Urban Financial Sells to Investor Group in $80 Million Deal [update]

Urban Financial Group will be acquired by an investor group affiliated with Walter Investment Management Corp. in an $80 million deal, the company announced Tuesday.

The reverse mortgage business has long been operated under the ownership of Knight Capital Group. Knight has since merged with Getco LLC, a Chicago-based trading firm under the company KCG Holdings (NYSE: KCG), which has sold off non-core assets including a bond trading unit and now its reverse mortgage company.

The investor group is led by Brian Libman, Walter Investment’s Chief Strategy Officer, with the transaction expected to be completed in the fourth quarter and generating proceeds for KCG Holdings of $80 million in cash consideration and retained net assets.

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Walter has entered into a strategic relationship with UFG Holdings, a company controlled by the investor group, which has agreed to acquire 100% of the membership interests of Urban Financial. Under the agreement, Walter Investment will invest  $15 million in UFG in the form of an unsecured loan and will be entitled to purchase up to 19% of the common units of UFG. Reverse Mortgage Solutions, a wholly-owned subsidiary of Walter will enter into a forward flow agreement to purchase mortgage servicing rights originated by Urban.

Upon the deal closing, Libman will resign from his position with Walter.

“Urban Financial Group is well positioned to capitalize on the significant growth opportunities in the promising reverse mortgage originations market,” Libman said in a press release. “The lender has demonstrated market share gains, operational excellence and solid growth fundamentals. I look forward to working with management to extend Urban’s track record of success.”

Tulsa, Oklahoma-based Urban has long operated as one of the largest reverse mortgage lenders, comprising the largest wholesale division in the industry as well as a retail channel. It has operated as one of the most active Ginnie Mae issuers in the space.

“The Urban management team is looking forward to working with Brian and his investor group,” said Steve McClellan, Urban Financial president and CEO. “Urban was acquired on the strength of our team and our high level of client service and I am confident that as we work together to invest further in the business, we will be well-positioned to take advantage of the market’s current and future opportunities.”

According to the company, KCG made the decision to divest Urban Financial Group after a strategic review and focus on its core market making and agency execution services.

Written by Elizabeth Ecker

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  • While the buyer might come as a surprise the sale is not. Ever since Knight Capital suffered its $400 million trading loss (as announced by RMD on August 2, 2012), the folks at Urban have been told they would not be sold off. Then Getco acquired Knight Capital and once again assures were given to Urban. To see the sale take place in less than one year from the announcement take place should be a clear warning about the stated intentions of management.

    What executive management was saying in its prior two assurances was that current bid prices for Urban were as of yet too small to consummate any sale of Urban. It is when management gushes that a unit will not be sold, employees need to be concerned about just when a sale will take place.

    While this may be good news for RMS and its appetite to be the largest lender, servicer, and GNMA issuer in the industry, it also means a more secure situation for Urban as well.

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