Specialty mortgage servicer Nationstar Mortgage (NSM) topped fourth-quarter estimates early Thursday, but shares fell 5.9% amid weak servicing income and press reports on possible loan auctions.
Credit Suisse analysts noted that over $1 billion in securitized nonperforming residential loans have shown up at Auction.com, saying "anecdotal evidence" suggests many "were offered by Nationstar.
Nationstar's servicing-side profitability stayed weak, other analysts noted, due in part to the high cost of servicing distressed loans. It was a similar scenario in Q3; shares fell 10% after Q3 results came out.
Servicing pretax income in Q4 totaled $14.9 million vs. $81.7 million for originations. As the company sells originated loans into the secondary market, it records a gain on sale, but keeps the servicing rights.
Nationstar earned 71 cents a share in the quarter, 2 cents above views. Revenue jumped 180% from the earlier year to $332.6 million, topping forecasts by $27 million.
But Keefe, Bruyette & Woods calculated in a client note that if one-time, nonoperating income in the quarter was excluded, earnings would be 68 cents a share.
Nationstar Chief Financial Officer David Hisey said in a conference call that servicing growth "requires initial investment" but would pay off down the road.
Nationstar stock jumped in early January as the firm said it would acquire $215 billion in servicing rights from Bank of America (BAC).
Fast-growing Nationstar is one of the largest nonbank mortgage servicers in the industry, along with Ocwen Financial (OCN) and Walter Investment Management (WAC).