Online mortgage lender NetBank Inc. has sold mortgage-servicing rights to $8.5 billion in loans — about 70 percent of its portfolio — and mortgage-backed securities that it held as a hedge, at a combined loss of $28.1 million.
NetBank said today it sold servicing rights to Fannie Mae and Freddie Mac loans totaling $8.2 billion to IXIS Real Estate Capital Inc., while another buyer purchased servicing rights to about $230 million in Ginnie Mae loans. NetBank said it incurred a $19.3 million after-tax loss on those sales.
NetBank also reported taking an $8.7 million loss on the sale of Ginnie Mae mortgage-backed securities it held as a hedge.
Losses from the sales were greater than expected, but will have a positive effect on the company’s bottom line, a NetBank official said in a statement.
“The cost of selling these MSRs exceeded our initial expectations, but we believe the entire transaction and the timing of it serve the long-term interest of our company and shareholders,” said Steven F. Herbert, chief executive officer. “The transaction immediately improves the operating profile of the company, as well as our bottom line. By reducing the size of our MSR portfolio, we eliminate significant earnings volatility. We will no longer have the same level of exposure to impairment and hedge-related losses.”
NetBank will continue to service about $3.5 billion in loans, and analysts estimate the company will experience third-quarter losses of 20 cents to 25 cents per share.
Under a sub-servicing agreement, NetBank will continue servicing the Fannie Mae and Freddie Mac loans it sold to IXIS, earning fees and helping the company achieve greater efficiencies through scale and leverage.