Nationstar accused of harming investors’ interest

Northern, WI 03/08/2013 (avauncer) - Nationstar Mortgage Holdings Inc. (NYSE: NSM), the mortgage service provider, has been accused of harming investors’ interest by auctioning home loans backed up by securities.

In a complaint filed in New York State Supreme Court in Manhattan, mortgage-bond investor KIRP LLC said that Nationstar’s loan liquidations are nothing but a blatant abdication of the firm’s responsibilities as a service provider.

“Nationstar has not fulfilled its duties as master servicer but rather has engaged in practices to enrich itself at the expense of” investors, KIRP said. KIRP said that it’s a “significant” investor in six residential mortgage-backed security trusts sponsored by Residential Accredit Loans Inc.
According to KIRP, Nationstar has an option to modify loan conditions or foreclosing in the event of default on mortgage loans. The loan sales, on www.auction.com, permit Nationstar to more quickly recuperate advances made on the loans, according to the complaint. Nationstar has a business tie up with the auction website.

“The only party that appears to have benefitted from the bulk note sales is Nationstar itself,” KIRP said.

The Association of Institutional Investors (AII), a group consists of members from Pacific Investment Management Co. and Loomis Sayles & Co., is all set to dispatch letters to mortgage-bond trustees who are challenging Nationstar’s sales, according to sources familiar with the matter, who do not want to be named as the negotiations are still on.

Nationstar expanded its service portfolio by 94 percent last year taking it to $198 billion, mostly through the purchase of assets. Its portfolio touched $300 billion mark last month after the firm concluded a deal partly for $215 billion, according to the data incorporated in its earnings report.

Nationstar CEO Jay Bray said over phone that the strategy is permitted to securitization and is being used to help out bondholders. It’s all about optimizing the takings for the trust and things which make sense, he said.

The shares of Nationstar Mortgage Holdings Inc. (NYSE:NSM) were down by 0.44% and currently trading at $38.48