NetBank Sells Servicing But Will Still Manage Portfolio.(IXIS Real Estate Capital)

ATLANTA -- NetBank here reached a deal to sell servicing rights on mortgages totaling $8.5 billion at a loss, with most of the asset going to IXIS Real Estate Capital. But IXIS, an investor in servicing rights, will hire NetBank to subservice the portfolio, so operationally the loans won't be going anywhere.

In an announcement, NetBank said that the mortgage servicing rights were sold for $119 million in two separate transactions and involved 70% of NetBank's mortgage portfolio. NetBank is retaining ownership of MSRs on approximately $3.5 billion of mortgage loans.

NetBank sold servicing rights on $8.2 billion of Fannie Mae and Freddie Mac loans to IXIS Real Estate Capital. A second unnamed buyer acquired serivicing rights on $230 million of Ginnie Mae loans. Both transactions closed on Sept. 29.

NetBank said the sale of MSRs and related hedges will result in a one-time expense of $0.61 per share. The sale results in an after-tax loss of $19.3 million since the sales price was below the carrying value of the servicing rights.

At the same time, NetBank liquidated the Ginnie Mae mortgage-backed securities that it held as an on-balance-sheet hedge for the MSRs. This resulted in an after-tax loss of $8.7 million, bringing the total loss on the two transactions to $28.1 million. NetBank said the transactions have "limited impact" on tangible book value.

In an unusual twist to the servicing sale, NetBank will continue to service loans as a subservicer for IXIS. The company said it had planned to maintain a servicing operation to handle the MSRs it is retaining as well as to service its own mortgage production on an interim basis before loans are sold into the secondary market.

"The cost of selling these MSRs exceeded our initial expectations, but we believe the entire transaction and the timing of it serves the long-term interest of our company and ...