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Servicing / The Ticker

Nationstar continues growth under regulator spotlight

Nonbanks doing better with MSRs than banks

Nationstar
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The big nonbank servicers – Nationstar (NSM), Ocwen Financial (OCN) and Walter Investments (WAC) – have been caught in the regulatory spotlight.

What’s drawing the attention of regulators? It’s the explosive growth of the nonbank mortgage servicing business.

The big three are growing at rate that alarms government watchdogs, over concerns they don’t have the capacity to properly and fairly service the mortgages they handle.

Turns out, the nonbanks are doing a much, much better job than the banks in helping troubled borrowers.

The value of loans handled by Nationstar, the second-biggest non-bank mortgage servicer, has tripled since the firm’s initial public offering in March 2012. Last month, the New York Department of Financial Services announced that Nationstar’s “explosive growth” may put homeowners at risk if the firm doesn’t have the capacity to service all the loans. As regulators probe Nationstar and Ocwen Financial (OCN) Corp., the biggest non-bank servicer, the companies are performing better than banks at handling delinquent loans -- the toughest task in the servicing trade.

Nationstar and Atlanta-based Ocwen, known as special servicers because of their focus on rehabilitating soured loans, have modified mortgages at about twice the rate of banks, according to a March 26 report from Fitch Ratings Inc. that looks at performance back to 2010. When mortgages go into foreclosure, the timeline for non-banks on average is shorter, reducing investor losses, according to the report.

Source: Bloomberg
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