Flagstar Bank, the bank subsidiary of New York Community Bancorp (NYCB), has entered into a definitive agreement to sell its residential mortgage servicing business, including mortgage servicing rights (MSRs) and the third-party origination (TPO) platform to non-bank mortgage originator and servicer Mr. Cooper for approximately $1.4 billion. The deal is expected to close during Q4 of 2024.
The acquisition of Flagstar’s mortgage operations by Mr. Cooper will be funded through available cash and drawdowns of existing MSR lines. Upon closing, Mr. Cooper expects to welcome 1.3 million customers and add approximately $356 billion in unpaid principal balance (UPB).
“We have the operational capacity to onboard Flagstar’s customers with a smooth and positive experience, which will be our top priority,” said Mr. Cooper Chairman and CEO Jay Bray. “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.”
Upon closing of the deal, NYCB expects that the transaction will add approximately 60 basis points to its common equity tier 1 (CET1) capital ratio—a measure of a bank’s capital strength and solvency—as converted for the remaining outstanding Series B Preferred Stock.
“The Flagstar mortgage servicing platform is well-respected throughout the industry, which we believe is reflected in the premium we received,” said Joseph M. Otting, Executive Chairman, President, and CEO of NYCB and Flagstar Bank. “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.”
In December of 2022, NYCB announced the acquisition of Flagstar, creating a regional banking franchise ranking among the top 25 banks in the country based on total assets. Earlier this year, NYCB and Flagstar completed the operational conversion of systems for NYCB and Flagstar Bank, rebranding nationwide to Flagstar—unifying under a single platform. Flagstar currently boasts a network of more than 400 retail branches, 500 ATMs, and all customer touchpoints.
“We are focused on transforming the Bank into a leading, relationship-focused regional bank,” added Otting. “Consistent with that strategy, we will continue to provide residential mortgage products to the Bank’s retail and private wealth customers. We are grateful to our customers for their partnership and loyalty over the years and look forward to deepening those relationships.”
Mr. Cooper also announced its second quarter results today, noting that its servicing segment encompassed approximately 5.3 million customers. In the first quarter, Servicing recorded pretax income of $354 million, including other mark-to-market of $68 million. The servicing portfolio ended the second quarter at $1,206 billion. Servicing generated pretax operating income, excluding other mark-to-market, of $288 million. At the end of Q2, the carrying value of the MSR was $10,352 million, equivalent to 153 basis points of MSR UPB.
