Blend’s move to buy Title365 from Mr. Cooper targets key fintech niche

Mr. Cooper, the lender and servicer formerly known as Nationstar, is selling its title agent and technology division to digital mortgage platform Blend, in a transaction valued at $500 million.

Mr. Cooper plans to close on the sale of Title365 to Blend in the second quarter if the acquisition receives all required approvals. It will retain a 9.9% stake in the company. Blend will pay $450 million in cash, subject to certain adjustments, and Mr. Cooper will record a $350 million after-tax gain. With those adjustments, Blend will pay $422 million for the acquisition.

The transaction will help the large nonbank mortgage company shore up its profitability, and allow a major point-of-sale technology provider to extend its reach into electronic closing.

“We believe the loan process and the title and settlement process should be collapsed into one thing and we’re going to deeply integrate those two things together,” Nima Ghamsari, CEO and co-founder of Blend, in a press release.

Blend plans to open use of the technology up to other title agents after acquisition while also offering complete title services, he said.

Mr. Cooper decided to sell the title agent and technology division it originally acquired in 2014 following a strategic review.

“We determined that Title365 would gain greater investor credit as part of a company like Blend, where it will have a significant strategic impact,” said Jay Bray, chairman and CEO of Mr. Cooper Group, in a press release.

Mr. Cooper is likely to increase its earnings per share by an estimated 6 to 20% in 2021 as the net result of this deal, the loss of earnings from title and a planned company stock buyback, according to a report issued Monday by Wedbush Securities.

Coordination with third-party providers of title and settlement services is one of the key hurdles in automating the closing process.

While hybrid electronic closings gained some momentum due to social distancing necessitated by the pandemic, relatively few lenders have fully implemented them.

That’s in part because differences in state laws force lenders to create a hybrid approach for some parts of the process, such as notarization.

While the percentage of housing finance firms with e-closing capabilities jumped to 43% in 2020 from 18% in 2019, only 12% of lenders have an adoption rate of 75% or more by their staff, the Stratmor Group reported last month.

E-closing “hasn’t been as well-trodden a path” as other mortgage technology sectors, but it has room to grow, which makes it attractive, Ghamsari said. Lenders may have more time to address it now that loan volumes have started to ebb.

“This is another piece of the puzzle we’re excited to tackle,” he said.