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August 18, 2017  

Nationstar Developing Non-QM Program

Nationstar Mortgage plans to start writing and securitizing home loans that fall outside the Consumer Financial Protection Bureau’s “qualified-mortgage” guidelines.

The Coppell, Texas, company intends to launch the lending program during the fourth quarter. It currently is setting underwriting standards and other specifications for the accounts, which would include alternative-A and interest-only products.

The loans would be originated both by Nationstar and correspondent lenders.

A debut securitization is seen as likely to take place during the second half of 2018, with follow-up offerings gradually increasing in frequency. To that end, Nationstar has been talking to potential warehouse lenders including Barclays and Nomura that also could underwrite its issues.

Nationstar’s primary business is mortgage servicing. It also has an agency lending unit that generated $20.3 billion of fresh accounts in 2016, up from $18 billion in 2015 and $17 billion in 2014. But the company’s move into non-qualified loans appears to mark its first significant attempt to offer private-label financing.

That said, Nationstar has occasionally issued bonds backed by non-agency accounts — in some cases by buying the servicing rights to another issuer’s deal, and then “collapsing” the obligations and re-securitizing the collateral loans. Since entering the market in 2006, it has sold $6.2 billion of securities backed by prime-quality mortgages, subprime mortgages, reverse mortgages and home equity loans, according to Asset-Backed Alert’s ABS Database. It has also issued $1.7 billion of servicer-advance paper and $131.8 million of bonds backed by net-interest margin payments.

Nationstar’s pursuit of non-qualified loans comes as part of an industry-wide trend. Under the Dodd-Frank Act, lenders that securitize those accounts must retain 5% interests in their deals — a condition that has made the space less appealing to banks, and thus more attractive to non-bank institutions.

Lenders also believe that by offering non-qualified loans to homebuyers, they could buoy their origination volumes amid an expected decrease in opportunities to refinance agency mortgages.

The executives overseeing Nationstar’s non-qualified loan program include Tony Ebers, an executive vice president in the company’s origination unit. Ebers arrived in 2015 from Black Knight subsidiary ServiceLink. Earlier, he led One West Bank’s mortgage-lending business and spent time at IndyMac.