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HomeStreet rejected ‘inadequate’ offer for DUS license

HomeStreet in Seattle rejected an unsolicited offer to buy its Fannie Mae delegated underwriting and servicing (DUS) license.

The $9.5 billion-asset company recently received a nonbinding offer to acquire the license, along with its $32 million loan servicing portfolio, for $57 million, Chairman and CEO Mark Mason divulged in a letter to shareholders.  

HomeStreet’s board and management “analyzed the DUS purchase proposal and determined that the price proposed was inadequate” and “was not in the best interests of the company,” Mason wrote.

Mason said Chuck Griege, managing member of Blue Lion Capital, had recommended one of the unnamed group’s members. Blue Lion has been pushing HomeStreet to improve its shareholder returns, possibly by selling the license.

License holders can underwrite, originate and sell multifamily loans under a loss-share arrangement with Fannie Mae. Only 25 licenses exist.

HomeStreet “is in position to create a competitive bidding process for the license because very few … are transferred and Fannie Mae rarely issues new licenses,” Timothy Coffey, an analyst at Janney Montgomery Scott, wrote in a client note.

“We believe HomeStreet could entertain selling both the license and servicing portfolio, but at a much higher price,” Coffey added. “Doing so could enable management to restructure the balance sheet, which has sizable concentration in multifamily loans with yields below Federal Funds.”

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