HomeStreet sells mortgage origination business, some mortgage servicing rights
HomeStreet announced that the bank has executed a definitive agreement for Homebridge Financial Services to acquire the assets of up to 50 stand-alone, satellite and fulfillment offices related to the bank's home loan center based single family mortgage origination business, and to make offers of employment to HomeStreet's related personnel. Homebridge has agreed to a purchase price of the net book value of the acquired assets plus a premium, as well as the assumption of certain home loan center and fulfillment office lease obligations. In the event Homebridge realizes a certain level of loan originations for the twelve months following the closing of the transaction, HomeStreet will be entitled to an additional payment of $1M at that time. The transaction remains subject to certain employee and branch office state licensing requirements and other customary closing conditions, and is expected to be substantially completed in Q2. The bank also announced that it has sold a significant portion of its single family mortgage servicing rights. The transactions provide for the sale of mortgage servicing rights related to single family mortgage loans held by or pooled in securities guaranteed by Fannie Mae and Freddie Mac with aggregate unpaid principal balances of approximately $9.9B to New Residential Mortgage and the sale of mortgage servicing rights related to single family mortgage loans pooled in Ginnie Mae mortgage backed securities with aggregate unpaid principal balances of approximately $4.4B to PennyMac Loan Services. Together, these sales represent approximately 71.0% of HomeStreet's total mortgage servicing rights portfolio as of December 31, 2018. The physical transfer of servicing from the bank will take place in stages and is expected to be completed by August. HomeStreet will continue to service the loans between the date of sale and the related physical transfer dates. In connection with these transactions, the company's board has approved a plan of exit pursuant to which the company will no longer consider mortgage banking to be a separate reportable segment of its financial statements under generally accepted accounting principles applicable to the company. These actions are expected to be substantially completed by June 30 and fully completed by December 31 and based on current estimates and assuming the full transfer of offices and employees contemplated in the transaction, the company expects to incur pre-tax charges of $5.4M-$6.7M for severance and related benefit costs, $11.1M-$13.5M of asset and technology related charges, and $3M-$4M of other charges. The total charges resulting from this plan are currently estimated to be approximately $19.5M-$24.2M.