Stewart Mortgage Information Systems is pulling the plug on its delinquent mortgage services business, citing an industrywide decline in new delinquencies and pricing pressures on its existing contracts.
The business line posted a $3.3 million loss during the second quarter of 2015, compared to a $2.3 million loss a year ago, and pretax earnings of $2.6 million in the first quarter 2015.
"We are mindful of our clients' need for an orderly wind down that ensures minimal disruption to their operations. As such, we anticipate that we will continue to operate the delinquent loan servicing business lines in a phased exit process. This will continue to impact the margin in the segment for the remainder of the year," Jason Nadeau, Stewart's group president of mortgages services (which includes delinquent mortgage services) said during a July 23 investor conference call to discuss second quarter earnings.
Stewart provides loss mitigation and asset management services, among other delinquent mortgage activities. During the conference call, the company said it will remain in the REO title business.
Stewart expects to take a $5 million to $7 million total charge to earnings in the third and fourth quarters because of the shutdown.
In addition to Stewart's exit from the distressed mortgage business, specialty servicer
Despite the waning delinquent loan business, Stewart's title underwriting business performed well enough for the company to post net income of $17.1 million in 2Q15, compared with $6.3 million one year ago.
The title segment generated pretax income in the quarter 2015 of $73 million on revenues of $469 million, a 15.5% margin, compared to pretax income in the prior year quarter of $46 million on revenues of $406 million, an 11.2% margin.
