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IPO / M&AMortgagePolitics & Money

It’s official: Mr. Cooper to acquire Pacific Union Financial

Plans expansion into wholesale, correspondent lending

In conjunction with its earnings release on Thursday morning, Mr. Cooper Group announced it would acquire mortgage company Pacific Union Financial.

But this isn’t news for HousingWire readers, who read Wednesday that multiple sources reported the acquisition was taking place.

Back in July, Pacific Union unexpectedly closed the doors to its mortgage fulfillment call center, leaving El Paso, Texas, short 699 promised jobs. And this wasn’t Pacific Union’s first branch to close. The company had previously closed two offices in California. The company explained it had been struggling due to the challenging mortgage market conditions.

Sources previously told HousingWire Mr. Cooper would announce the acquisition in its third quarter earnings – and they were right.

“We’re excited to announce our plans to acquire Pacific Union Financial in early 2019,” said Jay Bray, Mr. Cooper chairman and CEO. “This acquisition allows us to expand our servicing portfolio by welcoming more than 120,000 customers and increases our mortgage lending volume and capabilities.”

Mr. Cooper announced it will acquire Pacific Union, which holds about $25 billion in mortgage servicing and more than $10 billion in annual mortgage originations, of which about 80% are purchase originations. The company expects the deal to close in the first quarter of 2019.

Mr. Cooper will take ownership of the entire company, including its Correspondent, Wholesale and Servicing divisions. Mr. Cooper announced this integration will allow it to expand its presence in the correspondent and wholesale markets.

Pacific Union will bring more than 700 active clients, of which about 20% overlap with existing Mr. Cooper clients.

“This was an extraordinary quarter for our company as we completed the WMIH Corp. merger and renamed the company,” Bray said. “We've made strides in all our business segments. Servicing achieved 6.5 basis points of adjusted profitability, originations maintained profitability and Xome increased its third-party revenue to 56% with the acquisition of Assurant Mortgage Solutions.”

“We are continuing to make strategic investments to grow all our segments, and we are excited to announce our plans to acquire Pacific Union Financial,” he said. “We believe this acquisition is complementary to our business and significantly increases our originations volume and capabilities. Subject to regulatory approvals, the transaction will also allow us to grow our Servicing portfolio by approximately $25 billion upon closing in early 2019.”

Mr. Cooper reported a net loss of $64 million in the third quarter, or a loss of $0.65 per diluted common share for the month ending   July 31, 2018. However, it then reported a net income of $1.01 billion or $10.99 per diluted share for the remaining two months of the quarter. The total net income for the third quarter came in at $947 million.

On an adjusted basis, Mr. Cooper reported a combined earnings of $54 million in the third quarter, or $0.58 per diluted share.

For its servicing adjusted pretax income, Mr. Cooper reported $81 million in the third quarter, up from $72 million in the second quarter. It’s originations sector remained steady with an adjusted pretax income of $33 million.

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