Servicing
We are one of the largest residential mortgage servicers in the United States
conducting operations through our Nationstar Mortgage and Champion Mortgage brands.
As of December 31, 2015, we service 2.5 million customers with an aggregate outstanding
principal balance in excess of $402.6 billion. As of December 31, 2015, we are
the largest non-bank servicer and the fourth largest residential mortgage servicer.
Servicing primarily involves loan administration, payment processing, mortgage
escrow account administration, collection of insurance premiums, response to
homeowner inquiries, loss mitigation solutions including loan modifications
and supervision of foreclosures and property dispositions on behalf of the owners
of the loans. These activities generate reliable and recurring revenues and
cash flows. Revenues primarily consist of servicing fees which are generally
expressed as basis points of the outstanding unpaid principal balance (UPB)
and ancillary revenues (e.g., late fees, modification fees, incentive fees).
Our servicing portfolio may be segregated into the following components:
MSRs - Fair Value consists of rights we own and record as assets to service
traditional residential mortgage loans for others either as a result of a purchase
transaction or from the sale and securitization of loans we originate. We have
elected to mark this portfolio to fair value each quarter. Due principally to
servicer advance requirements, MSRs - Fair Value require capital and liquidity;
however, such advances are generally financeable. Our rapid growth has been
driven by the purchase and origination of MSRs. MSRs - Fair Value account for
86.8% of UPB of our total portfolio as of December 31, 2015.
Subservicing consists of forward residential mortgage loans we service on behalf
of others who are MSR or mortgage owners; therefore, no subservicing asset is
recorded in our consolidated financial statements. Since we are not the owner
of the servicing rights, we have limited advance obligations and as a result
the capital requirements are minimized.
MSRs - LOCOM consists of rights to service reverse residential mortgage loans,
owned by Fannie Mae, Ginnie Mae and private investors. We elected to record
MSRs LOCOM at the lower of cost or market. Similar to our MSR - Fair Value portfolio,
we temporarily advance funds as required under the applicable servicing standards.
MSRs - Fair Value consist of both credit sensitive MSRs, primarily acquired
through bulk acquisitions, and interest rate sensitive MSRs, principally consisting
of MSRs acquired via flow transactions or transferred from our origination activities.
For MSRs marked at fair value that are interest rate sensitive, servicing values
are typically correlated to interest rates such that when interest rates rise,
the value of the servicing portfolio also increases principally as a result
of expected lower prepayments. The value of credit sensitive MSRs are less influenced
by movement in interest rates and more influenced by changes in loan performance
factors which impact involuntary prepayment speeds.
For each loan we service, we utilize a customer-centric model designed to increase
borrower repayment performance with a view towards home ownership preservation
and to decrease borrower delinquencies and defaults on mortgage portfolios.
Keys to this model include frequent borrower interactions and utilization of
multiple loss mitigation strategies particularly in the early stages of a default.
We train and empower our individual customer service representatives to find
solutions that work for homeowners when circumstances allow. This commitment
to continued home ownership helps preserve neighborhoods and therefore home
values, as well as improves asset performance for our investors.
Originations
We primarily originate conventional residential mortgage loans through both
the Greenlight Financial Services (Greenlight) and Nationstar Mortgage brands.
We are licensed and qualified to originate in all fifty states and the District
of Columbia. As of September 30, 2015, we are the eighteenth ranked residential
loan originator funding $18.0 billion.
We primarily market mortgage products to existing servicing customers and customers
of homebuilders as well as participate in the correspondent market. Since 2012,
we have been principally focused on refinance solutions for our existing servicing
customers. We earn an up-front fee for processing the loan application which
covers the costs of securing the loan application and underwriting. The loan
origination market is sensitive to interest rate movements as typically loan
applications increase as interest rates fall.
We believe an integrated originations platform provides us with a competitive
advantage for several reasons including (i) a servicing portfolio retention
source by providing refinancing services to existing servicing customers; (ii)
an organic source of servicing assets at attractive returns; and (iii) a loss
mitigation solution for servicing clients and customers by offering refinancing
options to borrowers allowing them to lower their monthly payments which may
lower their risk of defaulting.
We utilize warehouse facilities to fund originated loans. To both mitigate
credit risk and minimize the capital required, we sell loans within approximately
30 days of funding while retaining the associated MSRs.
Xome
Xome (pronounced "Zome") is a residential real estate services and
technology company created to perfect the residential real estate transaction
experience for consumers and real estate professionals (including brokers and
agents) through service offerings. Xome intends to enhance the real estate buying
and selling experience through increased connectivity, transparency, convenience
and speed throughout the entire transaction process. Xome is comprised of three
business units:
Xome Exchange is a national tech-enabled platform that efficiently manages
and sells residential properties. In the last two years, Xome Exchange has sold
over 40,000 properties and ranks as a top 5 site for residential real estate
sales. Core services include traditional non-distressed sales, REO auctions,
short sales and foreclosure trustee sales.
Xome Services connects the major touch points of the real estate transactions
process by providing title, valuation, settlement and closing services to consumer
and financial institutions. Xome Services includes our Title365 branded offerings.
Over the last two years, Xome Services has completed over 560,000 title and
close orders and more than 725,000 collateral valuation orders.
Xome Technology and Support provides connectivity for the entire residential
real estate market through technology development, data analytics and customer
relationship management tools. Xome Technology contains diversified set of businesses
including Real Estate Digital (MLS data and broker tools), Quantarium (cutting
edge data analytics), GoPaperless (e-signature platform), Xome Signings (notary
services), Cerulean (digital marketing) and Xome Labs (product/technology development
incubation lab).
We believe that Xome is the only industry participant that has the data, content,
services and technologies all together that facilitate and streamline the residential
real estate transaction process both for consumers and financial institutions.