Fine Points on Nationstar's Accounting
Discount on advances purchased is recognized under "interest income" in the proportion of advance collected:
- This component contributed $6.5 million to first-quarter 2013 earnings and $11.5 million to fourth-quarter 2012 earnings.
- The accurate number for second quarter 2013 will be disclosed in the 10Q, and we estimate it to be in the range of $20 million to $25 million.
Mortgage-servicing rights on book are mark-to-market:
- Nationstar increased its mortgage-servicing rights mark by $118 million.
- 50% of the benefit is passed onto excess spread holder.
- Unlike Ocwen, Nationstar does not have 100% ownership of mortgage-servicing rights.
Accrued servicing fees are recognized on balance sheet:
- For first quarter 2013, it was $101 million -- the company does not provide any further details.
Mortgage-servicing liabilities are provided on the balance sheet:
- The amount provisioned has been between $81 million and $83 million since second quarter 2012, though the servicing portfolio has more than doubled over the past year. This might be underprovided.
- Delinquent agency portfolios recently acquired should have increased this amount by $125 million to $150 million.
- The company recognizes a $7 million to $8 million loss on its legacy book every quarter despite improvements in credit and interest rate markets over the past two years.
- The legacy book might still be overvalued at $257 million.