Two Harbors to buy mortgage servicing rights from Flagstar

Wed Dec 18, 2013 5:40pm EST

Dec 18 (Reuters) - Mortgage real estate investment trust Two Harbors Investment Corp said its unit would buy a pool of mortgage servicing rights (MSRs) from Flagstar Bancorp Inc for about $500 million.

Flagstar Bank will sell a portion of its MSRs portfolio to Matrix Financial Services Corp, a unit of Two Harbors.

The portfolio of mortgage loans has unpaid principal balances of about $40.7 billion and consists of Fannie Mae and Ginnie Mae loans primarily originated after 2010, the companies said in separate statements.

"We periodically evaluate the sale of MSRs as a way to reduce the concentration of the asset," Flagstar CEO Alessandro DiNello said in a statement.

Flagstar earlier this year settled lawsuits with bond insurers Assured Guaranty Ltd and MBIA Inc over misrepresenting the quality of loans underlying its mortgage-backed securities.

Companies such as Two Harbors and Ocwen Financial Corp have been picking up firms that collect payments on subprime mortgages - known as servicers - or the underlying service rights, as banks and private equity firms look to shed them because of new regulations and capital requirements.

Flagstar will act as sub-servicer on all of the mortgage loans under the MSRs sold to Two Harbors.

Two Harbor's shares were up 3 percent in extended trading after closing at $9.31 on the New York Stock Exchange on Wednesday. Flagstar's stock, which closed at $17.98, was unchanged after the bell.