New Residential Investment Corp. is buying Shellpoint Partners for $190 million from Ranieri Partners in a two-step process scheduled to occur in the first half of next year.
New Residential plans to first settle in January on Fannie Mae and Freddie Mac mortgage servicing rights with a total unpaid principal balance of $8 billion that it will acquire from Shellpoint and that Shellpoint will subservice.
Next, New Residential will acquire all of the equity interest in Shellpoint in a process expected to close in the first half of next year.
New Residential will pay for the acquisition using a mix of cash and financing with an additional earn-out over the next three years, New Residential CEO Michael Nierenberg said in a conference call Wednesday morning.
Among benefits of the transaction for New Residential are improved recapture capabilities, access to the Ginnie Mae market and the ability to diversify subservicing relationships, said Nierenberg. The subservicing relationship with Shellpoint will not be exclusive for either company, he said.
"It will not be a captive servicing business exclusively for NRZ," he said. "We want to grow our third-party business."
The subservicing of New Residential's MSRs "won't all go to Shellpoint," Nierenberg said. Shellpoint instead will work alongside the company's four main subservicing partners, including Nationstar. Nationstar, which rebranded as Mr. Cooper earlier this year, and New Residential share ties to Fortress Investment Group. Japan's SoftBank Group Corp. is acquiring Fortress.
In addition to being active as a servicer, Shellpoint originates through its New Penn Financial subsidiary and operates a title and appraisal division.
"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," said Shellpoint Co-CEO Bruce Williams in a press release.