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Nationstar Acquires Aurora Bank Servicing Rights

Financial Services Blog

Financial Services Watch Blog
July 24, 2012

Acquisition May Be of Interest to Originators/Correspondents

Nationstar Mortgage LLC, an indirectly-held, wholly-owned subsidiary of Nationstar Mortgage Holdings Inc., has completed its acquisition of approximately $63.7 billion in residential mortgage servicing rights from Aurora Bank FSB (f/k/a Lehman Brothers Bank) and its wholly owned subsidiary Aurora Loan Services LLC , a subsidiary of Lehman Brothers Bancorp Inc. 

Aurora and Lehman were once major players in the subprime-mortgage market, requiring little or no low down payments and income and/or asset documentation — risky lending practices that ultimately brought down Lehman and set off a global financial crisis.

This sale of servicing rights to Nationstar is part of the wind down of Aurora Bank and Aurora Loan Services, which ultimately is expected to help funnel $1.5 billion to creditors of Lehman, which filed for bankruptcy in 2008.

Thus, there appears to be a fund raising mentality at Lehman/Aurora, which perhaps explains why, years after the fact, originator/correspondents across the country were suddenly bombarded with repurchase demands for loans purportedly owned by Aurora Bank.

Questionable Motives?

This sale of servicing rights to Nationstar may be have further revealed Lehman’s/Aurora’s motives. Recent articles  indicate that ALL of the servicing rights which Aurora held were transferred to Nationstar, and that these servicing rights relate to approximately 75% of non-conforming loans in private label securitizations and the balance relate to conforming loans in GSE pools.

If this information is correct, it is a logical deduction that Aurora does not have an interest in any of the loans it purchased or originated years ago from originators and correspondents for which it has been seeking repurchase. This apparent lack of an ownership or other interest in the underlying loans should have precluded Aurora Services from making any loan repurchase demands on behalf of Aurora Bank against its former correspondents and originators, yet Aurora has aggressively been pursuing these claims.

If Nationstar now continues to demand the repurchase of loans on which Aurora had previously made such demands (and/or pursues additional claims), originators/correspondents should consider requiring adequate documentation in support of all these claims, such as proof of Nationstar’s entitlement to pursue the claims on loans purportedly owned by Aurora.

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