Computershare offloads US mortgage arm for $1.1b

Australian Securities Exchange (ASX)-listed financial administration firm Computershare has announced it will sell its US mortgage services arm to a US-based asset manager as part of the company’s wider simplification strategy.

Rithm Capital, a New York-headquartered asset manager focused on the real estate and financial services industries, will pick up Computershare’s U.S. Mortgage Services business for US$720 million (AU$1.13 billion), folding it into the firm’s mortgage arm Newrez.

The acquisition includes approximately $136 billion in unpaid principal balance (UPB) of mortgage servicing rights, of which $85 billion is third-party servicing, along with Computershare’s Specialized Loan Servicing (SLS) origination services business.

Chief executive and president of Computershare Stuart Irving explained that “full divestment” of the mortgage business “would be in the best interests of shareholders”.

The company added that the sale represents an “important milestone” in delivering on the business’s simplification strategy, as well as “the quality and consistency of earnings”.

“The divestment of US Mortgage Services allows us to focus our efforts on our core businesses which have high levels of recurring revenues, long-term growth runways, low capital intensity and attractive returns through the cycle, Computershare said in a statement.

The company added that the transaction would lead to a “material improvement”’ in its capital intensity and cash flow profile. However, Computershare anticipates absorbing a US$150 million to US$180 million (AU$236 million to AU$283 million) one-off pre-tax loss on the sale.

Irving praised Rithm’s “strong mortgage industry credentials and… ability to bring capital to scale the business further”.

“With its track record of successful M&A execution and integration, we expect a smooth transition for the business and our customers.”

Newrez president Baron Silverstein said the acquisition of the SLS business will “further [strengthen] our origination and servicing channels, both of which are designed to deliver a customer experience that prioritises a successful homeownership journey.”

The transaction is expected to be completed early in the fourth quarter of FY2024.

Founded in Melbourne in 1978, Computershare is a global transfer agency and share registration manager, overseeing employee equity plans, mortgage servicing, proxy solicitation and stakeholder communications.