New Residential Investment signs MSR purchase deal with PHH
Staff Writer |
PHH Corporation has entered into an agreement with New Residential Investment Corp. for the sale of its entire portfolio of mortgage servicing rights (MSR) and related servicing advances.
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This is excluding the Ginnie Mae (GNMA) MSRs and related servicing advances that were part of the sale transaction announced in November 2016.
Based on the MSR portfolio composition as of October 31, 2016 and market conditions as of December 28, 2016, total proceeds are expected to be approximately $912 million, of which approximately $612 million is from the sale of MSRs and approximately $300 million is related to the sale of servicing advances.
The MSR proceeds exclude estimated transaction fees and expenses of approximately five percent of MSR value, and represent a valuation of 84 basis points on total UPB of $72 billion as of October 31, 2016.
PHH’s MSR-related hedges, including those related to GNMA MSRs, have experienced aggregate realized and unrealized losses of approximately $135 million during the fourth quarter to date, and the company expects to terminate its related hedge positions in conjunction with the signing of this agreement.
In addition, PHH entered into a subservicing agreement with New Residential, pursuant to which PHH will subservice the 480,000 mortgage loans underlying the MSRs to be acquired by New Residential for an initial period of three years, subject to certain termination provisions.
The initial sale under the transaction is targeted for closing during the second quarter of 2017, but in no event later than the third quarter.
The transaction is subject to PHH stockholder approval and customary closing requirements, including anti-trust approval and the receipt of consents from certain loan originators and approvals from GSEs, private loan investors, and certain regulators.
The company expects that substantially all of the proceeds from the transaction will be used to repay PHH’s senior unsecured notes and borrowings under the company’s servicing advance facility and to pay taxes.
Upon the closing of the initial sale under the transaction, the company expects it would be required to make an Offer to Purchase its senior unsecured notes, under the terms of its bond indentures, at a purchase price equal to 101% of the outstanding principal amount. ■