Nationstar’s rapid growth prompts S&P to revise outlook

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Ratings giant Standard & Poor's shifted the outlook of Nationstar Mortgage Holdings' residential mortgage primary, subprime and special loan servicer ratings to 'developing' from previous outlooks of 'positive' for subprime and 'stable' for the company's primary and special servicing ratings.

Simply put, the outlooks changed from a distinct positive view to 'developing' because the company is in flux due to its rapid expansion in the MSR space.

Standard & Poor’s changed the outlook to ‘developing’ as a result of Nationstar's purchase [3] of Bank of America ($13.24 0.03%) [4] mortgage servicing rights valued at $215 billion for 1.3 million loans. The addition of these loans will increase the size of Nationstar’s portfolio by more than 100%, the ratings agency noted.

"In our opinion, Nationstar ($41.89 -0.44%) [5] has handled prior servicing transfers in a deliberate manner, with minimal disruption to borrowers, and we have received no significant inquiries from investors regarding prior servicing transfers to Nationstar," said analysts Todd Niemy and Steven Frie with S&P.

They added, "However, we have revised the outlook to ‘developing’ to reflect our concern that the increase of the portfolio by over 100% could affect the 'above average' ranking if Nationstar is not able to acquire the proper infrastructure and personnel to service the portfolio appropriately." 

In July, Nationstar increased its portfolio by 275,000 loans with the purchase of the mortgage servicing platform as well as MSR [6]’s of Aurora Loan Services.

This was one of 344 servicing transfers the company has completed since 2008, the rating agency noted. 

S&P met with the senior management of Nationstar on-site and noted that the company plans to service the additional loans by leveraging existing capacity, infrastructure and the expansion into new markets possibly leveraging existing BofA resources. 

The company is also in the process of reviewing all Pooling and Servicing Agreements (PSA’s) affected by the BofA acquisition and will abide by all servicing provisions, S&P said.  

Additionally, Nationstar plans to board the agency loans by June 2013 and the loans in private-label securitizations by August 2013, according to the rating agency. 

cmlynski@housingwire.com [7]