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Nationstar Optimistic About Its Growing Origination Business

AUG 6, 2014 3:47pm ET
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Nationstar Mortgage Holdings reported a 73% jump in pretax income from its mortgage origination business, despite a 6% drop in funded loans.

The servicing company in Lewisville, Texas, originated $4.4 billion in single-family loans through its direct and correspondent channels, down from $4.6 billion in the prior quarter.

Nationstar chief executive Jay Bray attributed the decline in loan volume to the company's ongoing effort to move Greenlight Financial Services and Nationstar's origination business onto the same platform. He expects to complete the move by yearend.

Nationstar acquired Greenlight in May 2013. It was based Irvine, Calif., and operated in California and neighboring states.

The CEO attributed the jump in pretax income to mortgage rates, which have stayed relatively calm. "It has been a good market from an origination standpoint," he said. Nationstar reported $69 million in pretax income from originations in the second quarter, compared to $40 million in the prior quarter.

Going forward, Nationstar expects to benefit from improving home sales and an increase in purchase mortgage transactions. "Our KB Home joint venture, Home Community Mortgage, Greenlight and potential new partnerships are all areas of potential growth," Bray said.

During the quarter, Nationstar generated $10 billion in new servicing assets through originations and acquisitions of mortgage servicing rights. The company serviced $387 billion in loans as of June 30.

"Since the end of the second quarter, we have commitments to acquire over $20 billion in mortgage servicing as of today," Bray said Wednesday in discussing Nationstar's 2Q results.

He expects servicing deals will accelerate over the second half of the year.

Meanwhile, Nationstar is partnering with investors to offer new refinancing products that would serve borrowers who don't qualify for HARP refinancings.

"It would be a product that is not offered today by any of the government programs," Bray said. Nationstar completed 6,000 HARP refinancings in the second quarter and 104,000 HARP refis since 2010.

"We feel comfortable" with the overall risk profile of the new refinancing products, the CEO said, noting that Nationstar will be originating the loans on behalf of the investors and servicing the loans for investors. But he noted it is a new market. "We will go at that at a measured pace."

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