Mortgage servicer stocks take huge hit on weak earnings

Nationstar, Walter, Stonegate all down more than 20%

It’s a rough day on Wall Street for mortgage servicers as Nationstar Mortgage Holdings (NSM), Walter Investment Management (WAC) and Stonegate Mortgage Corporation (SGM) all plunged into the red after releasing their third-quarter earnings Thursday morning.

What happened?

Let’s start with Nationstar, whose stock is down 26.58%. The company recorded revenue of $504.3 million, down 20.2% year-over-year, but beating Wall Street estimates by $134.4 million.

Seeking Alpha noted that the good news for the company is that since the end of the second quarter, Nationstar has entered into commitments to acquire $43 billion of new servicing acquisitions, and closed on $16 billion in the third quarter, with the expectation of closing the remaining $27 billion by first quarter 2015.

The same positive spin can't can’t be said for Walter’s earnings. A little before market close, the company’s stock was down 26.54%.  

As HousingWire reported Ben Lane reported, buried deep within its third quarter earnings statement, Walter revealed that the company is now the focus of several investigations into the business and servicing practices of Walter’s subsidiary, Green Tree Servicing.

On page 44 of the company’s earnings filing with the Securities and Exchange Commission, the company disclosed that during the second quarter, it met with a working group representing the attorneys general and regulators of several states as well as representatives of the Office of the United States Trustee to “discuss the business practices of Green Tree Servicing.”

In its earnings, Walter reported a GAAP net loss for the third quarter of 2014 of $70.8 million, or a loss of $1.88 per diluted share. The company had revenue of $386 million, down 21.1% year-over-year and missing Wall Street expectations by $4.84 million.

Stonegate is the best of the worst, reporting the lowest decline at 21.87%.

On the positive side, the lender recorded that its mortgage loan origination volume slightly increased in the third quarter, growing 7% to $3.5 billion compared to $3.3 billion in originations in the second quarter of 2014.

This is a 51% rise from origination volume of $2.3 billion in the third quarter of 2013.

But this doesn’t dismiss that the fact that it missed estimates.

Revenues increased 9% to $63.1 million in the third quarter of 2014 from $57.6 million in the second quarter of 2014 and were up 98% from $31.9 million in the third quarter of 2013. This missed analyst estimates by $14.55 million.

Despite the tough day for mortgage servicers, the HW 30, HousingWire’s exclusive list of stocks impacting the housing economy, was up .48%. 

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