Mr. Cooper CEO Jay Bray on the challenges and opportunities in acquiring Home Point Capital

By Real Estate News

The recently completed $300 million-plus acquisition of Home Point Capital by Mr. Cooper provided an attractive opportunity to bolster the company’s existing mortgage servicing rights (MSR) portfolio, and it’s expected to boost the company’s bottom line within the next couple of quarters.

This is according to Jay Bray, CEO of Mr. Cooper, in an interview on HousingWire’s Housing News podcast hosted by HW Media CEO Clayton Collins.

“We’ve known the management team [at HomePoint] well, [and] we’ve talked to them over the years about different strategic options,” Bray said. “As we entered the year, we felt like there was going to be an opportunity to buy some MSRs, and HomePoint presented a wonderful opportunity.”

Part of that stems from its large portfolio predominantly composed of Fannie Mae and Freddie Mac-backed loans, and aligned with Mr. Cooper’s own strengths, Bray explained.

“We just felt like that made a ton of sense,” he said. “We can add [them] to our platform without a lot of incremental costs, and continue to grow the platform that we’ve discussed over the years. And so, it just made a lot of sense for us.”

Bray said incorporating the company and its $84 billion in MSR assets has proven to be a smooth process so far, adding that it made a lot of sense for Mr. Cooper to explore strategically.

When asked about the differences in complexity between acquiring a company and an MSR portfolio, Bray explained that this particular acquisition was not very complex since Home Point Capital had spent much of the last year “simplifying their operation,” he said. That actually created more commonality with an asset purchase, he explained.

“Once we got to the stage where we were able to execute on a transaction, really, all that was left was predominantly the servicing asset,” Bray said. “And the servicing asset was being subserviced, so they just didn’t have a ton of operations [or] people that were supporting that asset. So, it was almost like buying an MSR asset.”

Prior transactions Mr. Cooper has been involved in were comparatively more complicated since they involved bringing over people and associated platforms in addition to the companies themselves, Bray said. 

“We’ve done more, I would say, asset transactions than really true company or platform transactions in the past,” he said. “We can certainly do either, but the complexity of HomePoint was pretty simple because they had really simplified their operation. So, that’s really the way to think about it.”

When asked about any added complexity existing subservicing relationships may add to an acquisition, Bray explained that Mr. Cooper typically pulls any related subservicing into its own platform.

“We view our platform as, if not the most efficient, one of the most efficient platforms out there,” Bray said. “And so with our scale, size [and] profitability, it always makes sense to move it onto our platform. Now, there may be a period of time that we keep it at the subservicer just from a logistics [or] approval standpoint, but we generally always move it to our platform.”

There were no real surprises to be found in the transaction process that were not previously identified by prior due diligence conducted by Mr. Cooper, Bray added.

Listen to the full discussion with Jay Bray on the recent episode of Housing News.