Nationstar Mortgage Holdings Inc. (NSM:US) agreed to buy servicing rights on mortgages with an unpaid principal balance of $10.4 billion from Bank of America Corp. (BAC:US) as banks reduce the amount of home loans they administer.
The purchase will be funded partly by an investment by Newcastle Investment Corp. (NCT:US), Lewisville, Texas-based Nationstar said in a statement today. Newcastle paid $44 million for the right to receive 65 percent of the monthly cash flow generated by the rights, the New York-based real-estate debt investor said in a separate statement.
Nationstar, taken public by Fortress Investment Group in March, is expanding its loan-servicing business as banks cut their portfolios to meet capital requirements proposed under the Basel III accord. The regulation forces lenders to hold more capital against mortgage servicing rights that exceed 10 percent of tier 1 capital, a measure of high-quality, loss-absorbing reserves that banks must hold against risky assets.
Nationstar is positioned to become the largest non-bank residential loan servicer by the end of this year, according to Chief Executive Officer Jay Bray. The company added $36.3 billion to its servicing portfolio in the first quarter from a year earlier, exceeding the $33.2 billion gain for market leader Wells Fargo & Co., data from Inside Mortgage Finance show.
Nationstar agreed last month to acquire $374 billion in servicing rights from Residential Capital LLC, a division of Ally Financial Inc. (ALLY:US)
Newcastle is managed by an affiliate of Fortress. The Bank of America loans are expected to transfer to Nationstar in July.
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