Key facts
- CrossCountry Mortgage (CCM) has completed its acquisition of Two Harbors Investment Corp. (TWO).
- The total cash outlay for CCM was approximately $1.28 billion, including a dividend.
- CCM paid $12 per share in cash for Two Harbors' common stock.
- The acquisition adds Two Harbors' approximately $155 billion owned MSR portfolio and servicing platform to CCM.
- CCM will bring the acquired mortgage servicing portfolio in-house.
- United Wholesale Mortgage (UWM) had previously sued Two Harbors over a terminated merger agreement.
CrossCountry Mortgage (CCM) has finalized its acquisition of Two Harbors Investment Corp. (TWO) for approximately $1.28 billion, concluding a protracted bidding war with United Wholesale Mortgage (UWM) and integrating Two Harbors' substantial mortgage servicing portfolio into CCM's operations.
The transaction, announced Tuesday, saw CCM affiliate CrossCountry Merger Corp. merge with and into TWO, with TWO now operating as a wholly owned subsidiary of CCM. Consequently, Two Harbors' common stock will no longer be traded on the New York Stock Exchange.
CCM's final offer comprised $12 per share in cash, along with a stub-period dividend of $0.20326 per share, bringing the total cash outlay to roughly $1.28 billion. This represents an increase from CCM's initial $10.80 per share offer in March, with subsequent revised offers of $11.30 in April and $12 in May, bolstered by the dividend component.
As part of the deal, CCM also assumed a roughly $25.4 million termination fee owed to UWM, which had previously held a merger agreement with Two Harbors. The acquisition brings Two Harbors' approximately $155 billion owned mortgage servicing rights (MSR) portfolio and its servicing platform, RoundPoint Mortgage Servicing LLC, under CCM's umbrella. CCM currently manages a roughly $209 billion MSR portfolio and intends to bring the newly acquired assets in-house, reducing reliance on subservicers like Mr. Cooper Group.
Following the merger's completion, all members of Two Harbors' pre-merger board of directors, including E. Spencer Abraham and Sanjiv Das, ceased their roles. Ron Leonhardt, founder and CEO of CCM, has become the sole director of Two Harbors. Their departures were stated to be in connection with the merger and not due to any operational disagreements.
Ron Leonhardt described the deal as a "transformational step" for CCM, creating a "one-of-one mortgage company" by combining its retail franchise with a scaled servicing portfolio. He highlighted the ability to serve customers throughout the loan lifecycle, enhancing customer experience and business durability.
Industry experts acknowledge the operational complexity of integrating a large servicing portfolio, including data onboarding, compliance, and loss mitigation. Analysts, however, generally express confidence in CCM's integration capabilities, while noting the increased leverage and need for disciplined capital management.
The sale process was marked by litigation, with UWM suing TWO in August for over $500 million, alleging breach of contract and fraud. Two Harbors has denied these allegations.