West Palm Beach, Florida-based Onity Group has struck a deal to acquire all assets of Mortgage Asset Management (MAM), which are estimated at a net value of $55 million, the company announced on Friday. The parties entered into an agreement on Oct. 9.
The deal includes Home Equity Conversion Mortgages (HECMs) and mortgage servicing rights (MSRs) with an estimated $3 billion in unpaid principal balance (UPB). The MSRs are currently subserviced by Onity subsidiary PHH Mortgage Corp.
Onity is also acquiring $20 million in cash and other related assets from MAM. Adding proceeds from future debt secured by mortgage assets, the cash associated with the transaction could reach $46 million.
The negotiations involved funds managed by Waterfall Asset Management, which owns MAM. Investors will receive Onity’s shares of a new series of non-convertible, perpetual preferred stock, with liquidation preference of about $52.7 million, subject to certain adjustments.
According to a filing with the Securities and Exchange Commission (SEC), each share
of Series B Preferred Stock will have a liquidation preference of $25, plus an amount equal to any accumulated and unpaid dividends. On Tuesday morning, Onity was trading near $30 per share.
The deal is expected to close in the fourth quarter of 2024, subject to certain conditions, including approvals from Ginnie Mae.
Onity Group, the parent company of top-five reverse mortgage lender Liberty Reverse Mortgage, first mentioned the deal in August during its second-quarter earnings report. Onity and Waterfall executed a letter of intent for the acquisition on July 26.
During the period, a decline in values of certain MSRs slightly diminished Onity’s income, but the company touted improvements in several other metrics.
“We expect this transaction to be accretive to earnings and cash flows immediately upon closing, while strengthening our position in reverse servicing as a hedge to forward [mortgage servicing rights (MSRs)], providing incremental asset management opportunities, and improving our capital structure,” Onity CEO Glen Messina said at that time.
