NYCB’s Flagstar to Unload Mortgage-Servicing Unit to Mr. Cooper for $1.4B

New York Community Bancorp’s (NYCB) Flagstar Bank unit has agreed to sell its residential mortgage-servicing business, including mortgage servicing rights (MSRs) and a third-party origination (TPO) platform, to mortgage lender Mr. Cooper Group Inc. for roughly $1.4 billion.

Hicksville, New York-based Flagstar expects it will add approximately 60 basis points to its common equity tier 1 (CET1) capital ratio, as converted for the remaining outstanding series B preferred stock. The transaction is expected to close in the fourth quarter.

The acquisition was announced along with NYCB’s second-quarter earnings release. The bank reported a larger-than-expected loss after widening its review of loans related to commercial real estate and multifamily properties and increasing its loan loss provision. Its credit loss provisions increased to $390 million in the quarter, up from a forecast of $193 million.

“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,” Flagstar CEO Joseph Otting said. He noted that Flagstar, amid its transformation, will keep providing residential mortgage products to retail and private wealth customers.

Mr. Cooper stated that the acquisition will be paid with available cash and drawdowns from existing MSR lines. The MSRs and subservicing contracts to be purchased from Flagstar have an unpaid principal balance of about $356 billion.

Jefferies LLC is acting as exclusive financial advisor to New York Community Bancorp, Inc.