Walter Investment Management entered into an agreement Tuesday to sell $35 billion in seasoned conventional mortgage servicing rights to New Residential Investment for the price of $231 million.
And that’s not all. Walter also agreed in principle to sell New Residential substantially all of the assets of Walter Capital Opportunity and its subsidiaries as well as certain related assets owned by Walter, which represent a total of $37 billion in MSRs. The purchase price for this will total about $283 million.
Assuming both transactions are completed, the purchase price is expected to total about $514 million.
“We are excited to announce this transaction with Walter and look forward to a successful long-term strategic partnership,” said Michael Nierenberg, New Residential chairman and CEO.
“Our new relationship with Walter allows us to add another highly rated mortgage servicer as a partner while creating meaningful value and returns for our shareholders,” Nierenberg said.
New Residential, through its wholly-owned subsidiary, New Residential Mortgage, also entered into an arrangement with Walter to acquire MSRs of newly-originated residential mortgage loans, subject to the parties’ mutual agreement on pricing. This agreement is intended to have an initial term of three years, which the companies can extend or set an earlier termination date.
With this purchase, NRM entered into a subservicing agreement with Ditech Financial, a wholly owned subsidiary of Walter, where Ditech will subservice the mortgage loans underlying the MSRs acquired by NRM.
“We are extremely pleased to have entered into this strategic relationship with New Residential,” said George Awad, Walter executive chairman of the Board, interim CEO and president.
“We anticipate this will be a long-term and mutually beneficial relationship, allowing both entities to achieve their shared objectives of growth and improved earnings with lower risk, which should ultimately drive significant value for shareholders,” Awad said.
After the announcement, Walter’s stock shot up from $2.69 at market’s open to $3.18 at 9:40 Eastern time.
The transactions are expected to close in the third or fourth quarter this year.