Mortgage servicers big winners on the HW 30 (and Trulia)
Walter, Ocwen, Nationstar overcome industry headlines
Despite Moody's Investors Service citing concerns that nonbank mortgage servicing companies, such as Ocwen Financial (OCN), Nationstar (NSM) and Walter Investments (WAC), will begin originating nonprime mortgages, their stocks carried on unaffected and even strengthened on Tuesday.
Nationstar, Ocwen and Walter surged 6.08%, 3.35% and 4.78%, respectively, and were unaltered by threats that the companies’ plans would negatively impact their credit ratings.
On Feb. 6 the New York Department of Financial Services indefinitely halted Ocwen's $2.7 billion deal to purchase mortgage servicing rights on approximately $39 billion of unpaid principal balance from Wells Fargo (WFC).
Many consider this a signal that regulators are going to limit the rapid growth of these kinds of companies.
"Over the medium term the regulatory attention could accelerate a shift in servicers’ business models to areas with even greater operating risk," Moody's said.
For now, the origination of non-prime mortgages is not a huge operation at any of the three firms. Nationstar, for example, is currently limiting its mortgage originations and plans to keep shrinking its market share.
However, Moody's is right to note there is an opportunity in the space. Traditional lenders are exiting the mortgage business as it becomes more unprofitable. Other players, such as real estate investment trust Redwood, are getting into the conforming mortgage market.
But before the companies can start celebrating, year-over-year, all of their stocks are still in the red, with Ocwen, Nationstar and Walter down 6.73%, 21.89% and 43.28%, respectively.
As a whole, the HW 30 — Housingwire’s exclusive list of mortgage related stocks — witnessed a strong day on the markets.
In addition to these three companies, Trulia (TRLA) recorded the best day on the HW 30 and jumped 7.34%.