Cherry Hill Mortgage Investment (CHMI) is set to acquire Aurora Financial Group for $4 million, plus the assumption of $3 million in liabilities. The acquisition will be conducted through Cherry Hill’s taxable real estate investment trust, CHMI Solutions.
As part of the transaction, Cherry Hill will acquire Aurora’s portfolio of mortgage servicing rights, which carries an approximate unpaid principal balance of $700 million.
“The acquisition of Aurora is a significant milestone for Cherry Hill on several levels,” said Jay Lown, Cherry Hill Mortgage Investment Corporation’s president and chief investment officer.
“Upon closing, we will have received approvals to service loans for the agencies and a MSR portfolio with approximately $700 million of UPB, thus strengthening our asset base.”
The two companies said that they plan to immediately begin seeking approval for the change in control from Fannie Mae, Freddie Mac and Ginnie Mae. The companies added that their expectation is that their proactivity in reaching out to Fannie and Freddie will “significantly accelerate” the approval process.
“The agency approvals give us the ability to embark on our previously stated strategy of purchasing full MSRs. The timing of execution of this strategy will depend on market conditions and available financing,” Lown added.
“The ability to purchase full MSRs will expand market opportunities for the company and allow us to create our own excess MSRs,” Lown concluded.
“Ultimately, we will become a more servicing-centric company with additional avenues for growth while continuing to focus on opportunities that will generate attractive risk-adjusted long-term returns for our shareholders.”
The companies noted that the deal is subject to customary closing conditions, including agency and regulatory approvals of the change in control, and is expected to close by the end of the second quarter of 2015.