New Residential Investment Corp., the massive real estate investment trust that is part of Fortress Investment Group, is set to buy Shellpoint Partners, a mortgage vehicle that is owned in part by Lewis Ranieri’s Ranieri Partners, in a $190 million deal.
Ranieri, considered to be the father of mortgage securitization, helped found Shellpoint in 2010, and still serves on the company’s board of directors.
Shellpoint is the parent company of several subsidiaries, including mortgage lender New Penn Financial, Shellpoint Mortgage Servicing, title and settlement services provider Avenue 365, and eStreet, an appraisal management company.
According to details provided by New Residential, Shellpoint currently has a mortgage servicing portfolio of $50 billion and an annual mortgage origination volume of approximately $6.6 billion.
Shellpoint is an approved Fannie Mae and Freddie Mac seller and servicer and a Ginnie Mae issuer, with servicer ratings from Standards & Poors, Moody’s Investors Service, and Fitch Ratings.
And now, the company is set to be acquired by New Residential, which has grown its market share in mortgages substantially in the last few years.
At the end of last year, PHH announced that it planned to sell off its entire mortgage servicing rights portfolio in a massive deal with New Residential. The company also bought nearly all of CitiMortgage’s mortgage servicing rights in a deal earlier this year.
New Residential is also buying $117 billion in MSRs from Ocwen Financial in a deal that also includes New Residential making an equity investment in Ocwen and becoming a 4.9% owner of the nonbank.
Fortress, the parent company of New Residential, is also the majority shareholder in Mr. Cooper, the nonbank formerly known as Nationstar.
Now, New Residential will be adding Shellpoint into its growing mortgage empire.
According to New Residential, the deal will be conducted in two stages.
First, New Residential will settle on approximately $8 billion in unpaid principal balance of Fannie Mae and Freddie Mac mortgage servicing rights from Shellpoint.
The MSR purchases are expected to close in January 2018 and are subject to regulatory approvals from Fannie and Freddie, along with other customary closing conditions.
Then, in the second part of the acquisition, New Residential will acquire 100% of the outstanding equity interests of Shellpoint. The corporate acquisition is expected to close in the first half of 2018, subject to receipt of regulatory approvals and certain third party consents and satisfaction of certain other closing conditions, the companies said.
In the time between the settlements of the MSRs and the actual acquisition of Shellpoint, the $8 billion in Fannie and Freddie MSRs will be subserviced by Shellpoint.
In a statement, Michael Nierenberg, chief executive officer of New Residential, touted the potential of Shellpoint’s platform.
“We are extremely pleased to announce the agreements to acquire Shellpoint. Shellpoint’s origination and servicing platforms provide New Residential with recapture capabilities that can help enhance returns on our existing MSR portfolio and create new complementary revenue channels,” Nierenberg said.
“In addition, as a rated servicer, we believe Shellpoint will provide added servicing capacity to further diversify our servicing relationships and help accelerate transfer timelines for our MSR purchases,” Nierenberg added.
“This is truly an exciting next step for New Residential and we look forward to working closely with the Shellpoint management team,” he concluded. “We are optimistic that Shellpoint’s business will be a strong contributor to our existing investments and will further enhance our ability to continue generating attractive returns for our shareholders.”
Bruce Williams, co-chief executive officer of Shellpoint, said the company is “excited” about being a part of New Residential.
“We are extremely excited to work with the New Residential team as Shellpoint embarks on this new chapter. We believe this is a very compelling transaction for Shellpoint, its employees and partners,” Williams said. “Being part of the New Residential platform will present unique opportunities that allow us to further enhance our operations and scale our business with dedicated capital.”