According to HousingWire, CrossCountry Intermediate Holdco is preparing to issue half a billion dollars in senior unsecured notes as it moves closer to completing its acquisition of Two Harbors Investment Corp., which is expected to close in August. The credit rating agency Fitch anticipates these notes will receive a BB-(EXP) rating and will rank at the same level as CCM's existing senior unsecured debt. The money raised will be used to pay back some of the mortgage servicing rights-backed financing that CCM is using to fund the overall transaction.
The acquisition is significant because it's pushing CCM up into the ranks of the largest mortgage servicers in the country. Two Harbors brings a substantial portfolio to the table, and when combined with CCM's existing business, the company jumps from number fifteen to number eight among the largest servicers by their owned portfolios.
What's noteworthy here is the leverage situation. Fitch expects CCM's corporate leverage to climb to 2.4x after the deal closes, which exceeds the rating agency's downgrade trigger of 1.5x. However, Fitch noted that retained earnings should help bring leverage back down toward CCM's target of 1.0x over the medium term. The shift from secured to unsecured debt is actually viewed positively because it frees up collateral and improves the company's liquidity position, even though overall leverage goes up temporarily.
CCM has emphasized to HousingWire that while leverage will increase in the short term, the combined company will be significantly larger and more cash generative. The company expects to see meaningful recurring cash flows from servicing, a larger mortgage servicing rights portfolio, and opportunities to realize cost savings that should help reduce that leverage over time.
What I am seeing locally here in the Bay Area and East Bay is that consolidation in the mortgage servicing space continues to reshape the industry. When larger players combine their portfolios and bring servicing in-house through operations like RoundPoint, it generally means more stability and potentially smoother customer service experiences for homeowners with loans being serviced by these consolidated entities. For sellers and buyers in our market, these kinds of industry moves don't typically move the needle on day-to-day transactions, but they do reflect the broader efficiency trends that influence lending standards and servicing quality across the region.
