The Federal Housing Finance Agency (FHFA) has announced its allowance for Fannie Mae and Freddie Mac to approve Rocket Companies’ acquisition of Mr. Cooper, adding a stipulation that the merger is “subject to appropriate conditions.”
The approval comes after what the FHFA dubbed a “rigorous analysis of the proposed merger of two of the Enterprises’ largest individual seller-servicer counterparties.” The stipulations made by the FHFA are that the combined company should not exceed a 20% counterparty risk limit.
“Staff independently recommended that the Enterprises approve the combined entity to do business with them so long as Fannie Mae and Freddie Mac each retain strict counterparty concentration risk limits at 20% and impose other appropriate financial and operating safeguards to protect the Enterprises and the mortgage market,” the organization’s statement reads.
The limits set are in order to ensure the “safety and soundness of the mortgage market and the overall economy,” the FHFA explained.
The acquisition was originally announced by Rocket back in March, with an offer of an all-stock transaction for $9.4 billion in equity value. The company stated that the deal would bring its mortgage recapture capabilities to a combined servicing book of $2.1 trillion across nearly 10 million clients, representing one in every six mortgages in America.
Rocket CEO Varun Krishna expressed to investors on a call following the announcement that “now is exactly the right time to pursue this sort of integration. We think the industry is ready for it.”
A spokesperson from Rocket released this statement following the approval announcement: “We are pleased to have cleared FHFA’s review in our pending acquisition of Mr. Cooper, which we expect to close in the fourth quarter. Rocket is creating the platform for affordable and sustainable homeownership, by removing inefficiencies, streamlining the experience and enabling accessibility for all to achieve the American Dream.”
Mr. Cooper has also recently been in the news for a data breach lawsuit over 2023 cyber attack that leaked millions of people’s private data to hackers. The suit, which was ruled by Judge David C. Godbey to move forward in court as of August, alleges the company breached contracts and was negligent. It is unclear how the lawsuit will affect Rocket.
