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MSR Purchases Boost Nationstar’s Standing

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With its latest acquisition of mortgage servicing rights, Nationstar Mortgage Holdings Inc. becomes the country’s fifth-biggest mortgage servicer — though that standing is likely to change with an upcoming acquisition by a rival servicer and additional planned MSR purchases by Nationstar. It’s the third time that Nationstar has recently done an MSR deal with Bank of America Corp.’s banking subsidiary.

In August 2012, Nationstar disclosed in its second-quarter 2012 earnings report that it had completed the acquisition of $10.4 billion in agency servicing from Bank of America, N.A.

In addition, the Lewisville, Texas-based company also picked up $9.6 billion in reverse mortgage servicing from BofA.

On Monday, Nationstar reported that it closed on the purchase of mortgage servicing rights for around $97 billion in mortgages based on outstanding balances as of Dec. 31, 2012.

The transaction involves loans that are either owned, insured or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.

“Nationstar expects to close on the remaining private label securitization MSR and other certain asset purchases as necessary third-party approvals are received in Q1 and Q2 2013,” Nationstar’s news release stated.

The latest acquisition brought the Nationstar mortgage servicing portfolio to 1.8 million loans $300 billion as of Feb. 1. That put the year-end 2012 total at around $203 billion.

With the BofA deal done, Nationstar ranks as the fifth-biggest U.S. mortgage servicer behind Citigroup Inc.

However, Ocwen Financial Corp. is likely to boost its roughly $204 billion mortgage servicing portfolio by around $127 billion with its planned acquisition of MSRs from bankrupt Residential Capital LLC.

Helping to finance the Nationstar deal was a co-investment in excess mortgage servicing rights on $58 billion in agency loans by Nationstar-affiliate Newcastle Investment Corp.

“Newcastle is entitled to one-third of the monthly cash flow generated by the Excess MSRs, net of a base fee paid to Nationstar,” Newcastle said in its own statement. “Nationstar will retain a one-third interest in the excess MSRs, and a Fortress-managed fund will acquire the remaining interest. Newcastle will not own the servicing rights and therefore will not have any servicing duties, advance obligations or liabilities associated with the portfolio.”

Nationstar said that subsidiaries Nationstar Mortgage LLC and Nationstar Capital Corp. intend to sell $400 million in privately placed, unsecured senior notes.

Proceeds from the notes will be utilized for corporate purposes potentially including the acquisition of servicing portfolios and residential mortgage servicing assets from BofA “and/or related businesses from third parties, including, but not limited to, from one or more affiliates of the initial purchasers in this offering.”

Headcount at Nationstar is around 4,900 employees.

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