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46 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T SERVICING SERVICING LOCAL EDITION Another Non-bank Servicer Counts Its Losses NATIONSTAR REPORTED Q1 LOSSES, BUT SERVICING WAS A BRIGHT SPOT IN THE REPORT. TEXAS // Nationstar Mortgage Holdings was not so fortunate in Q1 after turning a $43 million profit for 2015; for GAAP purposes, the Dallas, Texas-based servicer posted a net loss of $132 million (-$1.28 per share) for the first three months of 2016. Approximately $161 million, or $1.56 per share of the Q1 loss was primarily attributable to changes in fair value, caused by low interest rates. Profits plummeted for nearly every mortgage-related company in Q1. Nationstar posted a net loss of $48 million in the first quarter of 2015. A net loss of $132 million is an over-the-quarter negative swing of $221 million; for the fourth quarter of 2015, Nationstar took in a net income of $79 million, or 73 cents per share, largely driven by growth in the servicing segment. Servicing was a bright spot again for Nationstar in Q1, achieving $49 million of pretax income, which computes to five basis points based on an average unpaid principal balance of $392 billion. Nationstar's originations segment generated $40 million in pretax income for the company in Q1, in line with the company's expectations. It was the ninth consecutive quarter of $40 million or more for the originations segment. Pretax income the company received from the Xome segment totaled $11 million. "We posted solid first quarter earnings led by servicing, which delivered five basis points in profitability," Nationstar CEO Jay Bray said. "In addition, for the second year in a row, our servicing operations achieved Fannie Mae's highest level of performance recognition—the Five STAR designation, which reflects the hard work of our employees and the dedication to our customers. In addition, originations continues to be a solid bottom line contributor by delivering $40 million in pretax income, and we made significant progress with Xome that we believe will drive earnings in future quarters." On the Xome segment for Q1, Nationstar reported, "During the quarter, we made significant operational progress with respect to our property disposition and title operations that should generate a solid improvement in margin as we enter the second quarter. The improvements in the property disposition business were driven largely by enhanced workflow management of the pipeline. In our title business, we continue to board new customers and are working with existing customers to improve order timing to reduce costs and increase conversions. Furthermore, third party revenues remain stable at 36 percent and we continue to see progress in boarding new clients for a variety of services, including our technology offerings." Ocwen Receives Mixed Review from Monitor OCWEN HAS NOW EXCEEDED ITS FINANCIAL OBLIGATIONS TO HOMEOWNERS UNDER THE NATIONAL MORTGAGE SETTLEMENT, BUT THE NMS MONITOR SAYS THE SERVICER HAS NOT FULLY RESOLVED ISSUES WITH INFORMING BORROWERS OF REASONS FOR LOSS MITIGATION DENIALS. GEORGIA // Ocwen Financial Corp. received both good and bad news from an independent settlement monitor in late April. First the good news: Ocwen satisfied its consumer relief obligation under the 2012 National Mortgage Settlement (NMS), by providing 23,812 borrowers with approximately $2.1 billion in consumer relief from November 3, 2014, to September 30, 2015, according to a report from Joseph A. Smith Jr., monitor of the NMS. Ocwen was required to provide $2 billion in consumer relief by February 26, 2017 under the terms of the NMS. Smith also determined in the test for Ocwen's compliance with the NMS that the Atlanta-based servicer did not fail any metrics during the first half of 2015 and that Ocwen had corrected many previously failed metrics. "The Monitor's latest Consumer Relief Report is another positive step for Ocwen, and confirms our commitment to providing real solutions to struggling homeowners," said Ron Faris, President and CEO of Ocwen. "Our work with distressed borrowers will not end just because we have exceeded our NMS obligations. Families across the country are still being impacted by the financial crisis. Ocwen will continue to work with our customers, especially those facing foreclosure, to find loan modification programs, including principal reduction programs, to help them better afford and remain in their homes." Now the bad news: Smith said Ocwen has not fully resolved the issues that led to the failure of Metric 31, which tests whether the servicer has sent the borrower a notification that his or her request for a modification has been denied. That notification should include the reason for the denial, information the servicer used to make the decision, and a window of opportunity for the borrower to provide evidence that the servicer's decision was erroneous. According to Smith, Ocwen was delayed in implementing the Corrective Action Plan (CAP) for the failure of Metric 31; the delay was caused by difficulties in resolving the technical issues that led to Ocwen originally failing the metric for the third calendar quarter of 2014. Smith said in his report that he has approved a revised Metric 31 CAP to address the technical issues and that Ocwen had informed him recently that the implementation of the CAP is complete. Smith said if he determines the CAP has been implemented, Ocwen expects testing to resume as of Q2 2016. Due to the delay in implementing the CAP for the Metric 31 failure, Smith is requiring Ocwen to hold certain loans so that no foreclosure sale will be completed until Smith has determined that the Metric 31 CAP has been implemented. "Ocwen has exceeded its consumer relief obligation by providing more than 23,000 borrowers with $2.1 billion in consumer relief," Smith said. "While Ocwen has made progress toward correcting a number of past fails, it has not resolved its issues that led to its failure of Metric 31. Therefore, I will not allow Ocwen to move forward with foreclosures on any borrowers who could have been affected by this failure until each of these borrowers has correct information and a chance to appeal. Despite its progress, Ocwen continues to have work to do. I will continue my efforts to review Ocwen's compliance with the NMS and resolve any outstanding issues. I will report to the Court and the public on these efforts in the coming months." During the same week Smith released his report, Ocwen reported a net loss of $111.2 million for the first quarter. One of the factors offsetting a reduction in expenses for Ocwen during Q1 was $30 million in monitoring costs. According to Smith, the progress Ocwen has made toward correcting its previous fails involve completing the Global Corrective Action Plan (Global CAP), which is a plan to correct a variety of letter-dating issues previously uncovered, and completing CAPs for Metrics 7, 8, 19, and 23. • Metric 7 evaluates the timeliness, accuracy, and completeness of pre-foreclosure initiation notification (PFN) letters that servicers sent to borrowers. • Metric 8 tests whether the servicer complied with servicing standards regarding the propriety of default- related fees they collect from borrowers. Those fees may include property preservation fees, valuation fees, and attorneys' fees. • Metric 19 tests whether the ser- vicer complied with servicing standards regarding timeliness