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Mr. Cooper (COOP) Divests Title365 for $500M, Boosts Liquidity

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Mr. Cooper Group Inc. COOP concluded the sale of its title business — Title365 — to Blend Labs, Inc. on Jun 30 for $500 million.

The deal amount consisted of $450 million in cash and a retained interest of 9.9%. Accordingly, the company has recorded an after-tax gain of around $350 million.

Management noted that the divesture is “another step we are taking to transform Mr. Cooper into the leading non-bank mortgage company”. The transaction is a strategic fit as it improves the company’s liquidity and tangible book value, offering higher scope to expand its core business and enhance shareholder value.

Mr. Cooper has been undertaking initiatives to weed out non-core businesses in its efforts to focus on growth of core servicing and originations businesses. Recently, the company entered a definitive agreement to divest its Reverse servicing portfolio to Mortgage Assets Management, LLC and its affiliates.

The sale of the portfolio, which operates under the Champion Mortgage brand, will shrink Mr. Cooper’s servicing portfolio by around $16 billion in unpaid principal balance, and trim the balance sheet by around $5 billion in home equity conversion mortgage and other assets.

Chris Marshall, vice chairman, president and CFO of Mr. Cooper, remarked, “Measured from inception, Champion Mortgage has been a profitable operation for Mr. Cooper, but it is not a material driver of our business. This transaction strengthens our business model, simplifies our financial statements, and allows us to reallocate liquidity into our core operations.”

While Wachtell, Lipton, Rosen & Katz acted as legal advisor, Houlihan Lokey acted as the financial advisor to Mr. Cooper on both transactions.

The transactions are poised to improve the company’s profitability and boost liquidity, which can be channelized to higher-growth segments. Given the low mortgage rates and strong homebuyers demand, there are decent prospects for mortgage originations. Hence, Mr. Cooper is well-poised to capitalize on the favorable trend.

Currently, Mr. Cooper carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past year, shares of the company have soared 177.9% compared with the 127.9% rally of the industry it belongs to.

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