HomeStreet selling $14B in MSRs to New Residential, PennyMac

HomeStreet in Seattle could receive nearly $190 million for selling $14 billion in mortgage-servicing rights and selling its home loan centers.

The $7 billion-asset company disclosed in a regulatory filing last week that it will be paid an aggregate of $183 million for MSRs tied to single-family loans.

The company is selling almost $10 billion in Fannie Mae and Freddie Mac mortgage servicing rights to New Residential Investment and more than $4 billion in Ginnie Mae MSRs to PennyMac Loan Services. The MSRs transferred represent more than 70% of the unpaid principal balance of HomeStreet's portfolio as of Dec. 31.

HomeStreet will initially receive nearly $5 million from Homebridge Financial Services, based on the net book value of the acquired home loan centers. Homebridge also has agreed to pay a premium of $1 million.

"In the event Homebridge realizes a certain level of loan originations for the 12 months following the closing the asset sale, HomeStreet will be entitled to an additional payment of $1 million at that time," the filing said.

Total payments for the purchase could be reduced by up to $2 million to reimburse Homebridge for certain expenses tied to the acquisition.

The MSR sales and the sale of HomeStreet's stand-alone home loan centers are part of the company's plan to largely exit mortgage banking.

Blue Lion Capital, an activist investor, has long been concerned about the mortgage business' profitability and pushed HomeStreet to shed certain assets. The bank cited concerns over the industry outlook when it announced plans to sell the home loan centers and MSRs.

"The sale of the home loan center-based mortgage origination business and related servicing rights will significantly reduce the size and scope of HomeStreet's single family mortgage operation," Mark Mason, HomeStreet's chairman, president and CEO, said in a press release.

"These transactions align with our long-term strategic goal of reducing our reliance on this cyclical and volatile earnings stream and increasing our reliance on the more stable earnings from our commercial and consumer banking business. We believe our network of office locations and origination personnel complements the existing Homebridge business well," he said.

HomeStreet plans to source mortgages for its remaining mortgage operation through its branches, online banking and affinity relationships.