Big Banks Back Away From Mortgages; Nonbank Lenders Pick Up Slack

NEW YORK (TheStreet) — Big banks are continuing to back away from offering mortgages, allowing nonbank lenders such as Freedom Mortgage and Quicken Loans to grab a bigger share of the market.

Although the big banks such as Bank of America (BAC – Get Report) , JPMorgan Chase (JPM– Get Report) and Wells Fargo (WFC) are still happy to provide mortgages to wealthy borrowers with strong credit records, they are much more cautious about higher-risk loans, even ones that meet underwriting requirements of government agencies such as the Federal Housing Administration, Fannie Mae (FNMA) , Freddie Mac (FMCC) or Ginnie Mae.

That has created an opportunity for nonbank lenders such as Freedom Mortgage, a privately held lender based in Mount Laurel, N.J.

Although fewer mortgages were originated last year than in 2013, Freedom Mortgage actually increased its business, selling $22 billion worth of mortgages, according to Chief ExecutiveStanley C. Middleman.

He expects to originate more than $30 billion this year.

Read on.

Nationstar faces challenges as Wall Street turns skeptical on nonbank MSRs

Nationstar (NSM) isn’t facing quite the level of pushback or regulatory targeting as its counterpart Ocwen Financial (OCN), but it is having a devil of a time lately and it was reflected in reports and on the market boards Friday.

Nationstar will report its second-quarter earnings on Wednesday, August 6.

Nonbanks snapping up mortgage servicing rights have been fighting against a flurry of regulatory pushback and scrutiny, not so much for anything they have done, but because of their growing share of the MSR servicing space.

TheStreet Ratings team rated Nationstar as a “hold” with a ratings score of C-. TheStreet Ratings Team had this to say about their recommendation:

We rate NATIONSTAR MORTGAGE HOLDINGS (NSM) a HOLD. The primary factors that have impacted our rating are mixed – some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company’s strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and a generally disappointing performance in the stock itself.

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