NationStar buying up Mortgage Servicing Rights
Written by Emil Fleysher | June 21, 2012 | Debt
Bank of America Corp. has released roughly $10.4 billion in residential mortgage-servicing rights to Nationstar Mortgage Holdings Inc., as Bank of America looks to alleviate a portion of its mortgage-servicing obligations. This is only a small piece of more than $430 billion mortgage- servicing rights, or MSRs, which makes Nationstar the largest non bank-mortgage servicer in the U.S. Traditional banks, have removed themselves from the servicing business as regulatory scrutiny, new capital requirements weigh on these mainstream lenders.
As a mortgage servicer, Nationstar will provide administrative support on loans held by banks, government organizations, private funds and other owners of securities and mortgage loans. Nationstar will generate revenue primarily from the unpaid principal balance of loans serviced.
In 2010 it was discovered that a number of banks had engaged in “robo-signing,” in which bank officials signed off on foreclosure proceedings without proper documentation, as well as other unethical practices. The incident caused numerous lawsuits by homeowners and investigations by federal and state regulators which led to a $25 billion settlement earlier this year with the five largest U.S. mortgage servicers, which are Bank of America, Wells Fargo & Co., Citigroup Inc., J.P. Morgan Chase & Co. and Ally Financial Inc.
While most of the residential-mortgage-loan servicing rights are owned by a few banks, Nationstar who is a non bank servicer believes the industry is shifting toward non bank servicer’s. Many banks seek to exit from the servicing business, which has proven to be volatile and capital intensive.
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