July 29, 2024 | Premium Service | Last week, Mr. Cooper Group (COOP) acquired the mortgage servicing business of Flagstar Bank, N.A., the sole bank subsidiary of New York Community Bancorp (NYCB). The transaction disposes of Flagstar’s residential mortgage servicing business, including mortgage servicing rights and the third-party origination platform, for approximately $1.4 billion. The transaction is expected to close during the fourth quarter of 2024. 

As readers of The Institutional Risk Analyst appreciate, this sale essentially unwinds the acquisition of Flagstar Bancorp by NYCB and represents a substantial destruction of shareholder value for common stockholders. The $1.4 billion in consideration paid to NYCB by COOP represents only a slight premium to the fair value of the mortgage servicing rights (MSRs) and the roughly $4 billion in related escrow deposits. These deposits will eventually leave the bank, which seems to be in a managed windup. But the transaction is a huge windfall for COOP.