Walker & Dunlop announced it has completed the purchase of a $3.8 billion commercial mortgage servicing portfolio from a subsidiary of Oppenheimer Holdings for a final closing price of $44.6 million.
The acquisition is expected to make Walker & Dunlop (NYSE: WD) the largest Department of Housing and Urban Development (HUD) multifamily and health-care servicer in the United States. Its servicing portfolio is projected to exceed $9.3 billion at the end of the second quarter.
Walker & Dunlop ranked No. 13 on Affordable Housing Finance’s list of Top 25 lenders this year.
"In 2012, Walker & Dunlop set a goal to increase the proportion of revenues that comes from servicing and other non-transaction-based fees,” said Stephen Theobald, Walker & Dunlop CFO, earlier this month when the deal was announced. “Over the past several years, the servicing portfolio has seen steady growth with the value of its revenue streams becoming increasingly apparent in the financial stability and flexibility provided to the business. The opportunity to acquire a portfolio of this size is rare and our strong cash position allowed us to move quickly to accelerate the accomplishment of our goal."
The acquired portfolio, comprised of 480 permanent loans insured by HUD, has a weighted average servicing fee of 17 basis points. Annual servicing revenue from the acquired portfolio is projected to be approximately $6.4 million.
Officials said 361 loans, with an unpaid principal balance of $2.7 billion, are secured by multifamily properties. The other 119 loans, with an unpaid principal balance of $1.1 billion, are secured by senior housing and health-care properties. The portfolio is geographically diverse with loans in 43 states, the District of Columbia, and the U.S. Virgin Islands.
The loans in the portfolio have a weighted average note rate of 3.99% and an average age of 44 months. The average remaining life of the portfolio loans is 31 years. Given the relatively low average note rate and remaining maturity of the portfolio, the firm said it expects limited prepayments of loans over the coming years.
The portfolio brings with it $230 million in escrow balances and no loss-sharing risk to Walker & Dunlop.