The Zacks Analyst Blog Highlights: Bank of America, Ocwen Financial,
Nationstar Mortgage Holdings, Morgan Stanley and Goldman Sachs Group
CHICAGO, Jan. 8, 2013
CHICAGO, Jan. 8, 2013 /PRNewswire/ --Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog includeBank of America Corporation
(NYSE:BAC), OcwenFinancial Corp. (NYSE:OCN), NationstarMortgage Holdings Inc.
(NYSE:NSM), Morgan Stanley (NYSE:MS) and Goldman Sachs Group Inc (NYSE:GS).
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Here are highlights from Monday's Analyst Blog:
BofA Considering Sale of MSRs
According to Reuters, Bank of America Corporation (NYSE:BAC) is contemplating
the sale of mortgage servicing rights (MSRs) worth $300 billion. This step
will be taken by BofA in order to scale down its non-core operations and
further strengthen the balance sheet.
Among the companies that are in talks to buy MSRs from BofA (in full or part)
include OcwenFinancial Corp. (NYSE:OCN) and NationstarMortgage Holdings Inc.
(NYSE:NSM). The deal is expected to be announced in the next few weeks.
MSRs, in general, are becoming burdensome for the banks. Stringent capital
regulations and increasing balance sheet risk have made these an expensive
business. Hence, the banks are trying to offload these to specialized
mortgage-servicing companies that include three of the above-mentioned firms.
In the last couple of years, major banks like Morgan Stanley (NYSE:MS) and
Goldman Sachs Group Inc (NYSE:GS) have sold their respective mortgage
servicing subsidiaries to Ocwen. Last year, Ocwen, in partnership with Walter
Investment, also won the bid to acquire Residential Capital's (ResCap) MSRs
for $3 billion.
Getting back to the original story, BofA's mortgage servicing expenses has
shot up tremendously. In the third quarter, it stood at $3.4 million as the
company had to hire employees to work with those customers who are late in
loan repayments. As of September 30, 2012, the company serviced loans worth
$1.1 trillion, down from $1.4 trillion as of December 31, 2011.
Moreover, in June 2012, BofA announced a deal to sell $10.4 billion worth of
MSRs to Nationstar Mortgage Holdings' wholly owned subsidiary – Nationstar
Mortgage LLC. The MSRs comprise of loans in government-sponsored enterprise
Escalating servicing costs and strict regulations is expected to force BofA
and many other banks to do away with once lucrative MSRs operations.
Currently, BofA retains a Zacks #3 Rank, which translates into a short-term
We believe that BofA's plan to vend off MSRs will be slightly positive for the
company. Hence, there a marginal chance for upward estimate revisions. This in
turn, could also lead to an improvement in its Zacks Rank.
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