almost 10 percent this year in New York trading and recorded a $192.7 million third-quarter loss. Flagstar’s shares have retreated 7.3 percent in 2013.
The holders of servicing rights collect fees for sending out mortgage bills, collecting payments and handling the costly foreclosure process if the borrowers don’t pay.
To contact the reporter on this story: Dakin Campbell in New York at email@example.com