The company will have to watch out for their rising expenses. Selling, general and administrative expenses have risen each quarter this year for a total increase of 65.9%. Total operating expenses have risen 60% from Q1 this year.
Watch for good earnings but be weary of rising expenses.
Nationstar Mortgage Holdings Inc (NYSE:NSM) has a $215 billion loan servicing package from Bank of America Corp (NYSE:BAC), which has increased their entire portfolio to $425 billion. The $215 billion valuation is based on the principle remaining on the sum of the loans. The sale price of this was $1.5 billion. This is not a new practice in the banking industry. The loan servicing arrangement has Nationstar Mortgage Holdings Inc (NYSE:NSM) performing all of the administrative work involved with collecting the payments. In exchange, Bank of America Corp (NYSE:BAC) pays a small percent of the interest collected on the loans. This allows Bank of America Corp (NYSE:BAC) to collect payment without doing any work. With new capital regulations, it has become too costly for Bank of America Corp (NYSE:BAC) to originate and collect payments on its loans. This high cost coupled with mortgaged-based litigation in the past makes servicing a major challenge for the bank. Offloading this practice continues to reduce Bank of America Corp (NYSE:BAC)’s liability and allows them to focus on higher revenue generating practices with less financial risk.
There are more opportunities for loan servicing purchases and sales. Both Wells Fargo & Co (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) could very well sell their loan servicing programs. Both Nationstar Mortgage Holdings Inc (NYSE:NSM) and Ocwen could benefit from these future opportunities.
Austin Higgins is the Principal Consultant for Build. Invest. Grow. and focuses on building businesses through innovation, growth and investment. Learn more at BuildInvestGrow.com and follow him on Twitter @Austin_Higgins.
The article Ocwen and Nationstar Earnings originally appeared on Fool.com and is written by Austin Higgins.
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