As it continues taking steps to stem mortgage banking losses, HomeStreet Inc. has sold mortgage-servicing rights on nearly $5 billion in government-sponsored enterprise loans.
Losses from its mortgage banking business widened to $6 million in the first quarter of this year from just $1 million in the same three-month period last year.
HomeStreet has blamed its home-lending struggles on the tight Seattle housing market, which has hampered its ability to replace lost refinance business with purchase-money production.
In addition to laying off 37 mortgage employees in April, HomeStreet last month announced another 127 mortgage job cuts. Along with the layoffs, 19 single-family home-lending centers are being closed, consolidated or reduced.
On Tuesday, HomeStreet disclosed a definitive agreement to sell MSRs on Fannie Mae and Freddie Mac mortgages with an aggregate unpaid principal balance of $4.9 billion.
The bank-holding company noted that the sale represents roughly 20 percent of its total third-party servicing portfolio as of March 31, which was previously reported at $23.2 billion.
“This sale will provide regulatory capital relief to support the continued growth of our commercial and consumer banking business,” HomeStreet Chairman, President and Chief Executive Officer Mark K. Mason said in the statement. “Risk management results will also be improved through reduced convexity costs in the remaining mortgage servicing rights portfolio. Retaining servicing on most of our mortgage loans we originate and sell is an important part of our mortgage banking strategy to which we remain committed. This strategy has historically been a competitive advantage and these assets have generated strong returns on equity through the cycle.”
The physical transfer of servicing is scheduled for Aug. 16.
HomeStreet didn’t disclose the buyer of the MSRs or the terms of the transaction.
