December 2016 - Getting Serious About Diversity

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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 THE LATEST LOCAL EDITION THE LATEST Nationstar Beats Financial Expectations THIS MARKS THE INSTITUTIONS FIRST PROFITABLE QUARTER ALL YEAR. TEXAS // Texas-based Nationstar Mortgage Holdings recently reported earnings of 52 cents per share for Q 3. That's 11 cents better than what analysts had expected for the company. The company also posted a negative net margin of 3.92 per - cent and a positive return on eq- uity of almost 9 percent in its Q 3 earnings statement. Nationstar posted revenue of $542 million, well above anticipated revenue of about $370 million. A year ago, the firm posted $0.36 EPS. Overall, Nationstar reported a net income of $52 million, making Q 3 the first profitable quarter for the company in 2016. Nationstar was the only one of the three largest non-bank mort - gage servicers rated by Moody's (Ocwen and Walter Investment were the other two) to turn a profit for the full year 2015 ($43 million). In Q1 and Q2 this year, however, Nationstar posted net losses of $132 million and $92 mil - lion, respectively. Other significant numbers for Q 3 included the company's highest-ever unpaid principle balance of $453 billion, and an adjusted pretax income of $39 million. Nationstar also posted a GAAP pretax income of $83 mil - lion and adjusted pretax income of $85 million. "Our third quarter achieve- ments solidify us as the preferred industry partner," said Jay Bray, Nationstar's chairman and CEO. "In the quarter we posted strong operational results, added almost 510,000 customers to our servic - ing platform, funded over 25,000 loans, and launched enhanced technologies that improve the home ownership experience for our 2.7 million and growing customer base. We ended the quarter with the largest servic - ing portfolio in our company's history, are actively engaged in a significant pipeline and remain focused on creating value for our shareholders." Servicing saw a $14 million increase in amortization, which Bray said "reflects our focus on improving portfolio performance and cost containment initiatives." The company funded $5.5 billion for its servicing platform, which was a 6-percent increase over Q2. The company has been autho - rized to repurchase up to $250 million of common stock and has so far repurchased $125 million. Nationstar also boarded $100 billion in loans, including $91 bil- lion worth of subserviced loans that Bray said contribute less rev- enue via basis points, but a higher margin and return on equity due to the limited capital deployed. "We expect subservicing flow and originations volume to re - place anticipated run-off in 2017," Bray said. We remain actively engaged, along with our capital partners, in several large oppor- tunities that could substantially add to our servicing portfolio." The Q 3 results for Nationstar may be a sign that non-bank servicers have turned the corner financially. In late October, Ocwen reported a net income of $9.5 million for Q 3, which was that company's first profitable quarter since Q2 last year. Morningstar Revises Forecast for Ocwen THE RATINGS FIRM CREDITS IMPROVED GOVERNANCE, CONTROL, AND AUDITING FOR THE TURN-AROUND. GEORGIA // Morningstar Credit Ratings has come around on Ocwen Financial Corporation. The ratings agency has affirmed Ocwen's MOR RS3 Residential Mortgage Special-Servicer, Prime Servicer, and Non-Prime Servicer rankings as well as the MOR RV3 residential vendor ranking (Offshore) for Ocwen Financial Pty, and revised the forecast for the ranking from negative to positive. Morningstar cited Ocwen's management team, enhanced cor - porate governance and improved control, and its internal audit and quality control methodologies as reasons for the shift. It also cited Ocwen's stronger internal technology platform, improved loss-mitigation performance, transparency, and improved regu - latory outlook. According to Morningstar, Ocwen has enhanced its corpo- rate governance and risk man- agement oversight "through its robust three lines of defense audit methodology, and by completing an enterprise-wide review and update of all operating policies and procedures via a software application that effectively man - ages the drafting, review, and versioning of all policy and procedure documents." In addition, a new workflow technology tool introduced in late 2015 "provides an early- warning system by mapping and LOCAL EDITION SERVICING

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