Followers of publicly traded mortgage servicers might be coming down with a case of whiplash over the last few weeks. Walter Investment Management Corporation (NYSE: WAC) experienced massive losses following a dark mid-month earnings call, while Nationstar Mortgage Holdings (NYSE: NSM) and Ocwen Financial Corporation (NYSE: OCN) found themselves buoyed by positive news.
First, the bad news: RMD readers know by now that the Tampa, Fla-based Walter stock has spent the the past three weeks in near-total freefall, plummeting from $2.70 the day before its March 14 earnings call — in which it revealed a pair of Department of Housing and Urban Development subpoenas and substantial quarterly and annual losses — to a five-year low of $0.70 on March 23. While the stock has since rebounded slightly, opening Tuesday’s trading at $0.89, the outlook for Walter’s stock remains gloomy, with Seeking Alpha analyst John Zhang declaring last week that “the bull case for Walter is irrevocably broken.”
Zhang pointed to the losses, along with their subservicing fees and slowing origination volumes, as reasons not to hold the stock, and echoed sentiment from earlier in the month about Walter’s probability of entering bankruptcy.
“There is a very real chance that Walter may under go bankruptcy, restructuring, or further asset ales to raise cash,” Zhang wrote. “Under these scenarios, I am no longer comfortable holding Walter equity.”
Zhang had previously been a cheerleader for the stock as recently as January, when he predicted that rising mortgage rates would help boost the value of its existing servicing portfolio. Walter services Home Equity Conversion Mortgages under its Reverse Mortgage Solutions subsidiary, though Walter suspended all HECM originations in January and indicated on the earnings call that it was open to selling off all or part of the RMS arm in the future.
Ocwen, meanwhile, received a major Wall Street boost late Monday after the servicer announced a new consent decree that will allow it to shed a state-required independent monitor in New York, and indicated that it has a path toward the acquisition of new mortgage servicing rights in the state. Around the midpoint of trading Tuesday, OCN stock was up 7.4%, though the company — which services HECMs through its Liberty Home Equity Solutions entity — has still yet to announce a firm timeline for lifting the acquisition restriction.
Nationstar, meanwhile, got a boost from Wedbush Securities, which tagged its stock with an “outperform” rating and predicted its actual value at $19 per share — compared to its Tuesday opening price of $15.48.
“NSM is one of two remaining profitable independent public residential mortgage companies,” Wedbush analyst Henry Coffey wrote, according to StreetInsider.com. Coffey predicted that NSM will be able to use its existing servicing portfolio to generate new mortgages, while also expanding its servicing and subservicing operations.
“We believe 2017 should be a transitional year and the benefits of this strategy more apparent in 2018,” Coffey wrote.
Coffey’s sunny predictions reflect a major news shift from earlier in the month, when the Coppell, Texas-based Nationstar was forced to pay a record $1.75 million fine to the Consumer Financial Protection Bureau over a variety of reporting issues. The CFPB claimed that Nationstar, which services reverse mortgages through its Champion Mortgage entity, made “significant, preventable” errors in its Home Mortgage Disclosure Act (HMDA) recording protocols.
Written by Alex Spanko