Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of mortgage service companies Nationstar Mortgage (NYSE:NSM) and Walter Investment Management (NYSE:WAC) soared as much as 19% and 10% following a mortgage-backed securities settlement being reached for $10.3 billion between Bank of America (NYSE:BAC) and Fannie Mae.
So what: In addition to this settlement, Nationstar agreed to pay $1.3 billion to purchase $215 billion in mortgage servicing rights from Bank of America and, on that news, upped its full-year EPS guidance far beyond Wall Street's estimates. Similarly, Walter Investment Management will pay $519 million to Bank of America for the loan servicing rights, including $93 billion of unpaid principal balance of Fannie Mae-backed residential service assets.
Now what: Everybody's a winner in the finance sector today with a total of 10 banks (including Bank of America) settling $8.5 billion worth of foreclosure penalties, Bank of America settling with Fannie Mae, and Nationstar and Walter Investment making earnings accretive deals with Bank of America. If bank balance sheets continue to improve and the possibility of regulatory action is slowly removed, the entire sector stands ready to benefit.
Fool contributor Sean Williams owns shares of Bank of America, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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