Ally Financial Falls on Quicken Deal
NEW YORK ( TheDeal) -- Ally Financial Inc. fell Friday after agreeing to sell its remaining $34 billion mortgage servicing rights portfolio to private equity-backed Quicken Loans Inc. for about $280 million.
Ally Financial shares fell 0.4% to $25.38 in afternoon trading.
The loans being sold are the last that Midvale, Utah-based Ally had in its mortgage portfolio. The sale follows up Ally selling the servicing rights on $90 billion worth of mortgage loans to Ocwen Financial Corp. for $585 million earlier in March.
After those two transactions are completed, Ally will be able to focus on its core direct banking and auto loan businesses."This agreement marks a key milestone for Ally and upon successful completion of the MSR transactions, Ally Bank will have exited all the nonstrategic mortgage activities," Ally CEO Barbara Yastine said in a statement. The two companies said the loans exchanging hands will likely be refinanced because they have high interest rates. The loans are backed by Fannie Mae and Freddie Mac. Quicken Loans of Detroit is backed by private equity firm Rockbridge Growth Equity LLC. Detroit-based Rockbridge is led by Dan Gilbert, the owner of the National Basketball Association's Cleveland Cavaliers. Gilbert started Quicken Loans in 1985 as Rock Financial Corp. The online mortgage lender was sold to software maker Intuit Inc. in 2000, where it became known by its current name. In 2002, Gilbert bought the company back through a management-led buyout. Quicken Loans had about $70 billion in loan volume in 2012. That is more than double from $30 billion it closed in 2011. "We have not been bashful in making the market aware of our interest in acquiring servicing rights," Quicken Loans CEO Bill Emerson said in a statement. "This transaction with Ally Bank allows us to purchase a well-performing pool of loans and will help us grow our servicing footprint." The company added that the acquisition will make Quicken Loans a top-10 mortgage service provider. Quicken Loans chief economist Bob Walters said in a e-mail that a combination of near-record low interest rates and customers who are currently paying high interest rates on their mortgages who are looking to refinance made the deal attractive for Quicken Loans. The company will keep its eye out for additional deals, he added.
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