Velocity Financial (VEL) Buys Majority Interest in Century
Velocity Financial, Inc. VEL has acquired the majority stake in Century Health & Housing Capital. Century is a licensed “Ginnie Mae” issuerand servicer. Century offers government-insured Federal Housing Administration (FHA) mortgage financing for multifamily housing, senior housing and long-term care/assisted living facilities.
Century’s borrower-direct origination channel to originate and service loans through its in-house servicing platform facilitates long-term relationships with clients and enhances strong portfolio retention. Importantly, Century issued $158 million in unpaid principal balance (UPB) of loans for 11 months ended Nov 30, 2021. It also manages a servicing portfolio in excess of $500 million in UPB.
Hence, the acquisition will help Velocity Financial to leveraged Century’s well-established platform and diversify Velocity Financial’s revenues with the addition of fee-based origination and servicing income.
The buyout adds new products.This along with VelocityFinancial’snational origination footprint offers ample development scope for origination growth and expand commercial mortgage product offerings.Century has a government-insured product focus and this offers a hedge through market cycles. Also, Velocity Financial is well-poised to enjoy stable and durable income mortgage servicing rights due to long-term loan characteristics.
Century also has light-capital, fee-based businesses, whichdiversify revenue streamsand enhance return on equity (ROE). Also, the acquisition is expected to be immediately accretive to earnings per share and ROE with minimal impact on book value.
Per Velocity Financial management, “We are very excited to partner with a proven leader in Kyle and accelerate the growth of the Century platform in this important lending segment. We believe the long-term demographic trends will be a strong tailwind for the healthcare lending area in particular,”
In the past six months, shares of Velocity Financial have gained 8.2% against the industry’s decline of 10.1%.
Six Months' Price Performance
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Currently, Velocity Financial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inorganic Growth Efforts by Other Firms
Several companies from the finance sector are making consolidation efforts to counter the low-interest-rate environment and heightened costs of investments in technology.
FirstCash Holdings, Inc. FCFS completed the previouslyannounced acquisition of American First Finance, a technology-driven, virtual lease-to-own and retail finance provider for underserved, non-prime customers. The cash-and-stock transaction, valued at $916 million (based on FCFS’s closing stock price on Dec 3, 2021), was announced this October.
FirstCash has a proven performance history in retail-based operations, primarily for cash-and-credit constrained consumers. Via theacquisition, FCFS will become a pioneer in the complementary and burgeoning point-of-sale and buy-now-pay-later payment space.
Walker & Dunlop, Inc. WD closed a $696-million deal to acquire tax credit syndicators and affordable housing developers, Alliant Capital, Ltd. and its affiliates, Alliant Strategic Investments and ADC Communities.
Apart from steering Walker & Dunlop deeper into the affordable housing domain, Alliant’s competencies, assets and personnel will boost WD’s goals of furthering debt financing, property brokerage and assets under management, as underlined in its Drive to ’25 strategic plan.
In early December, United Bankshares, Inc. UBSI announced the completion of its merger deal with Community Bankers Trust Corporation.
The buyout brought together two high-performing banking companies. It also bolsters United Bankshares’ position as one of the largest and best-performing regional banking companies in the Mid-Atlantic and Southeast. The combined entity will now operate across 250 locations in opportunistic markets in the United States.
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