Swiss banking giant UBS Group AG has finalized the sale of Credit Suisse’s mortgage servicing arm, Select Portfolio Servicing (SPS), to an investor group spearheaded by Sixth Street, according to sources familiar with the transaction. Davidson Kempner Capital Management, another prominent investment firm, is participating as a co-investor in the deal.
While representatives from Credit Suisse, Davidson Kempner, and Sixth Street have remained tight-lipped, declining to offer any official statements, market insiders have confirmed the buyer consortium, initially reported by Bloomberg.
Salt Lake City-based Select Portfolio Servicing, despite its robust reputation within the mortgage servicing sector, has been on the divestiture block for some time under Credit Suisse’s ownership. The move aligns with a broader trend among major banks to reduce their exposure to mortgage servicing rights (MSRs). This industry shift is largely driven by anticipated increases in capital reserve requirements and the inherent risks associated with MSR portfolios, a strategy recently exemplified by Wells Fargo’s decision to scale back its correspondent channel.
UBS, which absorbed Credit Suisse in June 2023, inheriting SPS as part of the acquisition, officially announced the divestiture of the U.S. servicing operation on Wednesday. However, the announcement refrained from naming the purchasers or disclosing any financial specifics of the transaction.
During an analyst call, UBS Chief Financial Officer Todd Tuckner highlighted that the sale, projected to conclude in the first quarter of 2025, is strategically advantageous for UBS. It is expected to yield approximately $250 million in annual cost reductions and decrease risk-weighted assets by about $1.3 billion. CEO Sergio Ermotti, in a subsequent media briefing, corroborated the sale to a “consortium.” Reuters was the first to report on the transaction details.
Fitch Ratings, in a recent analysis, underscored SPS’s long-standing presence in the mortgage servicing market, noting its involvement in residential mortgage servicing since 1989 and in residential mortgage-backed securities (RMBS) transactions since 2000. Credit Suisse’s acquisition of Select Portfolio Servicing dates back to 2005. Following Credit Suisse’s rescue by UBS last year, SPS was integrated into UBS’s division focusing on non-core and legacy assets.
According to Inside Mortgage Finance (IMF) data from June, Select Portfolio Servicing ranked as the 20th largest primary mortgage servicer in the U.S., managing a staggering $166.7 billion in unpaid principal balance (UPB). Furthermore, SPS’s owned servicing portfolio was valued at $45 billion, positioning it at 36th in the IMF ranking.
In a move to further expand its servicing capabilities, SPS revealed plans in September 2022 to acquire select assets from Rushmore Loan Management Services, a Texas-based entity. The integration of Rushmore as a subsidiary was projected to elevate SPS’s operational capacity to over 1,600 employees, servicing approximately 1.4 million loans, as per the companies’ joint announcement.
This strategic sale marks a significant shift in the landscape of Select Portfolio Servicing Mortgage, as SPS transitions into a new chapter under the ownership of Sixth Street and its co-investors, while UBS sharpens its focus on core banking activities.
