Shares of Nationstar, which both collects mortgage debt and originates new loans were down by 3.01% to $31.22 some 40 minutes after the start of trading Tuesday.
In lowering his recommendation to market perform from outperform, FBR analyst Paul Miller cited "lower origination expectations, which are a large part of the company's earnings."
In a complex deal announced in December, Nationstar sold a part of the income it receives for collecting debt of $130 billion in mortgages to New Residential (NRZ - Get Report) a related company, which, like Nationstar, has close ties to private equity giant Fortress Investment Group.
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Miller stated in Tuesday's report he believes the deal "could be a positive in that it frees up a significant amount of capital for Nationstar while providing it with upside from portfolio improvements. However, we think the true earnings impact from the transaction remains in question as the company needs to get the level of advances down to $5 billion or below before it is revenue neutral."
-- Written by Dan Freed in New York.