Nonbank Servicers Walter, Ocwen Hit Mortgage Speedbump

Nonbank mortgage servicers are hunting for a market niche following an aggressive entry into lending ahead of new mortgage rules that will take effect in early 2014, writes American Banker. 

If mortgage volume takes the expected 32% hit next year that the Mortgage Bankers Association is predicting, says American Banker, then 2014 is shaping up to be the worst year for mortgage lending since 2000.

Cue Nationstar (NYSE:NSM), Ocwen Financial (NYSE:OCN) and Walter Investment (NYSE:WAC), the three largest nonbank mortgage servicers in the nation that have been buying up millions of dollars of distressed loans. 

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“The core problem they are having now is that they have purchased the rights to service nearly $1 billion in distressed loans with the intent of refinancing big swaths of those portfolios,” says the article, going on to reference a “dramatic” slowdown in refinancings for loans eligible for the federal Home Affordable Refinance Program (Harp) which expires at the end of 2014. 

Nonbank entities need to find a niche in order to compete effectively against the banks, the article notes, as getting into the origination side is not easy with banks and credit unions holding an advantage over nonbanks.

“They’re all getting hit by lower refinance volumes, and Harp refinancings are a lot of their originations,” Warren Kornfeld, a senior vice president at Moody’s Investors Service, told American Banker. “Originations are very important for these companies, they have to be originators or they will be a melting ice cube.”

Some strategists say nonbanks’ niche opportunity could be lending to underserved and minority borrowers who may get excluded from the home loan market once the Qualified Mortgage rule takes effect in January. 

“Because of higher interest rates and the drop in refinancings, it’s a bad time to be in the lending business,” Scott Buchta, head of fixed-income strategy at Brean Capital, says in the article. “But the nonbank servicers also could be ahead of the curve if they push into the underserved non-QM market.”

Read the full article at American Banker. 

Written by Alyssa Gerace

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  • How refreshing, an article that actually looks at factual information and makes reasonable projections for 2014. This is much different than the ultra optimists in our industry who claim that 2014 will be a great year for the industry, endorsements, and revenues or ultra pessimists who say the recent changes will be the end of the industry.

    2014 will not be a great year for the reverse mortgage industry not only because endorsements are expected to drop significantly but also because lender gross revenues are projected to drop proportionately much more. We have seen the ultra optimists mislead us before. Let us hope the HECM ultra optimists are right this time!!

    Fiscal year 2014 will most likely be the year of FHA/HUD and the HECM part of the MMI Fund.

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