Nationstar Sees More Deals as Regulators Investigate
When Jay Bray was a linebacker on his high school football team in a small town in Georgia, he said he drove a shoulder into any opponent in his path. Bray, now 47, runs Lewisville, Texas-based Nationstar Mortgage Holdings Inc. (NSM) with the same urgency. “My father always told me, ‘Go out and hit something that’s moving,’” said Bray, chief executive officer of the company, which collects payments on 2 million home loans. “That’s what we do. We don’t need 25 meetings to figure things out. I walk out of meetings with either a decision made or a clear next step on how to get there.” The value of loans handled by Nationstar, the second-biggest non-bank mortgage servicer, has tripled since the firm’s initial public offering in March 2012. Last month, the New York Department of Financial Services announced that Nationstar’s “explosive growth” may put homeowners at risk if the firm doesn’t have the capacity to service all the loans. As regulators probe Nationstar and Ocwen Financial (OCN) Corp., the biggest non-bank servicer, the companies are performing better than banks at handling delinquent loans — the toughest task in the servicing trade. Nationstar and Atlanta-based Ocwen, known as special servicers because of their focus on rehabilitating soured loans, have modified mortgages at about twice the rate of banks, according to a March 26 report from Fitch Ratings Inc. that looks at performance back to 2010. When mortgages go into foreclosure, the timeline for non-banks on average is shorter, reducing investor losses, according to the report. That pace of growth is “scaring” regulators, who see it as a threat to their four-year effort to improve how banks handle loans in default, said Karen Shaw Petrou, managing partner of Federal Financial Analytics Inc., a public policy research group in Washington. As the nation’s largest banks come into compliance with the terms of a 2012 settlement over allegations of foreclosure abuses, the lenders are selling their servicing assets to companies like Nationstar or Ocwen.