Iowa holding company Heartland Financial USA is parting ways with the mortgage servicing rights of a subsidiary. On April 26, Dubuque Bank and Trust Company signed an agreement to sell substantially all its mortgage servicing rights to PNC Bank, N.A., Pittsburgh.
The servicing rights had an estimated fair value of $37 million and a book value of $21 million as of March 31. The portfolio contained approximately 20,300 of serviced residential mortgage loans with unpaid principal balances of $3.35 billion as of March 31.
The serviced loans are primarily owned by Fannie Mae and Freddie Mac. The transaction has been approved by Fannie Mae and Freddie Mac and is expected to close on April 30, 2019. In the agreement, which includes customary terms and conditions, Dubuque Bank and Trust Company will provide interim servicing of the loans until the transfer date, which is expected to be in August 2019.
“During the fourth quarter of 2018, Heartland outsourced mortgage loan originations in many of our markets, and now, as a natural extension, we have decided to sell our mortgage servicing rights,” said Bruce K. Lee, president and CEO of Dubuque-based Heartland.
After the completion of this transaction, Heartland will continue to originate and service conventional residential mortgages through its PrimeWest Mortgage Corporation subsidiary in Texas.
The $11.3 billion Heartland also announced first quarter income of $31.5 million, up from $23.3 million for the first quarter of 2018. It also sold the consumer finance loan portfolios totaling approximately $67 million of Citizens’ Finance Company earlier this year.