Nationstar Mortgage

About Nationstar Mortgage

Nationstar Mortgage helps turn home ownership into more than just a wish upon a star. The company services residential mortgage loans throughout the US. Its servicing portfolio comprises more than 1 million loans that total some $198 billion in unpaid principal balances. Nationstar also originates loans, primarily government- and agency-backed mortgages, – more... which it typically sells or securitizes within one month of origination. The company serves consumers directly through its Texas-based call center; it also offers its products through wholesalers. The firm has seen rapid growth as a result of its expanding servicing portfolio. Nationstar went public in 2012.

IPO

In March 2012, the company raised $247 million through the initial public offering, which coincided with the economy's modest recovery. Nationstar plans to use the money to grow its mortgage servicing portfolio. 

Financial Analysis

The company's revenues have grown significantly since 2009. In 2011 alone revenues climbed 20%. Nationstar also reported net income of $21 million that year, compared to a loss of about $10 million the year before.

Strategy

Nationstar in 2013 agreed to pay $1.3 billion to acquire approximately $215 billion in residential mortgage serving rights and certain other assets from Bank of America. Since its 2012 IPO, Nationstar has embarked on a buying spree. Shortly after its public offering it purchased the servicing assets of Aurora Loan Services, a subsidiary of Aurora Bank, for $268 million. The deal included $63 billion in residential mortgages. As part of the transaction, affiliate Newcastle Investment paid $170 million to receive a portion of the servicing rights to the Aurora portfolio.

Following the announcement to buy Aurora, Nationstar agreed to buy certain servicing assets from Residential Capital, the residential mortgage arm of Ally Financial. The acquisition, which is expected to close in late 2012 and includes some $374 billion in servicing assets, will make Nationstar the country's largest nonbank residential mortgage loan servicer. The company later bought more than $10 billion in residential mortgage servicing rights from Bank of America; Newcastle Investment acted as a co-investor in that deal as well.

Nationstar sees opportunity in the weakened credit markets, as it has been successful managing portfolios of higher-risk loans. Its high-touch approach, an area in which the big banks tends to lack, is well-suited to handling riskier loans. The firm has seen rapid growth as a result of its expanding servicing portfolio; it has added about a dozen new servicing clients in the past three years. Also, by originating loans in-house, Nationstar is further able to boost its servicing portfolio, largely by offering borrowers refinancing options. 

Ownership

Fortress Investment Group owns about 80% of Nationstar.

Company Background

Once a subsidiary of homebuilder Centex, Nationstar Mortgage was acquired by Fortress Investment Group in 2006. At the time of the transaction, which was valued at some $575 million, Nationstar Mortgage (then named Centex Home Equity) was a subprime lender. Like many of its peers, Nationstar Mortgage exited the subprime lending business in late 2007, thereby focusing on its servicing activities. – less

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