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Mr. Cooper Acquiring Home Point Capital For $324M

David Krechevsky
May 11, 2023
Mergers & Acquisitions M&A

Adding $84B servicing portfolio; Home Point operations to shut down after deal closes.

Mr. Cooper Group Inc. said Wednesday it has signed a definitive agreement to acquire all outstanding shares of Home Point Capital Inc. for approximately $324 million in cash. 

As part of the transaction, which was announced after the stock markets closed, Mr. Cooper will assume $500 million in outstanding Home Point 5% senior notes, which are due in February 2026. The transaction is expected to close in the third quarter of 2023, subject to customary closing conditions and receiving all regulatory approvals. 

Once Home Point customers have fully transitioned to Mr. Cooper and the transaction closes, the remaining Home Point operations will be shut down, Mr. Cooper said.

The announcement comes about a month after Home Point said it would sell its wholesale origination business to The Loan Store and lay off about 350 employees. The companies did not disclose the terms of that transaction, which was expected to close in the second quarter of this year.

Home Point Capital, which operates Home Point Financial, was the third-largest U.S. mortgage lender by origination volume for 2022, according to Inside Mortgage Finance. After announcing the deal with The Loan Store, Home Point said it would focus exclusively on servicing mortgage loans.

According to Home Point’s earnings report for the fourth quarter and full year of 2022, released in early March, the company’s funded origination volume for wholesale totaled $22.4 billion in 2022, down 68% from $69.45 billion a year earlier. That significant decline included a drop of 58% in the fourth quarter of 2022.

Home Point has not yet released a report on its earnings for the first quarter of 2023.

At the time the deal with The Loan Store was announced, Home Point had approximately 500 employees, and about 100 were expected to "transition to The Loan Store," according to a company spokesman. He said approximately 50 to 60 employees would remain with Home Point after the deal is completed.

Mr. Cooper did not say whether any of the remaining Home Point employees would be retained.

Mr. Cooper Group Inc. reported first quarter net income of $37 million, or $0.52 per diluted share, up from $1 million, or 1 cent per diluted share, in the fourth quarter of 2022. Total revenue was $330 million in the first quarter, up 9% from $303 million in the previous quarter.

The unpaid principal balance (UPB) of its mortgage servicing rights was $413 million in the first quarter, up just 0.5% from $411 million in the previous quarter.

Jay Bray, Mr. Cooper’s Chairman & CEO, said the deal is “consistent with our strategy of growing our customer base, deploying our capital with a focus on attractive risk-adjusted returns, and maintaining a very strong balance sheet.”

Bray said Home Point has amassed “an impressive servicing portfolio, consisting of conventional loans to borrowers with high FICO scores, low coupons, and strong equity cushions. We look forward to welcoming these customers to Mr. Cooper and providing them with a high-quality, personalized, and friction-free experience.”

Kurt Johnson, Mr. Cooper’s CFO, said the senior notes his company is assuming from Home Point “serve as a low-cost source of funding and contribute to an attractive rate of return” on this transaction.

“Thanks to our strong operations and technology,” Johnson added, “we have the capacity to onboard this portfolio, with a focus on ensuring a positive customer experience.”

May 11, 2023
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