Mr. Cooper CEO Jay Bray on the challenges and alternatives in buying Residence Level Capital
3 min read
The just lately accomplished $300 million-plus acquisition of Residence Level Capital by Mr. Cooper supplied a lovely alternative to bolster the corporate’s present mortgage servicing rights (MSR) portfolio, and it’s anticipated to spice up the corporate’s backside line throughout the subsequent couple of quarters.
That is in accordance with Jay Bray, CEO of Mr. Cooper, in an interview on HousingWire’s Housing Information podcast hosted by HW Media CEO Clayton Collins.
“We’ve recognized the administration workforce [at HomePoint] nicely, [and] we’ve talked to them over time about completely different strategic choices,” Bray mentioned. “As we entered the yr, we felt like there was going to be a possibility to purchase some MSRs, and HomePoint introduced a beautiful alternative.”
A part of that stems from its massive portfolio predominantly composed of Fannie Mae and Freddie Mac-backed loans, and aligned with Mr. Cooper’s personal strengths, Bray defined.
“We simply felt like that made a ton of sense,” he mentioned. “We will add [them] to our platform with out plenty of incremental prices, and proceed to develop the platform that we’ve mentioned over time. And so, it simply made plenty of sense for us.”
Bray mentioned incorporating the corporate and its $84 billion in MSR belongings has confirmed to be a clean course of up to now, including that it made plenty of sense for Mr. Cooper to discover strategically.
When requested in regards to the variations in complexity between buying an organization and an MSR portfolio, Bray defined that this specific acquisition was not very advanced since Residence Level Capital had spent a lot of the final yr “simplifying their operation,” he mentioned. That really created extra commonality with an asset buy, he defined.
“As soon as we acquired to the stage the place we had been capable of execute on a transaction, actually, all that was left was predominantly the servicing asset,” Bray mentioned. “And the servicing asset was being subserviced, so they simply didn’t have a ton of operations [or] folks that had been supporting that asset. So, it was nearly like shopping for an MSR asset.”
Prior transactions Mr. Cooper has been concerned in had been comparatively extra sophisticated since they concerned bringing over folks and related platforms along with the businesses themselves, Bray mentioned.
“We’ve carried out extra, I might say, asset transactions than actually true firm or platform transactions up to now,” he mentioned. “We will definitely do both, however the complexity of HomePoint was fairly easy as a result of they’d actually simplified their operation. So, that’s actually the way in which to consider it.”
When requested about any added complexity present subservicing relationships could add to an acquisition, Bray defined that Mr. Cooper usually pulls any associated subservicing into its personal platform.
“We view our platform as, if not essentially the most environment friendly, probably the most environment friendly platforms on the market,” Bray mentioned. “And so with our scale, measurement [and] profitability, it at all times is sensible to maneuver it onto our platform. Now, there could also be a time frame that we preserve it on the subservicer simply from a logistics [or] approval standpoint, however we usually at all times transfer it to our platform.”
There have been no actual surprises to be discovered within the transaction course of that weren’t beforehand recognized by prior due diligence carried out by Mr. Cooper, Bray added.
Hearken to the total dialogue with Jay Bray on the current episode of Housing Information.
