Banks Still Selling Mortgage-Servicing Portfolios
Banks continue to move forward with plans to sell mortgage-servicing portfolios, despite increased regulatory scrutiny that has halted at least one large deal, executives at two of the biggest servicing firms said Thursday.
The comments helped boosted shares of Walter Investment Management Corp. and Nationstar Mortgage Holdings Inc., which have been under pressure since the increased scrutiny.
Mortgage servicers send bills and collect payments from borrowers. Federal and state regulators have increased their focus on nonbank mortgage servicers amid fears they are growing too fast, fueled by large banks scaling back in the business.
Nationstar Chief Executive Jay Bray said the heightened regulatory environment hasn't prevented it from moving forward with acquisitions of servicing rights from banks.
"We're able to close [on deals] as we speak," Mr. Bray said during a conference call with analysts to discuss first- quarter earnings. He also said sales of servicing portfolios are expected to accelerate later this year.
Denmar Dixon, chief investment officer of Walter, said in a conference call with analysts that the company should benefit from "a significant volume" of servicing portfolios that are expected trade hands in the coming years.
Earlier this year, New York's top financial regulator halted a deal between the largest nonbank mortgage servicer, Ocwen Financial Corp., and Wells Fargo & Co. The regulator, Benjamin Lawsky, cited concerns about Ocwen's ability to handle increased loan volume given the company's rapid growth.
Mr. Lawsky has also sent letters to Ocwen and Nationstar citing concerns about the companies' servicing practices and relationships with affiliated businesses that provide auction and technology services to the firms.
Ocwen and Nationstar both doubled the size of their servicing portfolios last year, according to industry newsletter Inside Mortgage Finance.
The growth of such nonbank firms has also caught the attention of federal regulators.
The Financial Stability Oversight Council, a federal organization that monitors for risks in the financial system, cited the growth of nonbank mortgage servicers as an emerging threat.
Nationstar shares were up 7.5% in recent trading at $31.16, boosted by the CEO's comments, even though the company reported earnings below analyst expectations and trimmed its earnings guidance for the year.
Walter's shares rose 16% to $28.84, after the company reported results that surpassed analyst estimates.
Ocwen's shares were up 3.9% at $32.95 in recent trading. Ocwen on May 1 said first-quarter results missed analyst estimates in part because of increased regulatory and compliance-related spending.
Write to Andrew R. Johnson at email@example.com
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