Mr. Cooper costs Rocket $5B more than first announced

Rocket Cos. has closed its acquisition of Mr. Cooper, just six months after the transaction was first announced, with a near $5 billion increase in valuation.

The transition has already begun; Mr. Cooper and all servicing functions are being rebranded  under the Rocket umbrella.

Right now, the company is being branded as Mr. Cooper powered by Rocket Mortgage. Its homepage has a similar message "Homeownership Powered by Rocket Mortgage."

This timeline was speedy compared with some mortgage industry deals. For example, Freedom's ill-fated purchase of Roundpoint was announced in May 2019 but didn't close until August of the following year. Freedom subsequently sold Roundpoint to Two.

What makes the speed of the Rocket-Mr. Cooper merger even more remarkable is that Rocket also purchased Redfin and its operations, including Bay Equity Home Loans, announcing the deal March 10 and completing it on July 1.

How the Mr. Cooper deal's valuation increased

In the six month period, the value of the all-stock transaction increased to $14.2 billion from $9.4 billion, according to data from Rocket.

On March 28, the last trading day before the transaction was announced, Mr. Cooper closed at $104.19 per share. Its final closing price was $210.79 per share.

The Federal Housing Finance Agency, which regulates the government-sponsored enterprises that Rocket sells conforming production to, approved the deal in August.

Rocket also spent much of summer seeing its stock price increase, rising 35% from the end of July through Sept. 25, Morgan Stanley analyst Jeffrey Adelson pointed out, in a report which also noted UWM was up 55% (Adelson downgraded UWM in the report).

Rocket's stock closed at $13.03 per share on March 28, falling to $12.02 the day the deal was announced.

On Sept. 30, the Detroit-based company closed at $19.38, opening at $19.76 after the transaction was finalized the next day.

Rocket did not provide any other timeline details, including the transition of its mortgage servicing portfolio to the Sagent platform, which Mr. Cooper owned a 20% stake in.

"On behalf of Sagent, I would like to offer Rocket and Mr. Cooper a warm congratulations on closing their landmark deal that'll create a seamless lifetime homeownership experience for nearly 10 million homeowners," its CEO Geno Paluso said in a statement.

Jay Bray, heretofore Mr. Cooper's chairman and CEO, will be the president and CEO of Rocket Mortgage, reporting to Varun Krishna, CEO of Rocket Cos. Bray will also become a director of the parent company.

In August, former Rocket Mortgage CEO Bill Emerson, who has remained in various roles at the parent company, most recently president, announced he is retiring at the end of the year,

Servicing and origination volumes at both companies

At the end of second quarter, Mr. Cooper serviced $1.5 trillion ($731 billion of owned servicing rights, $778 billion of subservicing) while Rocket serviced $609 billion.

Meanwhile, Rocket produced $29.1 billion of closed loans, while Mr. Cooper funded $9.4 billion.

"This transaction brings to a close a multi-year journey during which Mr. Cooper grew to become the nation's largest servicer and produced enormous value for our clients, partners, stakeholders and investors," Bray said in a press release. "Now, by joining forces with Rocket, we start a new journey, which I believe offers an even bigger opportunity."

Legal update on Redfin

In separate news, attorneys general from five states — Arizona, Connecticut, New York, Virginia and Washington — have filed their own lawsuit targeting a marketing deal for rental property listings between Redfin and Zillow, days after the Federal Trade Commission initiated its own legal action.

The state case was filed in the U.S. District Court for the Eastern District of Virginia.