What happened
Shares of the mortgage servicing company Home Point Capital (HMPT) traded roughly 18.3% higher as of 12:24 p.m. ET today after the company announced that it will be acquired by Mr. Cooper Group (COOP 2.82%), which itself traded close to 5% higher today.
So what
Home Point and Mr. Cooper Group announced in a joint statement that Mr. Cooper Group will acquire Home Point for $324 million in cash and also assume $500 million in senior notes due February 2026.
Mr. Cooper Group plans to shut down Home Point's operations after adding the company's customers, and the deal is expected to close in the third quarter of this year.
"This acquisition is consistent with our strategy of growing our customer base, deploying our capital with a focus on attractive risk-adjusted returns, and maintaining a very strong balance sheet," Mr. Cooper Group's CEO Jay Bray said in a statement.
He added: "Home Point has amassed an impressive servicing portfolio, consisting of conventional loans to borrowers with high FICO scores, low coupons, and strong equity cushions.
The acquisition of Home Point will come with 301,000 new customers and the mortgage servicing rights to $84 billion of unpaid principal balances. The deal is expected to boost Mr. Cooper Group's tangible book value or net worth by $1 per share. It's also expected to boost the company's operating earnings by 10%.
Now what
Mortgage servicing companies tend to perform well in a high-interest rate environment because fewer homeowners are refinancing. The deal adds further scale to Mr. Cooper Group's strong operations.
On the other hand, Home Point is also a mortgage originator and has seen volume plummet due to soaring interest rates. Even after the move higher today, the stock is still down about 80% since the company went public in early 2021.
