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Key Questions For NSM

Jan. 25, 2014 9:46 PM ETNSM
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Long/Short Equity, Value

Seeking Alpha Analyst Since 2013

This is a pseudonym. Individual investor. Started my career in structured finance, moved into corporate debt, and now equities.

Former CFA charterholder. I'm too cheap to pay hundreds in fees every year - already paid too much for that fancy MBA degree. Plus I have no stable income.

But I have the dream job. I sit at home and philosophize about the world and play armchair CEO

  • Servicing: Cost of replacing MSR? Working on an article on the proper way to evaluate FCF for OCN. Although not mentioned in the article, if I apply the same methodolgy to NSM their cash flow would be WAY lower..their D&A is less conservative

  • Origination: are these gain on sale margins sustainable? My gut feeling is they're not. Need to confirm but seems that GOS margin is high because they're just HARP refi-ing their existing borrowers directly.
    • Volume will be down vs last year's refi boom. So there's less revenue to spread some of the fixed cost
    • (my speculations) HARP loan prices in the market should be down this year. Traditionally HARP loans get a premium b/c they're less prepayment sensitive. But now with majority of recent vintages having coupon less than 5% and rates going up, prepays seem less a worry.
    • If NSM originate like a normal lender such as Flagstar, GOS will be MUCH lower.

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