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 andrewr.johnson@wsj.com
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