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Here: Quicken Loans to Buy $34 Billion Servicing Portfolio From Ally Financial

UPDATE: Quicken Loans to Buy $34 Billion Servicing Portfolio From Ally Financial

Last Update: 3/21/2013 10:25:22 AM

--Deal will grow Quicken's servicing portfolio by about 40%

--Portfolio represents final chunk of servicing rights for Ally Financial

--Ally looking to shed noncore assets to focus on core auto-lending business

(Updated with new details throughout.)



By Andrew R. Johnson


Quicken Loans Inc., the online home lender, is buying a $34 billion
mortgage-servicing portfolio from government-owned Ally Financial Inc. for about
$280 million.

The deal will expand the size of Quicken's servicing business by nearly 40% as it
and a slew of other firms scoop up assets being shed by large banks are scaling
back in the business, which involves collecting payments from and sending bills
to mortgage borrowers.

Among those banks is Ally, which said Thursday the deal with Quicken represents
its final chunk of servicing rights that it had yet to sell. The company has been
focusing its efforts on running its core U.S. auto-lending operations and raising
money to repay a $17.2 billion bailout it received during the financial crisis
that left the U.S. government with a 74% ownership stake in the former General
Motors Co. (GM) financing arm.

"Upon successful completion of the MSR transactions, Ally Bank will have exited
all non-strategic mortgage activities," Barbara Yastine, president and chief
executive officer of Ally's banking subsidiary, said in a statement. The bank's
focus going forward will be on its direct banking business as it works to grow
deposits to fund its auto loans.

The portfolio is part of a larger chunk of servicing rights Ally's bank
subsidiary said in October it planned to sell. Ally earlier this month said it
reached a deal to sell the rights to service $90 billion of mortgages to Ocwen
Financial Corp. (OCN) as part of that effort. It noted it expected to sell an
additional portfolio totaling more than $30 billion.

The exodus of some banks from servicing has created opportunities for emerging
players like Ocwen, Nationstar Mortgage Holdings Inc. (NSM) and Walter Investment
Management Corp. (WAC) to rapidly expand in the business, which they see
providing a consistent stream of revenue.

"We have not been bashful in making the market aware of our interest in acquiring
servicing rights," Bill Emerson, CEO of Quicken Loans, said in a statement,
adding the servicing portfolio it's buying from Ally will create a "large
opportunity for Quicken Loans to refinance a substantial amount of these clients
into significantly lower payments."

Quicken's servicing portfolio totals about $90 billion in mortgages and will grow
to about $125 billion following the Ally transaction, a Quicken spokesman said.
The company said it expects to be among the 10 largest servicers by mid-year.

In an interview in February, Mr. Emerson said Quicken was primarily interested in
servicing portfolios consisting of prime loans that have "less delinquencies in
them."

"We are absolutely going to look at a lot of them," Mr. Emerson said at the time.

The Ally portfolio is comprised of non-delinquent mortgages backed by Freddie Mac
(FMCC) and Fannie Mae (FNMA) that have "higher-than-market interest rates,"
Quicken said.

Among the deals Quicken has looked at previously is a $70 billion portfolio that
MetLife Inc. (MET) agreed to sell to J.P. Morgan Chase & Co. (JPM) last year, he
said.

Ally, on the other hand, has been working to limit its exposure to the mortgage
market after a surge in losses on subprime loans during the housing bust nearly
sank the company, leading to its need for multiple infusions of government funds.
Last May, its mortgage subsidiary, Residential Capital, filed for Chapter 11
bankruptcy, a move intended to sever Ally from mounting litigation over soured
mortgage securities and foreclosure practices.

As part of a bankruptcy auction in October, ResCap sold separate
mortgage-servicing and origination assets to Ocwen and Walter in a $3 billion
deal.

The Federal Reserve dealt Ally a setback last week when it rejected a capital
plan the lender had submitted under the regulator's annual stress tests of big
banks. The Fed projected the company's capital levels would be insufficient to
withstand a severe economic downturn under its analysis, which Ally called
"fundamentally flawed." Ally is required to submit a new capital plan to the Fed
outlining how it will deal with the insufficiencies.

Ally CEO Michael Carpenter said last month the company was working on a plan
involving the $5.9 billion of preferred shares that the U.S. Treasury owns in the
company.

Write to Andrew R. Johnson at [e-mail]

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(END) Dow Jones Newswires

March 21, 2013 10:25 ET (14:25 GMT)