Green Tree, partly owned by priavte equity firm Centerbridge Partners, a $10 billion alternative asset management firm, specializes in servicing delinquent home loans, a niche market that could see strong growth as more Americans struggle to make loan payments in an uncertain economy.

"The ability to generate revenues from recurring, fee-based sources, with high operating margins from an asset-light platform is an especially attractive addition to our existing business model," Walter Chief Executive Mark O'Brien said in a statement.

Green Tree manages about $34 billion in assets, and 40 percent of its servicing business comes from government-backed entities such as Fannie Mae and Freddie Mac, according to its website.

Walter Investment said it will issue about 1.8 million common shares to the seller, assume about $20 million of existing Green Tree debt, issue $765 million of new debt and pay cash.

Centerbridge Partners had bought Green Tree once owned by CNO Financial bankrupt predecessor Conseco from Cerberus Capital Management, Fortress Investment Group and J.C. Flowers, in 2007.

In a regulatory filing, Walter Investment said it expects the deal to add to free cash flow and core earnings in 2011 and beyond.

Following the deal, Walter Investment will no longer qualify as a real estate investment trust, the company said in a statement.

Real estate investment trusts qualify for lower corporate tax rates and, in return, must distribute 90 percent of their income in the form of dividends.

The company said it expects to continue paying a small dividend, but would use the majority of its free cash flow to reduce debt and fund growth.

Credit Suisse Securities acted as financial adviser to Walter Investment and Morgan Stanley & Co was Green Tree's financial adviser.

Shares of Tampa, Florida-based Walter Investment closed at $19.28 on Friday on NYSE Amex.