The Federal Housing Finance Agency (FHFA) in keeping with its responsibilities as conservator of Fannie Mae and Freddie Mac (the government-sponsored enterprises), allowed both GSEs to approve Rocket Companies’ proposed acquisition of Mr. Cooper Group, subject to appropriate conditions to ensure the ongoing safety and soundness of Fannie Mae and Freddie Mac.
The FHFA’s safety and soundness staff conducted an analysis of the proposed merger of two of the GSEs’ largest individual seller-servicer counterparties. Staff independently recommended that the GSEs approve the combined entity to do business with them, so long as Fannie and Freddie each retain strict counterparty concentration risk limits at 20% and impose other appropriate financial and operating safeguards to protect both the GSEs and the mortgage market. No market participant should have greater than 20% of Fannie Mae or Freddie Mac’s servicing market in order to ensure the safety and soundness of the mortgage market and the overall economy.
In late March, Rocket Companies announced the acquisition of Mr. Cooper Group Inc. in an all-stock transaction for $9.4 billion in equity value. After the acquisition, Rocket’s combined servicing book will be worth a reported $2.1 trillion across nearly 10 million clients, or one in every six mortgages in America.
Upon closing of the transaction, it is expected that Mr. Cooper Group’s Chair and CEO Jay Bray will become President and CEO of Rocket Mortgage, reporting to Rocket CEO Varun Krishna, as Dan Gilbert will remain on as Chair of Rocket Companies. The Board of Directors of the combined entity will consist of 11 members, nine of whom will be from the Board of Rocket, and two of whom will be from the Board of Mr. Cooper.
Founded in 1985, Rocket Companies’ fintech platform includes mortgage, real estate, title, and personal finance businesses: Rocket Mortgage, Rocket Homes, Rocket Close, Rocket Money, and Rocket Loans. Mr. Cooper Group provides servicing, origination, and transaction-based services throughout the U.S. with operations under its primary brands, Mr. Cooper, Xome, and Rushmore Servicing.
“Today’s decision ensures the housing finance system can continue to develop and innovate while Fannie Mae and Freddie Mac are able to confidently serve as an ongoing source of liquidity to the market throughout the economic cycle,” said the FHFA in a release on the merger approval.
Rocket’s acquisition of Mr. Cooper was announced just weeks after another major deal when Rocket agreed to purchase digital real estate brokerage Redfin in an all-stock transaction for a value of $1.75 billion in equity value.
Rocket expects the combined company to achieve more than $200 million in run-rate synergies by 2027, including approximately $140 million in cost synergies from rationalization of duplicative operations and other costs. In addition, Rocket expects more than $60 million in revenue synergies from pairing the company’s financing clients with Redfin real estate agents, and from driving clients working with Redfin agents to Rocket’s mortgage, title and servicing offerings. The transaction is expected to be accretive to Rocket Companies’ adjusted earnings per share by the end of 2026. Rocket Companies will maintain its strong balance sheet and conservative leverage profile upon close of the transaction.
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