HSBC Mortgage Services has been a trusted name in home lending across the United States for many years. But in early 2022, HSBC sold off its mortgage business to another company, NewRez LLC. This transfer of ownership raised questions for many existing HSBC mortgage customers about what the change means for them.
This introduction provides a comprehensive background on HSBC Mortgage Services, an overview of NewRez, details on the acquisition deal, and insights into what customers can expect going forward under the new ownership.
A Long History in U.S. Home Lending
HSBC Mortgage Services traces its roots back over 140 years to the Household Finance Corporation, which was founded in 1878. Household Finance focused on providing loans to working-class borrowers, who were often underserved by banks at the time.
The company steadily grew its branch network and product offerings across the United States over several decades. It expanded into credit cards and other consumer lending as well.
In 1998, Household Finance merged with Beneficial Corporation. The combined entity took the name HSBC Finance and became part of global banking giant HSBC.
HSBC Finance continued to build up its U.S. mortgage lending operations. The company offered a full suite of home loan products, including:
- Fixed-rate mortgages
- Adjustable-rate mortgages
- Jumbo loans
- Refinancing options
- Home equity lines of credit
- Second mortgages
Mortgages were originated both directly by HSBC Finance and through third party mortgage brokers and correspondents. This expansive network allowed HSBC Mortgage Services to serve hundreds of thousands of customers nationwide.
Financial Difficulties Lead to Sales
In the 2000s, HSBC Mortgage Services grew rapidly along with other U.S. mortgage lenders. But the 2008 global financial crisis dealt a major blow to the housing market and created enormous losses for mortgage providers.
HSBC took a more cautious approach to its U.S. home lending after this downturn. The company tightened underwriting standards, scaled back some product offerings, and lost market share in subsequent years.
By 2021, HSBC was originating less than $4 billion per year in new mortgages, far below its pre-crisis peak. Declining profitability and pessimism about growth prospects in the competitive U.S. mortgage industry led HSBC to put its mortgage unit up for sale.
Shedding the mortgage business would allow HSBC to focus more resources on its core international commercial banking operations.
NewRez Emerges as Buyer
Florida-based NewRez LLC ultimately emerged as the buyer for HSBC Mortgage Services in a $1.6 billion deal announced in early 2022.
For NewRez, acquiring HSBC enabled the company to quickly expand its lending capabilities and bolster its portfolio of mortgage servicing rights.
NewRez was formed in 2008 by a group of mortgage industry veterans and private investors. Though a relatively new company, NewRez grew rapidly to become a top 10 U.S. mortgage lender and servicer.
Buying HSBC Mortgage Services diversified NewRez’s origination channels and gave it an expanded national footprint. It also boosted NewRez’s servicing portfolio to over $500 billion.
NewRez has substantial experience acquiring and integrating lenders as part of its strategy to gain scale. The company aims to leverage technology and process improvements across lending platforms to maximize efficiency.
The HSBC Mortgage Services acquisition closed on March 1, 2022, after receiving the necessary regulatory approvals.
What Customers Can Expect with the Change
For existing HSBC mortgage customers, NewRez has emphasized that it will be mostly business as usual after the transfer of ownership.
All active HSBC mortgage accounts were assumed by NewRez as part of the sale. Customers can expect no change to their current loan terms, interest rates, or account details.
Borrowers will continue making payments to NewRez as they did previously with HSBC. NewRez has also committed to maintaining continuity in customer service. Clients will deal with the same loan officers and support teams they are used to.
The HSBC brand name will be phased out going forward. But the core operations and personnel handling day-to-day mortgage activities are remaining in place.
NewRez does plan to eventually integrate the technology systems and lending practices of HSBC Mortgage Services with its own. This process may take 12–18 months following the acquisition.
The goal is to merge backend processes in order to create a more streamlined customer experience. Borrowers may gain access to improved online mortgage account tools and loan management resources.
NewRez also sees an opportunity to cross-sell products from its various lending divisions to HSBC mortgage holders. This could include offerings like:
- HELOCs
- Credit cards
- Personal loans
- Insurance
Any new products would be optional for customers – there is no obligation to purchase additional services from NewRez.
The Future of HSBC Mortgage Services with NewRez
While the venerable HSBC name will fade away, NewRez has expressed its commitment to retaining the core functions that supported HSBC’s mortgage operations.
NewRez plans to maintain business continuity for both mortgage origination and servicing activities acquired from HSBC. This should prevent significant disruption for existing customers.
The integration process will focus on consolidating duplicative technology, vendor relationships, and fulfillment systems. This should yield cost savings that NewRez can reinvest to enhance services.
NewRez also sees opportunities to grow the business overall by leveraging the expanded national scale. Plans are underway to extend sales reach through HSBC’s network of third party brokers and correspondents.
Beefing up the correspondent network will allow NewRez to originate a substantially larger volume of mortgages under the new combined footprint.
NewRez also aims to refine its underwriting and risk management capabilities by tapping into HSBC Mortgage Services’ rich data on customer behavior. Applying analytics could enable improved credit decisioning and pricing.
While the HSBC Mortgage Services name is going away, customers will gain the backing of a larger, financially sound parent company invested in the mortgage sector. NewRez appears committed to maintaining continuity of service while pursuing growth.
Conclusion:
The sale of HSBC Mortgage Services to NewRez LLC marks the end of an era but also a promising new chapter. HSBC exits U.S. home lending to concentrate globally while NewRez gains expertise and scale. For now, customers should expect minimal changes. Mortgages and services are continuing uninterrupted under NewRez ownership. Longer term, borrowers may benefit from improved technology and expanded product offerings.
FAQs:
What does NewRez’s acquisition mean for customers with existing HSBC mortgages?
Existing mortgage terms, account access and servicing will remain the same in the near term. NewRez aims to eventually integrate operations but maintain continuity.
How will NewRez change things for HSBC Mortgage Services long term?
NewRez plans upgrades to technology, underwriting and product cross-selling. But core functions and customer service teams will stay largely intact.
When did NewRez LLC buy HSBC Mortgage Services?
The $1.6B sale closed on March 1, 2022 after receiving regulatory approvals.
Will HSBC Mortgage Services still exist as a separate brand?
No, the HSBC name will be retired but personnel and operations will remain under NewRez ownership.
What kinds of new mortgage products might NewRez offer?
Potential cross-sell offerings could include HELOCs, credit cards, personal loans, and insurance policies.