Flagstar Bank Sells Residential Mortgage Servicing Business for $1.4 Billion

Flagstar Bank, a unit of New York Community Bancorp, is set to sell its residential mortgage servicing business to Mr Coop for $1.4 billion. This strategic move aims to boost capital and focus on core businesses amidst pressures from commercial real estate loans. The transaction is expected to close in the fourth quarter.

Flagstar Bank, a division of New York Community Bancorp, has announced the sale of its residential mortgage servicing business to Mr Coop for $1.4 billion. The transaction is slated to finalize in the fourth quarter, aiding Flagstar Bank in bolstering capital and concentrating on its primary operations.

Amidst challenges stemming from its commercial real estate loan exposure, Flagstar's exit from the mortgage servicing sector is timely. NYCB CEO Joseph Otting noted that while the mortgage servicing division has been lucrative, its financial and operational risks are magnified in a fluctuating interest rate environment.

Following the announcement, Flagstar shares dropped by 7% in premarket trading. The bank subsequently revised its 2025 profit forecast to up to 5 cents per share, down from an earlier estimate of 35 to 40 cents per share. In the three months ending June 30, the bank reported a $333 million loss, a stark contrast to last year's $405 million profit.

(With inputs from agencies.)