Nationstar’s Q4 Profits Led by Servicing, Originations Growth

Driven by an uptick in servicing profitability and growth in originations, Nationstar Mortgage Holdings Inc., reported that its fourth quarter 2015 earnings reached $34 million, or 32 cents per share, according to company's earning statement released Thursday. The company's GAAP net income totaled $79 million, or 73 cents per share.

“Our Servicing segment continued to generate solid cash flows with sequential improvement in profitability to exit the year above our target of five basis points. In addition, our Originations segment had a strong fourth quarter, posting its best annual performance since 2012 and continues to provide a cost effective source of new servicing assets,” said Jay Bray, CEO at Nationstar.

The servicing sector at Nationstar earned $51 million of adjusted pretax income, or 5.1 bps based upon average UPB, for the quarter. "Adjusted pretax income improved for the fourth straight quarter as we reduced delinquency rates and implemented technology and process initiatives to drive improved profitability," the statement said.

Year-end 2015 servicing profits reached $117 million, down significantly from 2014's total of $213 million, which Nationstar says was driven down by higher amortization.

The company reported that $91 billion of servicing assets were boarded as a result of acquisitions and origination activities, up 56 percent year-over-year. For 2016, Nationstar said, "before consideration of potential MSR acquisitions, we expect the current servicing portfolio to grow modestly, with limited utilization of capital, given the recent subservicing win, expected origination activity and current CPR rates. Our servicing segment is focused on achieving high quality earnings that exceed 5 bps through the delivery of services that exceed the expectations of both customers and regulators."

On the originations side, adjusted pretax income totaled $43 million in the fourth quarter, marking the 8th consecutive quarter of pretax income above $40 million. Last quarter, origination profits reached $50 million. Year-end 2015 originations income totaled $210 million, up from $206 million in 2014.

"The originations platform continues to replenish the MSR portfolio at attractive rates of return. As expected, adjusted pretax income decreased sequentially principally due to the industry-wide implementation of TRID and general seasonality in the fourth quarter," the statement said. "Key initiatives for 2016 include increasing customer recapture by focusing on multiple segments within the servicing portfolio, expanding our FHA/VA streamline capabilities and reducing operating expenses."

The Xome segment of the company delivered $6 million in pretax income in the fourth quarter, but earnings were down "due to an increase in technology and marketing investments, higher title expenses due to TRID delays and increased title orders, and a reduction in property sales attributable to seasonality and pipeline delays that are in the process of being addressed."

Third party revenues rose to 37 percent of total revenues, as Xome continues to focus on diversifying its revenue streams and client base. Xome's total revenues increased 43 percent year-over-year mostly due to higher sales price execution on property sales and growth in our title and close business.

Nationstar expects Xome to continue to "transform the residential real estate transaction experience for consumers and real estate professionals. Key strategies for 2016 include improving core operations, continuing to grow third party clients and making measured investments in new products and technologies that will serve the needs of clients and target customers."

“Looking forward, we remain focused on taking steps that improve customer experience and drive customer retention while delivering greater value for our shareholders. We enter 2016 well positioned from a strategic, operational and capital perspective,” Bray stated.

Click here to see the full earnings statement.