Nationstar annual profit dragged by fourth-quarter loss
Solutionstar business records strong first year
Mortgage servicer Nationstar Mortgage Holdings net income for the year reached $217 million, or $2.40 per share, up 6% from $205 million in 2012, or $2.40 per share.
But the fourth quarter was not as kind.
The net loss in the fourth quarter 2013 hit $51 million, or 56 cents per share compared to net income of $64 million, or 71 cents per share, in the fourth quarter 2012.
““We achieved strong growth in our servicing portfolio and originations volume. We realized this growth while helping consumers with over 108,000 workouts and approximately 62,000 HARP refinancings. Nationstar delivered increased profitability and a healthy return on equity for our shareholders,” said Jay Bray, CEO of Nationstar.
The company’s servicing side maintained strong business and reported that servicing fee income, before fair value adjustments, escalated 77% to $312 million in fourth quarter 2013 compared to $176 million a year prior.
For the full year, servicing fee income before fair value adjustments hit $1.2 billion in 2013, rising 114% from $541 million in 2012. Servicing fee income of $292 million in the fourth quarter was up 101% year-over-year.
Nationstar’s earnings were boosted by the pipeline of bulk and flow MSR acquisition opportunities remaining strong at over $350 billion in aggregate UPB. The servicer’s existing flow agreements are expected to produce approximately $20 billion of UPB in annual volume.
However, the origination business did not fair as well, with interest rate volatility in the third quarter 2013 continuing into the fourth quarter 2013 placing downward pressure on refinance activity, the application pipeline and gain-on-sale margins.
For the full year 2013, origination revenue increased to $712 million, from $487 million in 2012 as Nationstar significantly increased its origination volume. Origination pretax income was $60 million in 2013, down from $262 million in 2012 as Nationstar worked through interest rate volatility and capacity reductions in the second half of 2013.
In addition, origination revenue was $45 million in the fourth quarter 2013, with a pretax loss of $143 million as Nationstar reconfigured its operations.
Nationstar’s latest Solutionstar posted a strong year and generated over $64 million in revenue in the fourth quarter 2013, up from $51 million in the prior quarter. In Solutionstar's first year of operation, it generated $185 million and $67 million in revenue and pretax income respectively.
“Within servicing, we will look to increase profitability as we drive down our cost per loan, delinquencies, and vendor spend. We will continue to grow our Solutionstar business with organic volume growth at Nationstar and third-party business along with fee-based services acquisitions that meet our return thresholds,” Chief Financial Officer David Hisey said.
“Although origination margins came under pressure in the fourth quarter, our current originations are profitable and we are confident this business will continue to be profitable in 2014 with its more focused footprint,” Hisey continued.