Mortgage servicer Nationstar Mortgage Holdings (NSM) saw its second-quarter profit double as its servicing pre-tax income jumped 110% and its origination revenue increased 45%.
The Lewisville, Texas-based servicer posted a profit of $123.4 million, or $1.37 a share, in the second quarter. That compares to earnings of $62.6 million, or 70 cents a share, in the first quarter of 2013 and a profit of $36.3 million, or 41 cents a share, in the second quarter of 2012.
Nationstar has spent the past year acquiring mortgage servicing rights, with a game plan of benefitting when home prices shore up and rates rise. FBR Capital Markets predicted earlier in the year that Nationstar would eventually benefit from today's rising interest rate environment.
In FBR Capital's own words, the firm's analysts said Nationstar "should benefit in a gradually rising rate environment as it extends the duration of its servicing book and improves its core earnings power while having a more muted impact on the origination platform."
Nationstar’s overall revenue grew 40% to $603.7 million in the second quarter, up from $431.1 million in the prior quarter and 198% from $202.8 million a year earlier.
The company’s servicing fee income hit $284.6 million during the period, up 38% from the previous period.
Nationstar’s average portfolio unpaid portfolio balance reached $315 billion in the second quarter, a 21% increase over the previous quarter’s average of $260 billion.
This increase is attributed to the firm closing on agency and government servicing portfolios from Bank of America (BAC) in the first quarter.
As of today, Nationstar says its “pipeline of bulk MSR purchase opportunities” is in excess of $400 billion in aggregate unpaid principal balance.
Total servicing portfolio prepayments in the second quarter as measured by the company's conditional prepayment rate reached a rate of 18%.
Origination revenue also grew by 45%, reaching $268.7 million in 2Q. The origination segment also reported a record funded volume of $7.1 bilion and a repacture rate of 48%.
Improvements in loan performance are another telltale sign of a servicer that is benefitting as the market shifts.
Delinquencies at Nationstar continued to fall in the second quarter, with the 60-plus day delinquency rate on serviced loans standing at 11.8% of UPB, down from 13.8% in the first quarter.