Nationstar Bulls Dream of Ocwen Spin-Off Magic

NEW YORK ( TheStreet) -- Nationstar Mortgage Holdings ( NSM) investors are hoping the company may look to spin off its Solutionstar unit, as they look to replicate the astonishing success of spin-offs by fellow mortgage servicer Ocwen Financial ( OCN).

"I fully expect them to do this, but they won't confirm it because they can't," FBR Capital Markets analyst Paul Miller says of a potential Solutionstar spin-off. "If you ask them they say we're not allowed to have that discussion which tells you they're thinking about it," he says.

While Nationstar has seen shares triple over the past 12 months, and Ocwen's stock has risen by 176%, Ocwen spin-offs have been even more impressive. Altisource Portfolio Solutions ( ASPS) is up 500% since Ocwen spun it off in August 2009.

Altisource Asset Management ( AAMC), meanwhile, has risen from $15 on its Dec. 13 debut to reach a high of $300 on Wednesday -- a 20-fold gain in just over six months.

Another Ocwen spin-off, Altisource Residential Corp. ( RESI), is up only 26% since its debut on Dec. 14.

Ocwen shareholders have benefitted from the gains since they received stakes in the spun-off companies.

Nationstar, roughly 75% owned by Fortress Investment Group ( FIG) is one of a group of so-called specialty mortgage servicers that have been growing rapidly as institutions like Bank of America ( BAC) and ResCap sell off their portfolios. Other servicers include Ocwen Financial ( OCN) and Walter Investment Management ( WAC).

Servicers are essentially debt collectors, though Nationstar, Walter and Ocwen also originate new loans. The three companies have been among the best performing financial services plays of the past 12 months, with shares of Ocwen and Nationstar roughly tripling over that time, while Walter shares have doubled. A new entrant managed by several ex-Countrywide Financial Executives, PennyMac Financial Services ( PFSI), went public last week.

Solutionstar offers a wide range of services, including appraisals and title insurance agency. A website,, hosts online auctions of foreclosed-upon homes. The site lists just one home at more than $320,000 and 17 at less than $20,000.

A Nationstar spokesman declined to comment on a potential spin-off of Solutionstar.

-- Written by Dan Freed in New York.

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