Nationstar-Serviced Mortgage Bonds to Realize Losses, Fitch Says

U.S. home-loan bonds without government backing serviced by Nationstar Mortgage LLC will recognize about $1 billion of losses because of an accounting change tied to modified loans, according to Fitch Ratings.

The losses, amounting to about 1.5 percent of the total balance of the mortgage pools affected, are likely to be realized by the transactions in July and mostly influence bonds with ratings at least eight levels below investment grade, the New York-based firm said today in an e-mailed statement.

The accounting change is tied to mortgages with forborne principal amounts whose servicing was acquired by Nationstar from Aurora Bank FSB in 2012, Fitch said.

The event is similar to about $1 billion of losses realized in May on loans whose servicing rights were acquired by Ocwen Financial Corp. (OCN), Fitch said. A survey of other services suggests that additional large losses shouldn’t be expected, the company said.

Marshall Murphy, a spokesman for Lewisville, Texas-based Nationstar, didn’t immediately respond to an e-mail about the statement by the rating company.

Fitch said that Nationstar had informed it of the planned change in the servicer’s reporting for the mortgages whose borrowers had been offered forbearance during modifications. That step entails homeowners not paying any interest or principal on some of their loan amounts until a later date.

The uncertainty about cash flows in subprime-mortgage securitizations contributed to declines in the debt that reached almost 22 percent in June among some of the notes as prices tumbled, according to Bank of America Corp. data.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net.

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.

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