Mba 665 final project government impact on business

MBA 665: Final Project: Nationstar Mortgage Holdings, Inc.: Government Impact on Business
and Deregulation of the Mortgage Industry
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MBA 665: Government Impact on Business
Final Project: Nationstar Mortgage Holdings, Inc.: Government Impact on Business and
Deregulation of the Mortgage Industry
By: Kelly A. Giambra
Southern New Hampshire University
Module 9: June 4, 2017

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Abstract:
The final project for this course is the creation of a paper about a current government action
that is impacting a business. This paper will discuss Nationstar Mortgage Holdings Inc. (NYSE:
NSM) and the potential impact on its business as a result of deregulation of the mortgage industry
which has been proposed by the Trump Administration in January 2017. The non-bank mortgage
business had gained significant market share following the 2007 & 2008 financial crisis due to
increased bank regulations that were passed under the Obama Administration and the Dodd Frank
Wall Street Reform and Consumer Protection Act (Dodd-Frank). Now, President Trump in
conjunction with Congress has announced plans to deregulate the mortgage, banking, and finance
industry and dismantle Dodd-Frank replacing it with new policies to promote economic and job
growth. The changes would possibly return the business to a less regulated environment similar
to the pre-financial crisis state we one had in the U.S. This paper presents an overview and analysis
of Nationstar and the mortgage industry, as well as possible opportunities and challenges the
business may face under deregulation. This paper concludes with recommendations that can both
maximize sustainability as well as mitigate any risks or losses likely to be faced in a more
competitive business environment that would be created under Trump.

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I. Overview
A. Business Profile: Nationstar Mortgage Holdings, Inc. (NYSE: NSM)
Nationstar Mortgage Holdings Inc. (NYSE: NSM) is a leading nonbank mortgage servicer
in the United States (U.S.) that has been in business since 1994 (Nationstar, 2017). Nationstar
earns a majority of its revenue through mortgage loan servicing and sub-servicing contracts, loan
originations, and transaction based services to mostly single family residences within the U.S.
(Nationstar, 2017). Their business consists mainly of a financial portfolio of purchased mortgage
servicing assets (MSAs), subservicing of loans from other banks, lenders, and investors,
originations of new loans to borrowers, and loss mitigation and foreclosure services on delinquent
loan accounts (Nationstar, 2017). Nonbanks like Nationstar earn the largest part of their revenue
from both servicing fees and monthly fees based on a percentage of the unpaid principal balances
(UPBs) of loans within their portfolios. Other sources of revenue include ancillary fees, float
income, origination fees, investments, and consulting services. Nationstar may also utilize equity,
debt, lines of credit, issue bonds, and initiate other liquidity raising alternatives to fund their
operations (Nationstar, 2017).
The mortgage servicing business generally consists of two different groups of both banks
and nonbanks each having different business models. Banks offer various financial products to
their consumers such as deposit accounts, auto loans, mortgages, and credit card products (GAO,
2016). Whereas, nonbank servicers like Nationstar mainly provide mortgage-related services and
do not offer these other products. Nonbanks participate in a variety of mortgage activities such
as servicing and originations as well as the purchasing and selling of Mortgage Servicing Rights
(MSRs) (GAO, 2016). Nationstar may also operate within both the primary and secondary
mortgage market. In the primary market, loans are originated to borrowers secured by property

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and are either held by the Company for investment or sold within the secondary market where
loans are packaged together and pooled and held in trusts. The pools of loans become the assets
of Mortgage Back Securities (MBS) which are issued to investors who receive cash generated from
the loans in the trust (GAO, 2016). Once a mortgage is originated, the loan then gets serviced
which is another asset acquired through MSRs. This is where nonbank servicers like Nationstar
earn a majority of their profits.
Nonbank mortgage servicers like Nationstar have gained significant market share in recent
years after many banks exited the servicing industry. Since June 2015, about one quarter of the
9.9 trillion dollar outstanding home mortgage loans in the U.S. were serviced by nonbanks (GAO,
2016). The shift in trend was a result of banks exiting the business after the 2007 & 2008 financial
and subprime lending crisis. These crises had led to a significant increase in the number of
delinquent loans and foreclosure homes thus creating opportunities for nonbanks (GAO, 2016).
Nationstar found opportunities to acquire more MSRs of delinquent loan portfolios between the
periods of 2010 to 2013 from banks (Nationstar, 2017). It was also around that time which the
U.S. Treasury had launched President Obama’s Making Home Affordable (MHA) act to help
homeowners avoid losing their homes to foreclosure (MHA, 2017). Subsequently, the large
number of delinquencies on residential mortgages from subprime lending had required a business
need for loss mitigation to help mitigate financial losses for investors as well as help homeowners.
Nationstar has also sought other opportunities to gain market share through investing
heavily in technology and using strategies that improve the customer experience (Nationstar,
2017). Leveraging such technology allowed their business to compete against other high tech
mortgage companies like Quicken Loans Rocket Mortgage who is currently the second leading
nonbank servicer in the business behind Wells Fargo Home Mortgage (Creswel, 2017). In recent

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years, these nonbanks have invested heavily in online technology to allow customers to
conveniently apply for mortgages while being able to easily understand the several regulations and
lending rules (Creswel, 2017). Nationstar had created its Xome real estate platform and Greenlight
Loans to compete by enhancing their technology through digitalization and automation of the real
estate and borrowing experience (Nationstar, 2017). The technology has enabled customers to
have a seamless experience from finding a home, to applying for mortgages and closing the deal
(Nationstar, 2017). In addition, to innovate and stay in line with competitors, Nationstar has been
working on a new rebrand strategy by changing its Company name to “Mr. Cooper” (Nationstar,
2017). The rebrand is expected to be launched in 2017 and will combine its entire originations
and servicing segments of Greenlight Loans, Xome, and Nationstar brands under the single “Mr.
Cooper” umbrella (Nationstar, 2017).
Competition will be the biggest threat going forward in 2017 for Nationstar as the Trump
Administration moves ahead with deregulation of the mortgage industry. Though the primary
sources of competition at this time remain with the other nonbank servicers such as Quicken Loans,
Ocwen Financial, Walter Investment, Wells Fargo, PHH Mortgage, and DHI Mortgage, Ltd.
(Morningstar, 2017). These nonbank servicers have also grown their market share in recent years.
In a report issued by the U.S. Government Accountability Office (GAO), it was noted that the
market share of mortgage accounts serviced by nonbanks increased from 6.8 percent in 2012 to
24.2 percent in 2015, which is still expected to grow through 2017 (Nazzaro, 2017). The reason
for such growth is the Consumer Financial Protection Bureau’s (CFPB) imposition of new rules
making compliance costs more expensive for most banks (Nazarro, 2017). Most specifically with
the regulatory rules under Basel III (the Third Basel Accord) restricting banks from holding onto

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a portfolio of MSRs to ten percent of the bank’s common equity, in which nonbanks are not held
to the same valuation standards (Nazarro, 2017).
B. Governmental Action: President Donald Trump’s Proposed Plans of
Financial Reform and the Deregulation of the Mortgage Industry
The government action that is likely to impact the future business of Nationstar involves
the Republican controlled Trump Administration and their proposed plans to deregulate and
reform the financial and mortgage industries in 2017 (Olick, 2017). The plans to deregulate are
expected to change the playing field for nonbank mortgage servicers as big banks are likely return
to the business. The larger banks like JPMorgan Chase, Bank of America, and Citibank had
become less competitive due to the high costs of regulations passed under the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Dodd-Frank) as well as lawsuits they had faced
during the financial and subprime lending crisis (Olick, 2017). Subprime lending practices first
began in the early 2000s when high interest mortgages were extended to borrowers with lower
than average credit scores (Ducas, 2013). In the past, these high-risk borrowers had found it
difficult to qualify for a mortgage unless the lender was protected by government backed
insurance. However, during the periods of 2003 to 2007, there were several regulations were
passed by Congress and the U.S. Department of Housing and Urban Development (HUD), to
make it easier for borrowers to qualify for a mortgage (Ducas, 2013).
The regulations permitted the Government Sponsored Enterprises (GSEs) such as Fannie
Mae and Freddie Mac to offer more subprime mortgages thus increasing consumer demand for
housing. Once the subprime loans were originated, lenders would repackage them into pools that
were sold to investors, known as “securitization” (Ducas, 2013). It was also during this time that
property values had increased which led to a housing bubble. Consequently when the economic

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recession hit, the housing market crashed and U.S. homeowners either fell underwater from
declining property values or could no longer afford to repay their mortgages due to various factors.
By the end of 2006, there were approximately 15 million subprime loans and 1.2 million
foreclosure filings in the U.S. (Mallach, 2009). As a result, many of the investors purchasing
Private Mortgage Backed Securities (PMBS) had fallen into bankruptcy with the two GSEs
suffering from the largest losses (Ducas, 2013). In 2008, the U.S. government, the Federal Reserve
(the Fed), and other state and federal agencies had to prevent further devastation by bailing out the
lenders and GSEs (Guynn, 2010). Congress then passed a series of strict regulations necessary for
re-stabilization of the housing, finance, and mortgage markets.
In 2010, Congress enacted Dodd-Frank which had introduced 16 regulatory Titles that
addressed a range of issues related to mortgage lending, finance, and investing activities (Koba,
2012). These Titles that have directly impacted the mortgage industry and investing in numerous
ways. Most relevant to the industry included: Title IX or the Investor Protections and
Improvements to the Regulations of Securities, Title X, or the Consumer Financial Protection Act
of 2010, and Title XIV, or the Mortgage Reform and Anti-Predatory Lending Act (GPO, 2010).
These titles have set various standards for the origination and securitization of mortgage loans.
For instance, Title X established the CFPB to oversee and regulate financial and large depository
institutions, as well as enforce the various consumer protection laws. In January 2014, the CFPB
passed its final mortgage servicing rules which clarified sections of the Federal Truth in Lending
Act and the Real Estate Settlement Procedures Act (TILA-RESPA), designed to regulate how
mortgage servicers interact with borrowers (CT Lien, 2017). An additional part of the reform
under Dodd-Frank was the Secure and Fair Enforcement for Mortgage Licensing Act (the SAFE

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Act) which required federal licensing of mortgage brokers which was previously regulated by state
laws (GPO, 2010).
Furthermore, Dodd-Frank placed major regulations in the financial industry that were
implemented to protect consumers from abusive lending practices by large banks, whom were
often referred to as “too big to fail” (Koba, 2012). Dodd-Frank also created the Financial Stability
Oversight Council (FSOC) to monitor financial risks and oversee nonbank firms such as hedge
funds (Koba, 2012). The Volcker Rule was passed as a component of the Act to prohibit banks
from owning or investing in hedge funds or private equity funds for their own financial benefit
(Koba, 2012). Dodd-Frank also required certain risky derivative instruments to be regulated by
the Securities Exchange Commission (SEC) or the Commodity Futures Trading Commissions
(CFTC) to make them more transparent (Koba, 2012). The law created the Federal Insurance
Office (FIO) through the U.S. Treasury which identified various insurance companies that may
create risks to the financial system (Koba, 2012).
Conversely, these regulations are now expected to change very soon. In January 2017,
Donald Trump was inaugurated as the 45th President of the U.S. bringing forth various plans to
dismantle Dodd-Frank replacing it with new policies that promote economic growth (Bennett,
2017). Government actions under Trump will impact Dodd-Frank and the CFPB through various
reforms under the Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs
(CHOICE Act) which was first introduced in 2016 (Bennett, 2017). A key provision of the
CHOICE Act would allow for a financial institution to hold ten percent of its assets in reserves for
protection from losses regardless of the bank’s size or complexity (Bennett, 2017). The CHOICE
Act would make compliance easier and less expensive for banks to improve business for large
financial firms (Bennett, 2017).

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In light of the proposed changes under Trump, Nationstar’s business will be impacted by
deregulation in a number of ways. For one, Trump announced possible plans to return the GSEs
to private control which would restrict certain borrowers from obtaining credit under these types
of invested loans (Bundrick, 2017). Trump had already began making further changes on
government loans backed by the Federal Housing Administration (FHA) by suspending the 0.25
percentage point interest rate reduction on these loans (Bowerman & Rossman, 2017). The new
rates have already affected millions of homebuyers and their eligibility for an FHA mortgage
which backs about 16 percent of the new mortgage market in the U.S. (Bowerman & Rossman,
2017). Second, Trump’s plans to increase spending on infrastructure projects is likely to cause
labor shortages which are needed to increase the supply of housing (Bundrick, 2017). Third,
mortgage rates have increased by about 500 basis points since Trump entered office (Bundrick,
2017). The rate increases will have negative impacts on homeownership for first time homebuyers.
This is mainly because higher interest rates result in higher monthly mortgage payments which
impacts affordability. Higher mortgage rates on the hand facilitates price appreciation which
would help sellers regain value in their homes once lost during the financial crisis (Bundrick,
2017).
Furthermore, the upcoming changes will increase competition for non-bank mortgage
servicers For instance, rolling back on Dodd-Frank would open up banks to taking on more
financial risks and loosening guidelines that would extend lending to borrowers with lower income
and credit scores (Bundrick, 2017). Deregulation would essentially reduce the costs of compliance
allowing small community banks to compete against the big banks hence increasing access to
credit for borrowers. These changes are expected occur over the next few years and will create an

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entirely new competitive landscape for Nationstar. As a result, the business environment of
Nationstar would face significant impacts from these government changes in upcoming years.
C. Organization and Teams: Nationstar and Past Responses to Government Regulations
Nationstar’s organization and teams consist of a board of directors, senior and operational
management, as well as over 7,000 employees across their three business segments of mortgage
servicing, loan originations, and Xome real estate home buying platform (Nationstar, 2017). The
leadership and management of Nationstar are comprised of several experienced individuals whose
primary responsibilities are to improve operations and generate financial performance to maintain
profits for the business (Nationstar, 2017). Nationstar employees include several types of
professionals such as licensed loan officers, mortgage processors, underwriters, and other
associates who work directly with consumers to assess their eligibility for a mortgage. The
employees help Nationstar customers through the entire application, approval, and closing process.
Once a new mortgage gets boarded, the Nationstar loan servicing team will provide consumers
with assistance in processing payments, updating account information, and answering any
questions related to their accounts. Nationstar’s lending team also works with other investors to
resell mortgages on the secondary market (Nationstar, 2017). The extremely large and liquid
secondary mortgage market is key to the business since it supports the availability of credit.
Altogether, Nationstar’s organization and teams are focused on providing quality service
to customers while also ensuring that delinquencies are minimized to prevent losses to investors,
and ensuring that regulations and compliance rules are followed (Nationstar, 2017). Between 2010
and 2013, Nationstar acquired many of the distressed portfolios from big banks that were unable
to service such a high number of delinquent loans in accordance to Dodd-Frank and the new CFPB
rules. Hence regulatory compliance in an important part of the organization as well as utilizing

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multiple loss mitigation strategies in the beginning stages of a borrower’s loan default. In response
to the regulations, Nationstar specialists have been trained to help homeowners with various
repayment solutions whenever circumstances are appropriate (Nationstar, 2017). If the borrower
does not qualify for loss mitigation, the organization must ensure proper state and federal laws are
followed when filing for foreclosure proceedings and servicing real estate owned properties (REO)
(Nationstar, 2017). This business model was developed in response to government regulations
under Dodd-Frank and the new rules implemented by the CFPB.
Overall, the government regulations have caused many competitors to leave the mortgage
industry because the compliance costs from Dodd-Frank and the CFPB have been too expensive
(Gordon, 2017). Thus, some have argued that consumers are being underserved and the economy
has been set back unnecessarily from attempts to reform the business (Gordon, 2017). For
instance, lenders have since implemented policies making qualifying for a mortgage more difficult
for applicants. These policies have changed most of the income, debt, and credit requirements that
verify a borrower’s ability to repay which were overlooked in the past (Olick, 2015). Loan officers
are no longer allowed to approve high risk loan products like negative amortization mortgages and
lenders must disclose all of the costs associated with the transaction (Olick, 2015). Lenders have
additionally responded by revamping their tech systems to meet compliance standards. Ultimately,
there was a clear need for governments to intervene because of obvious problems with approving
borrowers for unsustainable subprime loans as well as other unfair or deceptive practices.
D. Stakeholders: Political and Advocacy Actions Taken In the Mortgage Industry
The stakeholders in the mortgage industry tend to be very complex with numerous public
and private participants that operate within both the primary and secondary mortgage markets
(GAO, 2016). Nationstar recognizes their key stakeholders as being the leadership, team members,

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shareholders, policy makers, business organizations, government agencies, suppliers, nonprofits,
and advocacy groups, all whom have an interest or stake in their business (Nationstar, 2017).
Nationstar attributes their success to working with these stakeholders in order to deliver quality
services that comply with the regulations and advocate for homeowners. The customers are
viewed as the primary responsibility of the business, and may include the various real estate market
participants like homeowners, homebuyers, home sellers, investors, and real estate agents
(Nationstar, 2017). The investors mainly include the GSE’s such as Fannie Mae, Freddie Mac,
private label investors, Ginnie Mae, FHA, and organizations that own MSRs, all which have a
significant stake in the industry (Nationstar, 2017). Other industry stakeholders have also included
federal and state regulators, the CFPB, the Federal Housing Finance Agency (FHFA), the GAO,
and various housing agencies which generally advocate for consumers taking out mortgages.
External stakeholders have played an important role in the mortgage business following
the financial crisis and passage of Dodd-Frank. For instance, Fannie Mae, Freddie Mac, and Ginnie
Mae all have implemented policies for mortgage servicers that handle their loans as well as
provides oversight to ensure servicers are effectively providing loss mitigation options for
borrowers (MBA, 2017). There have also been profound shifts in the servicing market from banks
to nonbanks since depository institutions have sold their MSRs to comply with Basel III, the
National Mortgage Settlement Lawsuit, and Dodd-Frank (MBA, 2017). The increase in MSR
transfers have raised concerns with the state regulators about servicers’ abilities to handle such
high volumes without disrupting their quality of customer service. In response, there has been
increased regulatory attention by stakeholders with regard to mortgage servicing transfers. For
instance, the CFPBhas intervened by enforcing the rules on servicing transfers to ensure borrowers
are treated fairly in the process (MBA, 2017).

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Both the CFPB and the FHFA have taken an active role in the regulatory oversight of
nonbank servicers as well as the GSE’s. Since the CFPB’s creation, it has enforced the various
federal laws and regulations to ensure mortgage lending and servicing practices are in compliance
and that consumer rights are being protected (GAO, 2016). The CFPB also collects complaints
against mortgage and financial companies while also educating consumers about financial
protection laws (GAO, 2016). With respect to the FHFA, the agency was established under the
2008 Housing and Economic Recovery Act and supervises both the GSE’s and the Federal Home
Loan Bank System (GAO, 2016). The FHFA responded to the mortgage crisis by ensuring these
entities followed the laws and operated in a safe and sound manner. Moreover, federal and state
regulators now supervise businesses that are chartered and licensed in their states to offer mortgage
loan products and services (GAO, 2016). Federal agencies that insure mortgages or guarantee
loans including the FHA, Rural Housing Service, and Department of Veteran Affairs (VA) have
monitored non-bank servicers like Nationstar to ensure the loans are serviced according to their
guidelines (GAO, 2016). These entities conduct annual servicer recertification, tests of operations,
and important loan servicing tasks like applying payments and collections on delinquent accounts.
Similarly, the agencies have the right review all loans referred for foreclosure to ensure that
borrowers were first offered loss mitigation services.
Nationstar’s overall position with the stakeholders are to place the needs of customers first,
preserve homeownership in the community, and utilize foreclosure action as a last resort
(Nationstar, 2017). In 2016, Nationstar had participated in several outreach activities and had
helped over 25,000 homeowners lower their mortgage payments under the Home Affordable
Refinance Program (HARP). These initiatives had reduced the number of delinquencies exceeding
60 days from 6.9 percent to 4.7 percent (Nationstar, 2017). Nationstar has also put forth various

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efforts to simplify the process so that customers are better informed which reduced the number of
complaints reported to the CFPB since December 31, 2015 (Nationstar, 2017). The efforts have
resulted in prevention of regulatory violations, lawsuits, loss of business, and to promote
stakeholder interests of sustainable mortgage lending products and services.
E. Current Environment: Nationstar’s Business and the Mortgage Industry
The current business environment of Nationstar is stable, since many of the legal and
regulatory issues faced during the subprime lending crisis have either been resolved or are
retreating, thus allowing for their business to become stronger in 2017. Though Obama’s MHA
programs have ended in 2016, Nationstar still continues to help distressed homeowners through
their in-house financial assistance and loan modification programs. Nationstar’s culture and
products have also produced high growth rates in 2016 with a 22 percent increase in market share
(Nationstar, 2017). The Company’s year-end 2016 results consisted of 2.9 million customers and
473 billion in unpaid principal balance (UPB) which is the largest their portfolio has ever been
(Nationstar, 2017). All in all, Nationstar performed well in 2016 and is anticipating additional
growth and a strong portfolio in 2017. Nonbank mortgage lenders in general remain the top lenders
driving new mortgages and continue to occupy a majority of the market share (MReport, 2017).
With respect to mortgage servicing, there are a number of reports and studies noting an
increase in mortgages serviced by nonbanks with about 20 of the largest servicers accounting for
63 percent of all mortgages serviced in 2015 (GAO, 2016). Nonbank servicers also own a majority
of the MSRs associated with private label securities. A large reason for this is the willingness and
ability of nonbanks to service delinquent loans following the passage of Dodd-Frank (GAO, 2016).
The growth is now slowing down as noted from declining rates of delinquencies and foreclosures,
and the reduction in the size of transfers from banks to nonbanks (GAO, 2016). Loans are now

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better quality and more stable compared to the financial crisis which some market analysts are
expecting that banks will service more loans that are performing (GAO, 2016).
The aggregate mortgage originations market have performed well due to historically low
rates which led to wave of refinances over the past few years. However, rising interest rates in
2017 slowed the high demand for refinances. On another note, the 2017 homebuyers market has
been challenged by the low supply of housing causing home prices to rise as a result of demand.
Low inventory and strong demand raised prices as homebuilders are not building enough homes
to meet demand (AP, 2017). This accompanied with a sharp rate increase in recent months raised
the average rate on a 30 year fixed mortgage to 4.32 percent (AP, 2017). Long-term mortgage
rates follow the yield on a 10 year Treasury bond and when bond rates increase, mortgage rates
will also increase. The yield however goes down when investors bid up yet the opposite had
happened following Trump’s election into office. Investors expect that Republicans and Congress
will implement policies driving higher rates and inflation which is what drove the yield on a 10
year Treasury note to such a high level (AP, 2017). In addition, bonds backed by risky single
family mortgages increased to one trillion which is concerning that another mortgage crisis may
occur in the future.
Since the wave of foreclosures in 2010, there has been a steady decline in the same by
100,000 foreclosures per year which is a sign that the economy improved and that government
programs have been effective (KCM Crew, 2017). However, Republicans announced no plans to
extend or replace the MHA programs passed under Obama, and it will be entirely up to the private
sector to implement their own foreclosure prevention programs (Cowley, 2017). On the upside,
the housing market has stabilized and the number of delinquencies and foreclosures are at its
lowest since 2007 (Cowley, 2017). Mortgage lenders like Nationstar are now in a position to step

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up with their own homeowner assistance programs modeled after what was learned during the
Obama administration. Essentially, it will be an industrywide approach where no one wants the
business to return to the pre 2007 & 2008 financial crisis state.
II. Analysis
A. Business Environment: Nationstar and Deregulation of the Mortgage Industry
The Trump Administration’s forthcoming plans to deregulate the mortgage industry would
significantly impact the business environment of Nationstar, providing both opportunities and
threats. The primary opportunity for Nationstar under deregulation would be the ability to invest
more in better mortgage products and services that will enhance the customer experience
(Nationstar, 2017). In recent years, Nationstar experienced an increase of compliance costs due to
Dodd-Frank and the new CFPB rules which inhibited Nationstar’s growth and development
(Nationstar, 2017). As for the lending environment, higher interest rates presented a threat to the
entire mortgage industry, though there are still some opportunities for Nationstar customers to
benefit from a lower payment through a refinance (Nationstar, 2017). Nationstar’s mortgage
servicing segment would also benefit from higher interest rates since prepays will slow down and
result in higher profits from their MSR portfolio (Lane, 2016).
For example, MSR portfolios have faced threats from financial losses due to lower interest
rates and increased regulations on the industry which had caused many lenders to sell these
portfolios (Seeking Alpha, 2016). However, since interest rates have been on rise, borrowers are
now less likely to refinance and the speed of pre-payment of outstanding mortgages will fall, thus
increasing the value of Nationstar’s MSR portfolio and the estimate of future cash flows that will
be produced by mortgages serviced by the business (Seeking Alpha, 2016). As a result, rising
rates are likely to mean that Nationstar will hold onto their MSR portfolios to generate more cash

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flow (Seeking Alpha, 2016). Since many of the policies under Trump will send rates higher, this
ultimately presents a unique opportunity to earn more revenue on MSRs provided by the rise in
interest rates (Seeking Alpha, 2016). This will have a positive impact on the business environment
of Nationstar from its servicing portfolio as refinance activity continues to decline in 2017.
On the contrary, the business of Nationstar will face many threats from Trump’s plans to
privatize the GSEs as well as cut back on the government programs which helped borrowers reduce
their mortgage payments and avoid foreclosure. Nationstar depends on a large portion of its
business from loan originations through Fannie Mae, Freddie Mac, and Ginnie Mae, which Trump
intends to take out of government ownership (Hartman, 2017). Privatizing GSEs will create threats
to affordability and availability of low cost mortgages for consumers by making the costs of a
mortgage for the average consumer increase by several points since private investors are less likely
to take risks (Hartman, 2017). Alongside this, Nationstar will face additional threats from rising
mortgage rates though the purchase market has benefited from an improved economy as a result
of job growth and consumer confidence (La Monica, 2017). In fact, since February 2017, new
home sales have risen to more than 6 percent and are at its highest in seven months (LaMonica,
2017). However, the improved housing market will not benefit everyone and there are concerns
that the uptrend is only benefiting wealthier borrowers (LaMonica, 2017).
Nonetheless, the cutbacks on government programs will threaten Nationstar’s servicing
portfolio if unable to offer refinancing options that lower payments for troubled homeowners. The
Trump Administration has announced very few plans to improve affordable housing for middle
and lower income families (Weiss, 2017). This includes the fact that privatization will eliminate
GSE loan modifications, specifically Fannie Mae and Freddie Mac programs, the Home
Affordable Refinance Program (HARP), and the new Fannie Mae Flex Modification Program

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designed for struggling homeowners and to help prevent rising foreclosures across the U.S. (Weiss,
2017). Without any of these government sponsored programs, Nationstar will face threats from
lack of resources for financially distressed homeowners and leaving the business with limited
options mostly through in-house payment assistance programs (Weiss, 2017). Lastly, due to the
decrease and elimination of many loss mitigation programs Nationstar will see an increase in Real
Estate Owned (REO) inventory from a rise in foreclosed homes (Weiss, 2017).
B. Sustainability: Nationstar and Government Impact on a Sustainable Mortgage Business
Sustainability metrics have become increasingly important for Nationstar and the mortgage
industry as new trends surrounding Corporate Social Responsibility (CSR) activities have been
shown to improve financial performance (Finkelstein, 2016). This is primarily due to Nationstar
and other industry competitors’ reliance on sustainability factors in order to make decisions that
minimize financial losses from delinquencies and foreclosures (Finkelstein, 2016). The key
sustainability issues likely to challenge Nationstar and the mortgage business under Trump may
include consumer access to affordable housing, fair lending practices and transparency in
providing information, responsible lending efforts, affordable loan programs, improving programs
that prevent default and foreclosure, and ensuring compliance with regulations (Hartman, 2017).
In retrospect, both the financial and subprime lending crisis of 2007 & 2008 had revealed
that mortgage servicers were inadequately equipped to respond to homeowners struggling with
their mortgage payments (U.S. Treasury, 2016). The GSEs were introduced in response to the
crisis to stabilize the housing market by providing borrowers with access to low cost fixed rate
mortgages (Hartman, 2017). The GSEs also played a substantial role in sustaining real estate sales,
financing, and liquidity in the housing market following the financial crisis (U.S. Treasury, 2016).
There were also some residual effects as evidenced by the one million homeowners or 2.6 percent

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of mortgages recently found to be seriously delinquent on payments (Finklestein, 2016).
Deregulation under Trump would essentially bring this number even higher. Thus, sustainability
in mortgage solutions will be extremely challenging for Nationstar as a result of cut backs of
programs previously offered in response to the crisis. Sustainability for Nationstar will mean the
development their own modification and assistance programs to help their customers who become
delinquent in order to decrease the chance of a homeowner defaulting.
The mortgage business will play a critical role in the public with enabling consumers to be
able to purchase a home and afford to repay a mortgage. The cost of housing is increasing and
becoming very expensive for many potential homebuyers shopping in a market that currently has
limited inventory. This new housing crisis is expected to worsen under Trump. Though Trump did
propose to loosen mortgage lending standards in a speech to the National Association of Home
Builders (NAHB), citing that 25 percent of the cost of a home is a result of regulation (Oyedele,
2016). In this scenario, Nationstar would be able to loosen lending standards and lower credit score
requirement to qualify for mortgage. This would improve sustainability of mortgage lending in
the short term while also fulfilling the Nationstar mission of keeping the dream of homeownership
alive. On the other hand, there could be negative effects in the long run. For instance, increased
demand for housing would increase house prices thus leading to the cost of owning a home being
too expensive for the average consumer (Oyedele, 2016). In addition, loosening lending standards
would lead to another credit and housing bubble similar to what had happened in 2008 (Oyedele,
2016)
Rolling back Dodd-Frank would also influence sustainability when it comes to consumers’
receipt of fair and transparent information. Allowing the mortgage and financial industry to self-
regulate may create even more risks of predatory and deceptive lending practices (Bennett, 2017).

20
However, these new one-size fits all approaches under Trump’s CHOICE Act would make
compliance simpler and less costly for Nationstar and the mortgage industry to comply with.
Though the research surrounding the effects of Dodd-Frank found that it had a positive impact on
the economy and lending safety with little downsides (Bennett, 2017). Hence, incorporating
responsible lending practices and default prevention will be important for Nationstar to maintain.
C. Internal Resources: Evaluation of Nationstar’s Internal Resources
Nationstar utilizes a number of internal resources to comply with both existing regulations
and any forthcoming changes under the Trump’s CHOICE Act and the dismantling of Dodd-Frank.
Technology is a key internal resource that will provide Nationstar with opportunities to grow their
business by bringing new customers through the internet and social media, as well as improving
current services provided to their customers. For example, in 2016, Nationstar invested in their
interface platform in an effort to increase work efficiencies in loan originations which improved
the quality of mortgage products and the customer experience (Nationstar, 2017). Nationstar
launched a new mobile app, redesigned their website with more user friendly personalized
services, and launched “Street Smarts” to offer customers easier access to information about their
loan, neighborhood, and home (Nationstar, 2017). Additional investments were made in Nationstar
Xome digital real estate platform to provide customers with a better home buying experience,
allowing them to increase revenue while reducing expenses (Nationstar, 2017). These initiatives
will be important internally to grow and originate new loans as well as grow their servicing
portfolio while increasing customer retention a competitive environment.
Nationstar financial analysts and project teams are another internal resource useful in
monitoring market participant data for valuation of any changes in MSRs resulting from
fluctuating interest rates (Nationstar, 2017). Internal models are frequently utilized to properly

21
estimate any loss exposures surrounding MSRs, interest rates, borrower defaults, foreclosures, and
other Nationstar macro-economic issues (Nationstar, 2017). Lower interest rates and regulations
have reduced the value of Nationstar’s MSRs in recent years. However, the Trump administration
is likely to improve valuation since interest rates are expected to rise hence reducing the pre-
payment speed of outstanding principal balances (Seeking Alpha, 2016). As a result, Nationstar’s
internal financial models and valuation experts will be an important resource in accurately
validating and predicting the value of their MSR portfolio.
Furthermore, Nationstar’s loss mitigation and home loan specialists are an important
internal resource as many of the government loan programs under MHA have ended in December
2016. As a mortgage servicer, a key part of Nationstar’s business is to decrease the number of
account delinquencies and to help customers preserve homeownership while minimizing losses to
investors and shareholders. Key to this internal model requires teams to focus on quality service
to customers, frequent borrower interactions, and utilization of loss mitigation strategies to prevent
payment default as soon as possible (Nationstar, 2017). Under deregulation, Nationstar will need
to continuously find and develop new programs and solutions that work with homeowners
struggling with their payments. Nationstar specialists will be an internal resource that is critical
in preserving neighborhoods, homeownership, and home values essential in improving asset
performance for investors (U.S. Treasury, 2017). This may include best practices and methods
Nationstar used in the past to produce positive outcomes for all stakeholders.
D. Communication: How Nationstar Communicates Regulatory Changes to Stakeholders
Nationstar regularly communicates regulatory changes to its various stakeholders using a
variety of methods. In general, communication in mortgage industry can be very challenging since
the financial crisis had impacted the level of public trust in these institutions (Sahin, 2015). As a

22
best practice, Nationstar should provide public information carefully and conservatively to
preserve relations with stakeholders (Sahin, 2015). Nationstar’s main methods of communication
have included press releases, public conference calls, quarterly and annual reports filed with the
SEC, webcasts, social media, and in letters to shareholders (Nationstar, 2017). The newer trends
in communications in the mortgage and finance industry have also shown an increased use of
Public Relations (PR) and technology. Some common trends that have shaped communication in
recent years include engaging social media content, regulatory guidance for social channels,
building positive relationships with customers, insight into financial and real time communication,
and feedback to stay relevant with consumers and shareholders (Sahin, 2015).
The CEO of Nationstar, Jay Bray, is expected to make more public announcements in the
near future regarding how Trump’s deregulation plans may impact their business. In a recent
interview with HousingWire, Bray did state that he was surprised by the election results and is
“cautiously optimistic” about the impact Trump could have on the financial services business
(Lane, 2016). Bray further noted that Nationstar would work with any administration as they have
been for the past 20 years since Nationstar has been in operation (Lane, 2016). Bray stated that
the regulatory environment has been significant in recent years and hindered Nationstar’s ability
to innovate and create new products and services (Lane, 2016). In 2016, 80 percent of Nationstar’s
resources were focused on implementing new rules and regulations under the CFPB’s TILA-
RESPA Disclosure Rule which created new forms and procedures for borrowers closing on a loan
(Lane, 2016). Bray is hopeful that Trump’s dismantling of Dodd-Frank will provide an opportunity
for Nationstar to re-evaluate which compliance rules worked and which ones did not for their
customers and organization (Lane, 2016).
E. Company Image: Impact of Mortgage and Deregulation on Company Image

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Nationstar’s Company image could potentially improve in a deregulated business
environment, particularly with their plans to rebrand itself by changing their name to “Mr. Cooper”
(Nationstar, 2017). Nationstar’s Company image has been focused on “keeping the dream of
homeownership alive” and “a promise delivered”, thus branding strategies have recently been
restructured to improve growth for the customer, products, and services (Nationstar, 2017).
Deregulation would facilitate these plans because loosened lending standards would fulfill these
customer expectations. The new plans for rebranding Nationstar’s servicing and originations to
Mr. Cooper are also intended to align the entire business around customer advocacy and creating
a more personalized relationship with a home loan provider (Nationstar, 2017). Nationstar Mr.
Cooper is expected to advocate for the consumer, teach employees to love their customers, increase
retention, reduce expenses, and provide new growth opportunities by differentiating itself from
competitors (Nationstar, 2017).
Most recently under Dodd-Frank, the CFPB had rolled out disclosure rules which
significantly hindered the customer experience for Nationstar thus negatively impacting their
image. Consumer research has additionally shown that 51 percent of homebuyers reported that
they had incurred unexpected costs, fees, and more time and frustration in their most recent
mortgage closing, likely attributed to lender costs to implement these rules (West, 2014). These
negative experiences have been a threat to Nationstar’s Company image which will likely change
for the better under the CHOICE Act and the roll back of Dodd-Frank. On the negative side, the
changes in government programs such as MHA-HAMP, and home refinances under HARP could
adversely impact their image if no longer able to provide assistance to distressed homeowners
(Nationstar, 2017).
F. Response: Potential Courses of Action for Nationstar’s Business under Deregulation

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There are several potential courses of action that Nationstar may take to respond to
mortgage deregulation in the both macro economy and the business environment. Since Nationstar
will face increased competition, it will need to respond with continued to focus on enhancing the
customer experience. Nationstar’s loan originations segment is heavily dependent on building
positive customer relationships as well as staying competitive (Nationstar, 2017). Thus, emphasis
on the customer experience would minimize risks of loss from customers choosing the larger banks
who tend to have greater access to resources and better product offerings (Floify, 2016). Nationstar
should also attempt to bring in new customers (Nationstar, 2017). One method of achieving this
would be through increased spending on innovation, technology, and automation (Passy, 2017).
There are already a growing number of mortgage lenders implementing automation into
their business models to make the mortgage process faster and less expensive for consumers
(Passy, 2017). This will be important if the costs of a mortgage are impacted by deregulation.
According to the Mortgage Bankers Association (MBA), the average turn time to originate a
mortgage is 45 days while the average costs to originate a loan has been between six thousand to
eight thousand per loan since 2013 (Passy, 2017). Speed and efficiency will be necessary in the
future since the market has shifted toward a more purchase oriented environment, due to a decline
in refinances from higher rates (Passy, 2017).
The competitive factors of Nationstar’s Xome segment include the quality and timeliness of
services, the competence of their vendors, the variety of real estate services offered, pricing, and
the quality of technology in loan services (Nationstar, 2017). Based on the Company’s knowledge
of the mortgage industry, most competitors do not offer the same innovative solutions to their
customers. Hence careful monitoring and continuous improvement of technology and software
development will be a significant driver in a deregulated business environment. The costs due to

25
complex regulatory compliance are likely to go down, which will free up resources need to focus
more on technology and bringing in more customers to Nationstar. Continued investment in
technology will be extremely important in increasing customer retention and creating a more
rewarding home mortgage experience (Nationstar, 2017).
Nationstar’s primary competitive differentiator has always been from their ability to market
loan products within their existing servicing portfolio (Nationstar, 2017). With deregulation, this
strategy will need to be reevaluated in order to prevent loss of business to new competitors likely
to reenter the market. Nationstar’s originations segment must be able to respond with more loan
product offerings, competitive interest rates, lower fees, and faster customer service. Many of
Nationstar’s originations competitors will be commercial banks who typically have access to a
greater level of financial resources have more diverse products, as well as lower funding costs, and
are less dependent on sale mortgage loans to the secondary market (Nationstar, 2017).
In 2016, Nationstar’s originations segment earned 738 million and increased by 11 percent
due to favorable interest rate market (Nationstar, 2017). However, this could change under Trump.
The loan originations segment is facing pressure from the increased rates, so Nationstar must target
the many customers in their present portfolio who still could benefit from a mortgage refinance
(Nationstar, 2017). Deregulation could present a tremendous opportunity here, since Nationstar
may be able to loosen some of the credit and guideline requirements allowing for more customers
to qualify for loans. Most important to the business of Nationstar is within the servicing segment
who primarily competes against large financial institutions and non-bank mortgage servicers
(Nationstar, 2017). Nationstar servicing portfolio has strengthened and placed them in a position
to compete and respond with additional growth. Nationstar is at an advantage because it had
invested and improved their servicing capabilities while many industry competitors retreated from

26
the mortgage servicing market. In 2016, Nationstar had boarded 161 billion in UPB and more than
864,000 customers through subservicing which grew their portfolio by 25 percent (Nationstar,
2017). In 2016, Xome Exchange sold over 58,000 properties and ranks one of the top websites for
residential real estate sales (Nationstar, 2017). Overall, in wake of deregulation Nationstar must
respond with continued focus on driving value for stockholders by delivering financial results and
investing capital to support additional growth (Nationstar, 2017).
G. Impact: Short and Long Term Impacts of Deregulation on Nationstar’s Business
The short term impacts of deregulation and Nationstar will mainly involve a more
competitive mortgage market with widened access to homeownership yet more risk will be
introduced to the financial system. Deregulation may also improve the housing sector in the short
term by making housing wealth more liquid hence improving the economy (Olick, 2017).
However, in the long-term Nationstar’s volume of loans funded may be negatively impacted by
both higher interest rates and the availability of government programs if they are unable to replace
them with their own loan programs (Olick, 2017). This would adversely affect the Company’s
ability to maintain profits in upcoming financial reporting quarters. Terminating government loan
modification programs under Trump will further impact Nationstar’s future revenues. Nationstar
had earned special financial incentives and success rate fees that were paid out by the government
when a mortgage refinance or modification was provided to an eligible borrower (Nationstar,
2017). The programs under HAMP and HARP were significant revenue drivers and now that these
programs have ended, modification volumes, revenues, and margins are expected to decline in
2017 (Nationstar 2017). On the upside, the higher interest rates will improve performance of
Nationstar’s MSR portfolio to offset these losses.

27
One of the biggest concerns for Nationstar is that the majority of the loans in their portfolio
are serviced for GSEs and could be affected under Trump’s plans to privatize Fannie Mae and
Freddie Mac. On the positive side, proposed changes could allow for the GSEs to possibly merge
with other primary mortgage investors giving them the ability to expand their lending activities
and create more productivity gains (Floify, 2016). However, under government control, the GSEs
are able to benefit from tax exemptions, reduced borrowing costs, and market premiums on their
federally backed securities all which would go away under privatization (Floify, 2016). This
would increase mortgage costs for consumers thus preventing low and moderate income families
from being able to afford a loan. (Floify, 2016) There are also indicators of a rise in mortgage
delinquencies since February 2017. According to the Mortgage Bankers Association (MBA), FHA
mortgage delinquencies have jumped for the first time since 2006 increasing from 8.3 to 9.02
percent (Reuters, 2017). This is a sign that more defaults will be on the horizon with fewer
government programs to bail out distressed homeowners from mortgages they cannot afford.
Foreclosures will especially impact states where there are high numbers of illegal
immigrants since Trump’s primary campaign platforms was that of deportation (Weiss, 2017).
According to a study conducted by Cornell University, the consequences of deportation can lead
to an increase in foreclosures (Weiss, 2017). This is mainly because many undocumented
individuals are renters or residing with legal resident family members who depend on their income
to pay their mortgages. The potential increase in deportation related foreclosures is likely to add
to the foreclosure crisis especially within Latino families who already account for the highest
percentage of foreclosures in the U.S. This study found that as deportation rates increase,
foreclosure rates also increase in proportion (Weiss, 2017).

28
Changes to Dodd-Frank will reduce the costs of compliance allowing banks to make more
loans which could also boost home building activity needed for the current housing shortage (Yun,
2016). Current trends in homeownership are also changing and will impact sustainability of
Nationstar’s business. In the past, homeownership was a significant part of American life since it
meant security, stability, and control. However, the economic recession and U.S. housing bubble
led to more than 20 million foreclosure filing and 7.3 million consumers losing their homes from
2007 to 2014 (Oyedele, 2016). Subsequently, the average value of a home ended up dropping by
30 percent, as consumers learned that investing in a home is not always the best investment
(Oyedele, 2016). These trends in homeownership are concerning since housing and finance play
a major role in the U.S. economy.
Nonetheless for homebuyers, a combination of difficulty getting the credit or approval
along with the lack of housing inventory, leads to a depressed market (Shushman, 2017). On the
upside, Fannie Mae and Freddie Mac have raised their loan limits thus making it easier to qualify
for larger loan amounts. Zillow also predicted that more millennials will enter the purchase market
and will boost homeownership (Shushman, 2017). One of the main reasons why these young
borrowers have been unable to qualify is student loan debt according to the U.S. government. This
is turn led to a rental boom since many of the under 35 generation are moving around more due to
their jobs and staying in apartments (Shushman, 2017). Should Nationstar implement more
strategies to move away from stringent underwriting to more flexible guidelines, it would allowing
more consumers to get approved for loans. This could be both positive and negative for
sustainability. On the negative side, loosened underwriting standards could lead to riskier
investments many of which were the cause of the subprime lending crisis (Yun, 2016).

29
Currently, there has been a decline in loan applications for government-insured loans
impacting the business for most servicers like Nationstar who originate these loans (Olick, 2017).
According to the Mortgage Bankers Association (MBA), mortgage applications have fallen by 3.2
percent, most notably with FHA applications which dropped 13 percent as a direct result of
Trump’s reversal of a cut in annual mortgage insurance premiums (MIP), necessary to reduce
payments for many lower income borrowers (Olick, 2017). In addition, mortgage rates of 2017
have continued to increase to its highest level since December 2016, while applications to
refinance a home loan fell one percent for the first week of January 2017 (Olick, 2017). Purchase
applications have also decreased by 6 percent while home prices have gone up and weakened
affordability across the U.S. (Olick, 2017). However, demand for housing is still rising and home
sales are still expected to grow this year while inventory will remain a constraint (Olick, 2017)
It is the position of Trump that the Obama Administration’s financial regulations had
negative impacts on business and are responsible for the slowdown in the U.S. economy.
Deregulation is expected to return 25 billion dollars in capital to the financial services industry in
the next two years and there are four main regulatory actions and Trump will take to benefit the
mortgage and banking industry (Chaparro, 2017). First, the Volcker Rule will be repealed saving
investment backed securities approximately 6 billion which would free up money needed to
generate additional profits and revenue (Chaparro, 2017). Second, the reductions in capital and
liquidity requirements under Dodd-Frank, that were enacted to prevent risky lending during the
housing crisis will free up the large banks ability to increase lending (Chaparro, 2017). Third, the
CFPB could be eliminated during Trump’s first term which was the “watchdog” for banks,
mortgage companies, and other financial institutions (Chaparro, 2017). The reduction in CFPB
rules could save roughly 1.4 billion dollars (Chaparro, 2017). Fourth, Congress will revisit the

30
Financial Stability Oversight Council (FSOC) and their ability to determine certain financial firms
as being “too big to fail” (Chaparro, 2017). Deregulation of the FSOC would return and addition
840 million dollars to financial institutions (Chaparro, 2017).
H. External Resources: Roles and Functions of External Resources
At the external level, the success of Nationstar during the Trump’s plans to deregulate the
mortgage and financial industry will ultimately depend on working with investors, regulators, and
consumer advocacy groups to support delivering quality mortgage products and preserving
homeownership (Nationstar, 2017). Some key external resources in this situation will include the
U.S. Department of Housing and Urban Development (HUD), as well as HUD approved housing
counselors, the U.S. Treasury (Treasury), the Government Accountability Office (GAO), the
Federal Housing Administration (FHA), the Federal Housing Financing Agency (FHFA), and the
Consumer Financial Protection Bureau (CFPB). The Treasury, HUD, and the FHFA will work in
conjunction to continue making efforts that help stabilize the housing market and to help struggling
borrowers avoid foreclosure (U.S. Treasury, 2016). These agencies will be an important external
resource for Nationstar in maintaining strong loss mitigation programs going forward.
HUD has been existence since 1965 following Congress passage of the Department of
Housing and Urban Development Act, whose mission is to create strong, sustainable communities
and quality affordable homes for all Americans (HUD, 2017). HUD is also currently facing budget
cuts under Trump who announced the proposal of more than six billion in cuts toward mortgage
assistance programs, public housing, and federally funded community development grants
(DelReal, 2017). Trump appointed HUD Secretary Ben Carson who takes a conservative approach
on public assistance claiming HUD programs create dependency for recipients (DelReal, 2017).
Nationstar as well as affordable housing advocates are lobbying against HUD cuts because it

31
reduces federal spending on housing that helps working families, lower income homeowners,
senior citizens and individuals with disabilities (Rao, 2017). The role the FHFA is to serve as
regulator of Fannie Mae and Freddie and of the Federal Home Loan Banks (Light, 2016).
Currently, the FHFA is controlled by Democrat, Mel Watt who is not subject to the will of the
president since the agency is an independent regulator (Rao, 2017). This will interfere Republicans
plans to reshape housing through privatization of the GSEs. Affordable housing advocates are in
support of Watt in office and hopeful that he increases the number of loan Fannie Mae and Freddie
Mac offer to low and moderate income borrowers as well as lower their fees.
The GSE’s were had first introduced treatment for delinquent borrowers and established
standards for how mortgage servicers should assist struggling homeowners. In 2010, the FHFA
instructed the GSEs to discuss various practices that would mitigate losses from nonperforming
assets and set standard for evaluating mortgage servicer performance (U.S. Treasury, 2016). The
FHFA made servicers more aware of their obligations to assist homeowners in distress in pursuit
of foreclosure alternatives that would likely help preserve homeownership (U.S. Treasury, 2016).
The path forward will continue with a positive trend of collaboration among government agencies,
mortgage servicers, investors, and consumer advocates all working together to stabilize the
housing marking and help homeowners stay in their homes (U.S. Treasury, 2016). The Agencies
will continue to serve as a resource to stakeholders particularly with mortgage servicers like
Nationstar, in keeping them informed as new programs develop for homeowners in future years.
III. Recommendations:
In light of the foregoing changes to the mortgage, banking, and finance industry proposed
under Trump, the following recommendations have been made for Nationstar’s business:
A. Business Project Teams:

32
It is recommended that Nationstar utilize their business project teams to strengthen risk
management practices which will be useful in delivering favorable business results within a
deregulated environment. By 2025, it is expected that risk functions will be fundamentally
different than what they are today thus lenders will need to prepare now for any regulatory changes
or other demands they may face (Härle, et al. 2015). Similarly, customer expectations of mortgage
and financial services have changed since technology and new business models have emerged and
will continue to evolve (Härle, et al. 2015). Nationstar project teams must be able to develop and
implement new and innovative procedures that maintain strong financial performance in the future.
In recent years, Nationstar has also faced many challenges and increased costs from complex
regulations and compliance policies that can now be reexamined to determine which ones work
and which ones may be rolled back under Trump.
Since increased regulations had made the mortgage experience even more complex for
Nationstar borrowers, business project teams will be useful in working to continue to improve and
simplify the process for Nationstar customers. If Nationstar want their business to thrive during
this period of regulatory transformation, they need to put forth new initiatives that target both short
term and long term goals of the business. It is the mission of Nationstar to take a leadership role
in the mortgage industry by putting customers first and preserving homeownership (Nationstar,
2017). Business project teams will be extremely helpful in support their mission, and
strengthening the Company’s teams, compliance, technology, that will support the customer
centric approach. In 2016, Nationstar already launched a redesigned website for loan customers
simplifying the process for borrowers and providing greater visibility to monitor their mortgage
loan payments and loan balances (Nationstar, 2017). These improvements helped reduce the
number of complaints filed with the CFPB and will add value to the future of Nationstar’s business.

33
It is expected that this trend toward consumer protection and business conduct regulation will
continue as customer expectations and technology will be the norm for the mortgage, banking, and
finance industry (Härle, et al. 2015).
B. Communication:
It is recommended that Nationstar develop an effective internal and external
communication strategy to prepare the organization and stakeholders for the upcoming regulatory
changes under Trump. The mortgage, banking, and financial industry have notoriously received
negative public attention over the years due to numerous unfair and deceptive practices that had
occurred during the subprime lending and financial crisis. Now more than ever, Nationstar needs
an effective communication plan as well as the proper resources to ensure their business continues
to engage in ethical, fair, and honest business practices while deregulation plans continue to roll
out. Internal communication has the objective of keeping Nationstar employees informed of
developments that are impacting their organization and project they are currently involved in
(Emanuel, 2017).
Internal communication will be vital for encouraging employee participation, preventing
false rumors and essential for strong financial performance in the future under deregulation
(Emanuel, 2017). External communication is more complex since there are various stakeholders
involved each with different agendas and objectives (Emanuel, 2017). External communication
should be interactive facilitating a two-way process and be sensitive to the stakeholder with whom
Nationstar intends to communicate with (Emanuel, 2017). The CEO of Nationstar, Jay Bray,
should also continue to assume the role as primary spokesperson responsible for informing the
media, staff, customers, and the public of any changes that may impact business. The CEO’s

34
communication should continue to be open and transparent as it has been in order to maintain the
trust of Nationstar stakeholders.
C. Solutions:
There are several solutions that Nationstar may consider as a part of their strategy in
approaching the business impact of a deregulated mortgage environment. It is recommended that
strategies continue to involve emphasis on superior customer experience as well as other effective
strategies that allow Nationstar keep up with the increased competition. Privatizing Fannie Mae
and Freddie Mac will be a concern to Nationstar’s business since a majority of their loans are
purchased by these GSEs who securitize them, and then guarantee them to investors in the event
that a borrower defaults on their mortgage payments (Trapasso, 2016). Privatizing the GSEs will
also increase the interest rates and the costs for mortgages making it harder for borrowers to qualify
for loans (Trapasso, 2016). The best solution for Nationstar in this situation is to continue to stand
behind its mission and not lose insight of their core values. Nationstar should consider developing
new programs that help homeowners qualify for mortgages as well as avoid foreclosure in the
event that the Trump Administration eliminates any of these programs.
The government still provides about 90 percent of mortgage financing through Fannie Mae,
Freddie Mac, FHA, and Veterans Administration (VA) loans which is expected to change under
Trump (Lane, 2017). The solution for Nationstar in response to possible privatization or cut backs
to government programs would be to diversify their loan products by offering more private
invested or non-agency mortgages (Hutchens, 2015). This would allow Nationstar to bring in more
customers since private invested or non-agency loans have more flexible underwriting guidelines
allowing for more loan approvals. For instance, a borrower with self-employment income may
not reflect their true income on tax returns required under government guidelines due to too many

35
expense deductions. Or, a foreign national that does not have sufficient credit in the U.S. may not
normally qualify under traditional guidelines. Hence, these borrowers would be good candidates
for private invested or non-agency mortgages.
Ultimately, Nationstar must ensure strategies will offset any losses from privatization as
well as expand their referral bases with a wider array of ways to facilitate customer needs. That is
why it will be additionally important for Nationstar to continuously improve their approach in
responding to delinquent borrowers who need assistance with avoiding payment default and
prevention of foreclosure. The Obama Administration had offered various programs under the
MHA Act which have recently expired. However, the Trump Administration announced no
intentions of replacing the programs so it will be up to mortgage lenders to proactively step in with
their own loan modification and foreclosure prevention programs. Essentially the five guiding
principles for Nationstar’s loss mitigation programs should include accessibility, affordability,
sustainability, transparency, and accountability (The Treasury, 2016).
D. Political Influence:
Nationstar’s success will depend on working with customers, investors, and regulators to
deliver quality services that help foster and preserve homeownership (Nationstar, 2017). It is
recommended that Nationstar continue to work with outside resources and take various approaches
in advocating for affordable and sustainable housing and mortgages for homeowners. This may
involve working with and backing key external resources such as the Treasury, HUD, and the
FHFA. These government agencies have actively worked to stabilize the housing market and help
homeowners who were impacted by the prior financial crisis. With the termination of the programs
under MHA, the agencies now serve as a valuable resource in working with stakeholders to
maintain strong foreclosure prevention programs going forward. Some additional external

36
resources Nationstar should work with are the GAO, the Homeownership Preservation Foundation,
the HOPE NOW Alliance, National Association of Realtors (NAR) all which are in favor of
providing access to credit and affordable housing for homeowners.
Lastly, Nationstar should continue to follow the rules implemented by the CFPB and
carefully watch for the upcoming changes that will take place under Trump. The Trump
Administration is now working with Congress in deciding whether it should place budget controls
on the agency, replace the single director with a bipartisan board, or eliminate the agency
altogether and return oversight to bank regulators. The changes that Trump will make with the
CFPB will benefit Nationstar since it could save on compliance costs. However, Nationstar should
still self-regulate and implement their own internal consumer protection policies to be socially
responsible. The biggest fear of the mortgage business under Trump is that lending practices would
become riskier thus placing the U.S. at risk of another financial crisis, and Nationstar should avoid
engaging in business practices that could potentially harm their organization.

37
Conclusion:
In conclusion, the outcome of government impacts on Nationstar’s business in wake of the
Trump Administration’s CHOICE Act and proposed plans to roll back Dodd-Frank will be both
positive and negative. The potential government action will impact Nationstar in a number of
ways and in the very near future. Deregulation would essentially remove a majority of Obama’s
post financial crisis regulations that were implemented under the Dodd Frank Wall Street Reform
and Consumer Protection Act. Dodd-Frank placed major regulations in the financial industry that
were geared toward protecting consumers from abusive mortgage lending practices by large banks,
whom were often referred to as “too big to fail” (Koba, 2012). On the positive side, the upcoming
changes will provide opportunities for Nationstar to cut back on compliance costs since many of
the regulations under Dodd-Frank were expensive to implement. In addition, Nationstar will have
opportunities to increase business through new loan programs and product offerings that may be
easier for borrowers to qualify for in a deregulated environment. On the negative side, Nationstar
may face tougher competition as banks, credit unions, and other lending institutions may re-enter
the mortgage business. The primary sources of competition for Nationstar have mostly existed
amongst the other non-bank servicers such as Quicken Loans, Ocwen Financial, Walter Investment
Management, PHH Mortgage Corporation, and DHI Mortgage Company, Ltd. (Morningstar,
2017). However, new opportunities under Trump will bring in additional competitors that had
once exited the business following the 2007 & 2008 financial crisis and passage of Dodd-Frank.

38
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epublicans_plan_to_kill_financial_reform_under_trump.html
Bundrick, H. (2017). How the Trump Presidency Will Impact Housing in 2017. Nerdwallet.
Retrieved from: https://www.nerdwallet.com/blog/mortgages/trump-presidency-will-
impact-housing-2017
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Servicing-Non-Banks-2017
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the-volcker-rule-6-billion-1
Cowley, S. (2017). Foreclosure Prevention Returns to the Unknown. The New York Times.
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