Nationstar Mortgage Holdings (NSM) announced its place as the definitive buyer for Residential Capital mortgage servicing assets, with the mortgage unit of Ally Financial filing for Chapter 11 bankruptcy protection.
"Upon closing, the acquisition will make Nationstar the largest nonbank residential mortgage loan servicer and one of the largest residential mortgage loan originators in the United States," Nationstar said in a press release.
Nationstar estimates it will add 2.4 million customers to its current base of approximately 1 million patrons. It also will be growing its total servicing and subservicing book for $550 billion, Nationstar said.
ResCap's bankruptcy plan clearly outlines its intent to seek approval from the court to sell off mortgage servicing assets in an auction process. Nationstar is the subsidiary of investment manager Fortress Investment Group (FIG), ().
The sale will take place under the U.S. Bankruptcy Code, with Lewisville, Texas-based Nationstar agreeing to spend $700 million to purchase ResCap's mortgage servicing rights and subservicing contracts. The firm also will acquire servicing advanced receivables for $180 million.
"We believe this transaction will cement Nationstar’s position as the nation’s pre-eminent non-bank mortgage servicer, and it reflects a record of servicing performance that has made us a partner of choice in a transforming industry."
The mortgage servicing assets in the Nationstar transaction are valued at approximately $374 billion and include $201 billion in primary residential mortgage servicing rights, $173 billion in subservicing contracts, $1.8 billion in related servicing advance receivables and other complimentary assets, according to a press release on the Nationstar plan.
The transaction is expected to close in late 2012.
About 68% of the loans in the portfolio up for grabs are owned, insured or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.
Nationstar plans to fund $450 million of the purchase price and cash price for advances. Other funding will come from a co-investment deal with Newcastle Investment Corp. and Fortress-related entities. As part of that co-arrangement, Nationstar plans to sell the right to receive 65% of the excess mortgage servicing rights and all ancillary income tied to the servicing of the loans.
The bankruptcy court is expected to approve the auction process in mid-June. From that point on, ResCap will have 90 days to solicit competing bids. If Nationstar ultimately is the highest bidder, ResCap will seek court approval, with the intent of closing the deal by late 2012.