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Despite Q2 Net Loss Nationstar Remains Positive

Rates drop BHThe first quarter this year was not kind to non-bank mortgage servicers, earnings-wise. In the last couple of weeks, the industry has seen that the second quarter has not been so great, either.

Following Ocwen’s reported net loss last week of $87 million for Q2 [1], Nationstar Mortgage Holdings [2] reported on Tuesday a net loss (for GAAP purposes) of $92 million [3] for the three-month period ending June 30.

Still, there were positives in Nationstar’s earnings report for Q2 2016. On an adjusted basis, the Dallas, Texas-based servicer’s net income was $52 million, with the three major drivers for growth being strong servicing performance, a favorable originations environment, and property sales growth in the company’s Xome segment.

The originations segment posted a GAAP pre-tax income of $54 million for Q2, driven by the company’s direct to consumer business (29 percent recapture rate). The servicing segment achieved a pretax GAAP loss of $158 million, but on an adjusted basis (removing the impact of fair value marks), the servicing segment posted a pretax income of $64 million (6.8 basis points). That segment has generated 5.9 basis points of profitability year-to-date, according to Nationstar.

“Given the solid first half of the year, we remain committed to achieving quality earnings that exceed 5 bps on average for 2016,” the report stated.

Nationstar’s Xome segment produced $22 million in GAAP pretax income in Q2 ($28 million on an adjusted earnings basis). The second quarter saw an uptick in the number properties sold via Xome, from 4,165 in the first quarter up to 5,406 in the second quarter.

“We’re off to a fantastic start to 2016 with Servicing, Originations and Xome all delivering solid second quarter earnings,” said Jay Bray, CEO of Nationstar Mortgage. “In addition, we are positioned to grow our servicing book to over $450 billion by year-end, principally driven by on-boarding the assets of our newest partners Seneca and USAA. We are extremely proud that both Seneca and USAA selected us as the best servicing partner. We enter the second half of 2016 as the industry leader, extremely well positioned to capitalize on the significant market opportunities ahead.”

Nationstar was the only one of the three largest non-bank mortgage servicers rated by Moody’s (Ocwen and Walter Investment were the other two) to turn a profit for the full year 2015. Last year saw Nationstar post a net income of $43 million for the full year, but things went south for the company in Q1 this year with a net loss of $132 million [4].

Click here [3] to view Nationstar’s Q2 results.

8-3 Nationstar Graph