In the first quarter of 2013 Home Loan Servicing Solutions Ltd. reported net income of $24.8 million, or $0.44 per share, up from $1.3 million in the first quarter of 2012, despite changes in prepayment speeds.
Earnings included a $0.03 per share “benefit from lower-than-expected amortization” that resulted from a 2.3% decrease in the annualized prepayment rate to 12.7% for the first quarter, down from the firm’s benchmark rate of 15%.
Despite changes in prepayment speeds HLSS executives maintain a positive outlook for the future. According to HLSS chairman William Erbey, the outlook for the prepayment speeds for its nonagency mortgage asset servicing portfolio “has become increasingly positive fueled in part by Ocwen's continued success in resolving delinquent loans.”
The lower prepayment speed trend that started in the middle of 2012 has continued in the first quarter of 2013, said Erbey and was a factor in the decision to increase the dividend to $0.14 per share for the second quarter of 2013.
Quarter highlights include the completion of the issuance of three notes on Jan. 22 that generated total proceeds of $1.15 billion.
In March HLSS completed the flow acquisition of mortgage servicing rights on nonagency mortgage loans with UPB of $15.9 billion from
At the same time HLSS incurred $226,000 in expenses as part of its professional services agreement and administrative agreement with Ocwen and Altisource.
First-quarter results “were in line with our expectations,” said HLSS president John Van Vlack. After accounting for the benefit from lower-than-expected prepayments and amortization and the timing of the first-quarter flow purchase from Ocwen, he said, “stable prepayment rates and access to long-term financing in the ABS market” show further improvement in future earnings.
