A Mortgage Stock Worth Paying Attention To

by 23 Oct 2012

(TheNicheReport) -- Recent financial news headlines have been dominated by the recovery of the housing economy and the future of the mortgage markets, but not much has been mentioned about the performance of the publicly-traded companies in those sectors. The shares of some companies doing business in the mortgage and housing industries have enjoyed a performance almost parallel to the housing market recovery. 

Home builder stocks often take the spotlight during a housing boom; this often leaves mortgage stocks in the background. According to a recent MarketWatch column by Jon D. Markman, investors should take a second look at the following stock to see if it fits into their portfolios as part of a diversification strategy

Nationstar Mortgage 

Just like mortgage lenders and originators, home loan servicing companies were subject to close scrutiny by regulators in the aftermath of the housing crash and mortgage meltdown of 2008. Nationstar Mortgage (NYSE:NSM) had its Initial Public Offering (IPO) earlier this year with a debut of about $14 per share. The stock is currently trading at $34, and Nationstar enjoys status as a major independent mortgage servicing enterprise. 

As the housing market improves and more successful loan modifications allow homeowners to keep their properties, Nationstar Mortgage stands to grow their operations and deliver more value to shareholders. The company also has a mortgage origination unit that closed $3.4 billion in new home loans in 2011. The majority of these loans are guaranteed by Fannie Mae and Freddie Mac.

Clients of Nationstar Mortgage are not limited to mortgage investors and originators. The company also services loans for government agencies and private equity funds. As part of the company's servicing efforts, Nationstar is on the front lines of loss mitigation since it can identify potential delinquent payments and intervene accordingly in order to avoid default. 

Further proof of the company's growth strategy can be appreciated in the recent acquisition of Residential Capital, a company that was part of the troubled lender Ally Financial. The transfer of assets should be completed by the end of the year, and at that point Nationstar's loan portfolio will grow by about 400 percent.


Should CFPB have more supervision over credit agencies?