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Mon, Jan. 25, 3:16 PM
- Modest declines in the major averages are masking the continued liquidation in a number of financial sectors.
- Hotel REITs: Pebblebrook Hotel (PEB -2.4%), LaSalle Hotel (LHO -2.2%), FelCor Lodging (FCH -2.9%), DiamondRock Hospitality (DRH -3.3%)
- Nonbank servicing: Ocwen Financial (OCN -6.9%), Walter Investment (WAC -10.5%), Nationstar Mortgage (NSM -6.7%), Altisource Portfolio (ASPS -4.6%), New Residential (NRZ -3.2%)
- Mortgage REITs: Two Harbors (TWO -3.8%), Invesco (IVR -4.3%), American Capital Mortgage (MTGE -3.4%), Western Asset (WMC -3.7%), Apollo Residential (AMTG -3.8%), AG Mortgage (MITT -3.9%)
- BDCs: Prospect Capital (PSEC -4%), Apollo Investment (AINV -2.2%), Medley Capital (MCC -4.1%), Gladstone Capital (GLAD -4.4%). A few in this sector are managing gains though: Main Street (MAIN +1%), TICC Capital (TICC +1.9%), Harris & Harris (TINY +1.8%)
Fri, Jan. 22, 11:59 AM
- According to Inside Mortgage Finance, just $254B in agency MSRs changed hands last year, a far cry from the $1T figure that used to be bandied about by fans of nonbank servicers like Ocwen Financial (OCN +0.4%), Nationstar Mortgage (NSM +0.5%), and Walter Investment (WAC -1.4%).
- With Q4 results on tap next month, Sterne Agee's Henry Coffey says this could be the last quarter for the group to show any progress on earnings growth. It's mostly downhill from here, he says, thanks to declining HARP volume and rising refinancing. The refinancing boosts prepayment speeds, thus forcing markdowns on MSR portfolios.
Wed, Jan. 20, 9:54 AM
- Unbridled selling of the mortgage-related names continues in today's session.
- A sampling: PennyMac (PMT -3.9%), Ocwen (OCN -12.8%), Walter Investment (WAC -1.4%), Nationstar Mortgage (NSM -4.3%), New Residential (NRZ -3.8%), Altisource Portfolio (ASPS -12.2%).
- There's a general market panic going on, but there's also a plunge in interest rates which lowers the value of servicing portfolios as it makes refinancings more likely. Indeed, the MBA earlier today reported a 19% increase in mortgage refis last week.
- Owcen and New Residential come to mind as two with active buyback programs in place.
Wed, Jan. 13, 1:14 PM
- It wasn't supposed to be this way after the Fed embarked on a rate hike cycle as these yield-starved names could finally look forward to earning a better spread on their money.
- Since the Fed hiked last month, however, the long bond yield has tumbled about 20 basis points, further narrowing the yield curve.
- With today's 1.3% decline, the XLF is lower by 7.6% YTD, about 200 basis points worse than the S&P 500 (but about 250 basis points better than the energy sector).
- TBTFs: Morgan Stanley (MS -3.9%), Goldman Sachs (GS -2.3%), Citigroup (C -1.8%)
- Regionals: U.S. Bancorp (USB -2%), Regions Financial (RF -3.4%), New York Community Bancorp (NYCB -2.2%)
- Mortgage-related names like Ocwen (OCN -6.2%), Nationstar (NSM -5.3%), Walter Investment (WAC -13.9%), and New Residential (NRZ -5.3%) have come in for particular punishment this day and this year. The mortgage REITs too: Hatteras Financial (HTS -4.4%), Western Asset (WMC -3.6%), New York Mortgage (NYMT -2.3%), Five Oaks (OAKS -5.2%), PennyMac (PMT -2.6%)
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, BTO, SEF, IYG, FXO, FNCL, FINU, RWW, RYF, FINZ, XLFS
Dec. 21, 2015, 12:26 PM
- Higher interest rates boost servicing portfolio values as it makes refinancing less likely. An added boost might come if origination volume can pick up at the same time.
- The bad news, notes National Mortgage News, is that servicers remain stuck with costly-to-service problem loans - and those costs are going up amid greater scrutiny from regulators. While the cost per year to service a performing loan of $170 in 2014 was up from $59 in 2008, according to the MBA, the cost of servicing a NPL skied to $2,300 from $482.
- "Mortgage servicing is so hard these days, even the current stuff, you just can't make money at it," says Andy Laing of Fay Servicing. "Costs have gone up across the board."
- That's where specialty outfits with scale like Nationstar Mortgage (NYSE:NSM), Ocwen Financial (NYSE:OCN), and Walter Financial (NYSE:WAC) come in, but regulatory pressure is keeping them from adding to portfolios. Nomura's Brock Vandervliet estimates there's four years worth of potential NPL that could be sold and nearly six years of reperforming loans.
- "There's a lot of raw material for a servicers but they have to stay on top of those borrowers to make sure they continue to write checks," says Vandervliet. "It's not a one-time fix and they move on."
Dec. 17, 2015, 7:33 AM
- $150M would be enough to buy back about 12.6M shares of the company's roughed-up stock at last night's closing price of $11.88. That's more than 11% of the float.
- Source: Press release
- In a new presentation today, the company says intrinsic book value excluding Xome is $15.77 per share. As for Xome, it's a unicorn says the company - worth more than $1B.
- Previously: Nationstar Mortgage slides after Raman exit (Dec. 1)
- NSM flat premarket
Dec. 16, 2015, 10:20 AM
- After what can be politely called a crash in the stock, Morgan Stanley picks today as the day to downgrade Nationstar Mortgage (NYSE:NSM) to Underweight from Equalweight. The price target is cut to $12 from $19.
- Alongside a pummeling in the rest of the nonbank servicer group, Nationstar is lower by 60% year-to-date, and 80% since topping out about two years ago.
- The stock opened lower today, but has now turned higher by 1.5% to $11.59.
- See also: American Capital Agency downgraded at Morgan Stanley (Dec. 16)
Dec. 1, 2015, 2:40 PM
- Nationstar (NSM -2.7%) bulls may have thought they had a unicorn on their hands in Xome Holdings, but those dreams are likely over after the departure of the unit's head, Kal Raman.
- Following the news, Sterne Agee cuts its price target on the stock to $12 from $15 (current price is $13.24).
- Previously: Nationstar Mortgage and Kal Raman part ways (Nov. 30)
Nov. 30, 2015, 4:50 PM
Nov. 24, 2015, 2:02 PM
- Consolidation in the servicer industry had been the norm prior to the housing crisis, with the market share of the top five at 59% in 2009 vs. 37% in 2001. In Q2 of this year, that market share had slipped to 40%. Nonbanks accounted for 9% of servicing in 2009, and 19% by 2014.
- With post-crisis increases in regulatory and counterparty oversight, significant boosts in costs to service mortgages (particularly NPLs), and new capital rules making it more costly to hold MSRs, it only makes sense for consolidation to return.
- Interested parties: PennyMac Mortgage (NYSE:PMT), Ocwen Financial (NYSE:OCN), Nationstar Mortgage (NYSE:NSM), New Residential (NYSE:NRZ), Altisource Portfolio (NASDAQ:ASPS), Walter Investment (NYSE:WAC).
Nov. 6, 2015, 11:51 AM
- The brutally roughed-up sector enjoys a small bounce today after this morning's jobs report nearly assures the Fed will embark on a rate hike cycle in one month's time.
- Mortgage prepayments fall as rates rise, thus meaning the mortgage servicing rights which make up the bulk of these firms' assets go up in value.
- Ocwen Financial (OCN +1.2%) for one, reported a loss in Q3, with the big move lower in rates - the 10-year stood at 2.43 at Q2's end and fell to 2.02% at the end of Q3 - and subsequent markdown on MSRs a big factor in the loss. With today's sharp move higher in rates, the 10-year is all the way back to 2.34%, maybe setting the stage for a profit in Q4.
- Nationstar (NSM +4.3%) and Walter Investment (WAC +9.6%) share similar stories, but Ocwen has been the first of the group to de-lever, maybe putting it in a better place to buy MSRs and repurchase stock (an authorization is already in place).
- Also on the move is New Residential (NRZ +2.6%).
Nov. 3, 2015, 2:57 PM
- The New Residential earnings call (transcript) seemed to put to rest the idea the company doesn't want to work with Ocwen FInancial (OCN +3.7%) in the future. NRZ management mentioned Ocwen a number of times in various capacities as a partner. Both Ocwen and Nationstar (NSM +0.4%), says New Residential CEO Michael Nierenberg, are very good at servicing delinquent loans and this would be an area where his company would look to make further acquisitions and work with the two.
- Turning to the Nationstar call, it appears that company isn't going to be in the market bidding for MSRs in the near-term as management implied it's looking to pay down debt and de-lever. Ocwen already has very low leverage and might be able to step in to some smaller deals.
- Nationstar might also be looking to raise capital for its Xome platform and mentioned a valuation of $1B, making a similar business Altisource Portfolio (ASPS +3.4%) is developing look very cheap.
- Previously: Earnings grow at New Residential (Nov. 3)
- Previously: Earnings slip at Nationstar Mortgage (Nov. 3)
Nov. 3, 2015, 7:30 AM
- Q3 adjusted earnings of $32M or $0.30 per share vs. $35M and $0.32 in Q2.
- Servicing Segment adjusted pretax income of $36M up 57% Q/Q; equates to 3.6 basis points based upon average servicing portfolio - target of five bps for Q4 is reiterated. Ending UPB of $408B up 1%. 60-day delinquency rate of 7.2% down 20 basis points. Annualized CPR rate of 16.2% down 70 bps. Workouts of 16,340 down 3%.
- Originations Segment adjusted pretax income of $50M down 15% Q/Q. Revenue of $180M up 6%. Total funded volume of $4.9B up 2%. Recapture percentage of 28% vs. 25%.
- Xome Segment pretax income of $17M down 39% Q/Q. Revenue of $109M down 11%. Property sales of 4,913 down 20%. REO ending inventory of 8,008 down 3%.
- Conference call at 9 ET
- Previously: Nationstar reports Q3 results (Nov. 3)
- NSM flat premarket
Nov. 3, 2015, 6:56 AM
- Nationstar (NYSE:NSM): Q3 EPS of $0.30
- Revenue of $397.18M (-36.1% Q/Q)
Oct. 28, 2015, 2:32 PM
Oct. 13, 2015, 1:41 PM
- Screening its U.S. coverage universe to find companies where its analysts views diverge widely from that of the consensus, and then narrowing further to those names with high conviction, Credit Suisse puts out a list of eight buys and 6 sells.
- The full report with thesis on each name is here.
- The buy list: Box (NYSE:BOX), Boyd Gaming (NYSE:BYD), CF Industries (NYSE:CF), Ingredion (NYSE:INGR), L-3 Communications (NYSE:LLL), LaSalle Hotel Properties (NYSE:LHO), Nationstar Mortgage (NYSE:NSM), SeaWorld Entertainment (NYSE:SEAS), Sysco (NYSE:SYY), Wal-Mart (NYSE:WMT), Weatherford (NYSE:WFT), and WisdomTree (NASDAQ:WETF).
- The sells: Aon (NYSE:AON), Dollar Tree (NASDAQ:DLTR), Hyatt Hotels (NYSE:H), Macerich (NYSE:MAC), Pulte (NYSE:PHM), Realogy (NYSE:RLGY).
Nationstar Mortgage Holdings Inc along with its subsidiaries is residential mortgage servicers in the United States. It conducts operations through servicing, originations and solutionstar through its Nationstar Mortgage and Champion Mortgage brands.
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