mba 635 final project csr addendum
TRANSCRIPT
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
MBA 635: Ethics, Corporate Culture, and Social Responsibility
Final Project: Nationstar Mortgage Holdings, Inc.
Corporate Social Responsibility (CSR) Addendum
By: Kelly A. Giambra
Southern New Hampshire University
Module 9 January 2, 2017
1
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Section I. Background Information
Nationstar Mortgage Holdings, Inc.: Company Description
Nationstar Mortgage Holding, Inc. (NYSE: NSM) is a leading non-bank mortgage
servicer that provides servicing, loan originations, and transaction based services mainly to
single-family residences within in the United States (Nationstar Mortgage, 2016). The Company
was founded in 1994 with headquarters in Lewisville, Texas and is a subsidiary of Fortress
Investment Group, LLC. Nationstar operates within three mortgage market segments: servicing,
originations, and Xome real estate services (Nationstar Mortgage, 2016). The Nationstar
servicing segment offers residential mortgage services such as payment processing, collection of
insurance, response to borrower inquiries, loss mitigation, loan modifications, foreclosures and
property disposition on behalf of investors, and escrow account and loan administration
(Nationstar Mortgage 2016). The originations segment offers various types of residential loan
products under the Greenlight Financial Services and Nationstar Mortgage brands (Nationstar
Mortgage, 2016). The Xome real estate segment provides online residential home-buying and
selling services using technology aimed to enhance the residential and transaction experience for
both consumers and real estate professionals (Nationstar Mortgage, 2016).
Nationstar Mortgage Holdings, Inc.: Target Stakeholders
The Nationstar target stakeholders include team members, customers, shareholders,
business organizations, suppliers, non-profit organizations and advocacy groups (Nationstar
Mortgage, 2016). Nationstar team members consist of over 7,400 employees and a leadership
team of ten executive vice presidents (VPs), along with five members whom serve on the board
of directors (Nationstar Mortgage, 2016). The Company Chairman and CEO is Jay Bray who
was first appointed to the Nationstar board in 2012 and became Chairman in July 2016
(Nationstar Mortgage, 2016). Nationstar team members serve approximately 2.7 million
2
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
customers from across the U.S. (Nationstar Mortgage, 2016). The customer base consists of
several members of the real estate market: homeowners, homebuyers, home sellers, investors,
and realtors (Nationstar Mortgage, 2016). The shareholders whom own Nationstar shares and
may consist of customers, employees, businesses, and individual members of the broader public.
Nationstar’s primary investors consist of Government Sponsored Entities (GSEs) like Fannie
Mae and Freddie Mac, private label investors, Ginnie Mae, investors in mortgage servicing rights
(MSRs), and clients who hire them to subservice their accounts (Nationstar Mortgage, 2016).
Nationstar also takes an active role in business organizations that share common interests
related to the mortgage industry. These relationships are helpful in establishing an understanding
of stakeholder expectations, best practices, and may enhance learning from other leading
companies in the business. Some examples of these organizations may include the Mortgage
Bankers Association (MBA), U.S. Green Building Council, The Clearing House, state mortgage
associations, the Center for Financial Services Innovation, and Financial Services Roundtable.
In addition, the Company actively engages in public policy advocacy in various government
organizations on a wide array of issues impacting the mortgage industry (Nationstar Mortgage,
2016).
Nationstar engages with thousands of global suppliers that provide various goods and
services needed to adequately and efficiently run their business (Nationstar Mortgage, 2015).
These stakeholder relationships are important in enhancing the quality and value of products and
services offered to Nationstar customers. In addition, Nationstar regularly engages with
community leaders and advocacy groups at the local and global level as a part of their CSR
efforts (Nationstar Mortgage, 2015). These interactions are important for maintaining
relationships in various markets to identify opportunities to help serve communities in which
3
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Nationstar does business. Collaboration with advocacy groups on issues related to housing and
the mortgage industry is important in establishing strategic relationships, where resources and
expertise are shared to reach common mutual goals.
Relationship of the Target Stakeholders to the Nationstar Mission, Vision, and Values
It is the mission of Nationstar is to: “deliver services in a manner which ultimately better
serves and empowers customers so that customers are created for life” (About Nationstar, 2016).
Nationstar is customer-centric, experienced, and growing, with future goals of innovation and
becoming the leader in quality customer service in the U.S. non-bank mortgage servicing
industry (About Nationstar, 2016). Nationstar has been dedicated to providing exceptional
customer service since 1997 and continues to make improvements that supersede the industry’s
competition. As a non-bank mortgage servicer, the Company innovated its growth when new
opportunities became available as many large banks exited the servicing industry in recent years.
As a result, Nationstar introduced additional brands alongside its original name: Greenlight
Loans, Xome Real Estate, and HomeSearch.com (Nationstar Mortgage, 2016).
Developing lifelong relationships with target stakeholders is fundamental to Nationstar’s
ability to identify and deliver solutions to social, economic, and environmental issues and to help
strengthen the communities in which Nationstar operates. As a result, Nationstar invites its
stakeholders to help them understand their perspectives so they can better serve their customers
and communities. The Company encourages feedback from stakeholders and aims to be
transparent about progress made and any challenges in its CSR efforts. Collaborating with
stakeholders is essential to long-term success and effective strategic relationships with the
community, government, and advocacy groups and other stakeholders in order to meet the needs
of Nationstar customers and communities to help strengthen the economy.
4
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Section II. Trends
A. Nationstar Mortgage Holdings, Inc.: Analysis of Current Internal and External
Factors Impacting the Mortgage Business Environment
The business environment of Nationstar may be impacted by several current internal and
external factors. Internal factors may consist of financial performance, organizational direction,
and employee culture and company morale, while external factors may consist of economic
growth, aggregate demand for U.S. mortgages, volatility in interest rates, and complex mortgage
regulations.
Internal Factor: Financial Performance
The financial performance of Nationstar is a key internal factor currently impacting their
business environment. According to third quarter 2016 earnings results, financial performance
appears to be positive (Nationstar Mortgage, 2016). Nationstar has positioned itself to grow their
mortgage servicing portfolio to over 450 billion by year-end 2016, which will mostly be driven
by new partnerships with Seneca Mortgage Servicing and USAA (Business Wire, 2016). During
the third quarter, the Company earned net income of 51 million, boarded over 510 thousand new
customers to their servicing segment, funded over 25 thousand mortgages, and developed new
technologies to improve the mortgage experience for their 2.7 plus million customers (Business
Wire, 2016).
Internal Factor: Organizational Direction
The role of Nationstar’s leadership in its organizational direction is an important internal
business factor that impacts the Company’s business environment. One of the critical issues with
Nationstar leadership is the lack of women and ethnic diversity in executive roles. Currently, the
Nationstar Board of Directors consists of no less than three and no more than eleven members,
5
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
which allows room to accommodate more women and minorities to the board. Cultural diversity
and inclusion will also bring in new thinking, insights, and perspectives about Nationstar’s
consumers, markets and business practices (Bajic, 2015). .
Internal Factor: Employee Culture and Company Morale
The employee culture and Company morale of Nationstar employees is an internal factor
that will be important for future growth of the business. Nationstar company culture is centered
on working hard and playing hard, while going the extra mile to help customers find solutions to
their unique needs (Nationstar Mortgage, 2016). However, Nationstar employee reviews on
culture have been recently reported as being poor to average (Glassdoor, 2016). Nationstar
employees also rated the Company three out of five stars when it comes to culture and values,
work-life balance, benefits, and career opportunities (Glassdoor, 2016). This is a sign that the
Company will need to make improvements in order to minimize turnover which may impact the
Nationstar mission of providing quality service to customers.
External Factor: Future Economic Growth
A key external factor affecting both Nationstar and the U.S. mortgage industry is the
future growth of the economy. According to Freddie Mac, current 2016 growth improved with
low unemployment rates and higher wages (Freddie Mac, 2016). However, the Federal Reserve
(the Fed) is likely to raise interest rates in the near future, though the global economy is expected
to worsen (Freddie Mac, 2016). Overall, the U.S. economy made modest gains in 2016, with
growth trending upward for 2017, and GDP increasing as a result of high levels of consumer
spending (Freddie Mac, 2016). Furthermore, inflation remains under 2 percent, though energy
prices are forecasted to push inflation rates to above 2 percent in 2017 (Freddie Mac, 2016) The
6
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
job market is currently at a slowdown while employment and unemployment rates are expected
to decline to about 4.7 percent ending in 2017 (Freddie Mac, 2016).
External Factor: Aggregate Demand for U.S. Mortgages
The aggregate demand for mortgages in the U.S. is a main driver for Nationstar’s loan
production and mortgage servicing segments. Demographic trends are now showing an increase
in demand for homeownership especially amongst minority households, millennials, and the
aging baby boomer generation (Evidence Matters, 2016). The consumer demand for mortgages
is affected by both interest rates and the strength of the U.S. housing market. In 2016, the U.S.
housing market continued to perform well and it is likely that the growth will eventually
slowdown in the near future (Freddie Mac, 2016). Demand for mortgages increased over the
past few years due to the historically low interest rates, however, refinancing activity is
beginning to decline and may persist into 2017 as the market shifts more towards home
purchases (Freddie Mac, 2016).
External Factor: Volatility in Interest Rates
Volatility in interest rates may have a significant impact on Nationstar’s business
environment, which includes its loan originations volume, mortgage servicing segments, and the
estimated value of their mortgage servicing rights (MSRs). Though mortgage rates have been
forecasted to remain low, the likelihood of rates increasing will depend on the global economy
and the performance of worldwide bond yields. In addition, the 2017 forecast has predicted a
gradual rise in interest rates with the average rate for a 30 year fixed mortgage expected to
increase to 3.9 percent by the end of the fourth quarter of 2017 (Freddie Mac, 2016). Rising
interest rates may reduce the number of Nationstar’s loan originations, while low interest rates
7
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
may cause a write-down in the value of MSRs, which must be offset by increasing loan
originations to prevent a reduction in net income (Nationstar Mortgage, 2016).
External Factor: Complex Mortgage Regulations
Nationstar’s business environment operates in a highly regulated industry subject to
federal, state, and local regulations, which can significantly impact financial performance. These
laws and regulations affect the way Nationstar does business and can restrict certain types of
product offerings or business expansion opportunities. For instance, the Consumer Financial
Protection Bureau (CFPB) adopted new disclosure rules required under the Truth in Lending Act
and Real Estate Settlement Procedures Act (TILA-RESPA). These rules require investments in
new mortgage production processes and compliance systems. In addition, expansion of the state
Attorney General authority under the Dodd Frank Wall Street Reform Act and Consumer
Protection Act of 2010, can place Nationstar at risk of more state lawsuits, thus increasing legal
and compliance costs.
B. Nationstar Mortgage Holdings, Inc.: Description of Trends in
Corporate Social Responsibility (CSR), Sustainability, and Business Ethics
The 2007-2008 U.S. subprime lending and financial crisis brought about significant
consequences for both the economy and society in which the mortgage industry continues to
recover from. Prior to the subprime lending crisis, the absence of CSR in U.S. mortgage lending
practices caused many lenders to irresponsibly approve mortgages without considering borrower
affordability. Consequently, new movements have now emerged involving Corporate Social
Responsibility (CSR) efforts in helping to prevent another crisis from occurring. As Nationstar
looks ahead, there will be a number of trends in CSR, sustainability, and business ethics that
8
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
could potentially impact the business; several of which will relate to environmental, social and
economic concerns.
Continued Trends in Responsible Mortgage Lending
Continued trends in responsible lending in relation to CSR efforts are likely to continue
in the future of the mortgage industry. Responsible lending practices may involve taking the
extra steps needed to consider whether a customer has the ability to repay, while also offering
assistance to homeowners who face foreclosure. In addition, lenders will continue to extend
credit to the underserved as well as adjust loan approval standards to offer more programs to
borrowers with low credit scores (The News Desk, 2016). Responsible lending practices are
especially important to today’s millennial consumers whom have learned from the previous
economic downturn to make better financial choices (Frost, 2016). Millennial consumers are
additionally seeking out “green” homes that are energy efficient and are making improvements
to their existing residences that reduce energy costs (Frost, 2016).
Mortgage Lenders Will Increase Their Focus on Sustainability
Current trends in CSR have shown that mortgage lenders are increasing their focus on
sustainability metrics. This is primarily due to investors becoming more dependent on an array
of sustainability issues when making informed decisions on investments (Finkelstein, 2016).
Most of these issues surround minimizing risk of financial loss and looking at the shifting
demands of today’s borrowers in the changing marketplace. Most specifically with risk
reduction, CSR activities will consist of continued trends in foreclosure prevention. Despite
recovery from the subprime crisis, there are still over one million borrowers or 2.6 percent of all
mortgages seriously delinquent on payments (Finklestein, 2016). Though the aggregate number
9
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
of seriously delinquent mortgages and foreclosures have declined since 2007, there is still a need
to continue implementation of sustainable lending practices (Finklestein, 2016).
Increased Investments in Technology
Increased investments in technology in CSR activities will continue in upcoming years as
lenders attempt to provide customers with more choices and financial resources (Hoyles, 2016).
Alongside this trend, there will be more investments in data protection and other technology that
protects consumer privacy and information security (Hoyles, 2016). The mortgage industry has
gone through rapidly changing technologies over recent years, and any disruption in computer
systems from fire, power loss, telecommunications, cyber-attacks, computer viruses, and natural
disasters can adversely impact Nationstar’s business. Nationstar will need to take extra steps to
prevent these events which could lead to violations in privacy laws, financial loss to customers,
loss of customer confidence, customer dissatisfaction, and harm to Nationstar’s reputation
(Nationstar Mortgage, 2015).
C. Nationstar Mortgage Holdings, Inc.: Impact of Trends and Preparing for Impact
Nationstar may prepare for impact of future trends in CSR by leveraging their existing
mortgage loan servicing platform to enter into better programs and services for homeowners. By
year end 2016, Nationstar will seek to reduce costs in mortgage production and servicing to
better align resources and expenses with the upcoming mortgage origination volume (Nationstar
Mortgage, 2015). As a mortgage lender with a critical role in the housing market, Nationstar
must take moral responsibility in its mortgage product offerings and put forth efforts to protect
their consumers from harm. In addition, Nationstar must be held to highest standards of CSR
and avoid offering products that are likely to harm the environment and local communities
(Frost, 2016). There are several new and amended rules and regulations that promote fair
10
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
lending and consumer protection, which have eliminated many of the risky loans offered during
the mortgage boom. Therefore, with Nationstar’s goal of making financial lives better, extra
efforts should be taken to protect consumers and ensure compliance.
Section III. Ethics
A. Nationstar Mortgage Holdings, Inc.: Ethical and Regulatory Issues
That Could Impact Business
Ethics and regulatory issues play a significant role in Nationstar’s mortgage lending
practices and overall business environment. The unethical behavior that occurred during the
subprime crisis had been named partly responsible for the financial crisis in conjunction with
poor regulations and lack of borrower insight at the time. One significant unethical practice
during the subprime lending crisis involved predatory lending. Predatory lending is a practice
which engages in unfair and abusive loan terms, or convinces a borrower to accept a loan that
may be unfair in terms thus exploiting, coercing, or deceiving a borrower (Debt.org, 2016).
Predatory lending also benefits the lender while disregarding the borrower’s ability to repay a
mortgage or understand its terms (Debt.org). These practices were damaging to stakeholders,
which caused regulators to intervene through passage of laws like the Ability to Repay Rule that
requires for borrowers to provide documentation showing ability to repay (Bankers Edge, 2016).
New industry regulations have additionally been designed to increase transparency and
regulatory reporting of mortgage lenders. This includes legislation passed to restrict predatory
and deceptive lending practices, as well as promote fair lending among industry players. Federal
and state mortgage laws have been put in place to ensure that professionals are engaging fairly
with consumers throughout the entire loan process. In addition, certain lending practices are
prohibited by federal and state law in order to promote ethical lending. For instance, in recent
11
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
years the federal government made revisions to existing laws under the Real Estate Settlement
Procedures Act (RESPA), the Truth-in Lending Act (TILA), the Gramm-Leach Bliley Act
(GLBA), the Equal Credit Opportunity Act (ECOA), and the Fair Housing Act (Bankers Edge,
2016).
Mortgage fraud is an additional ethical and regulatory issue that costs the mortgage
industry billions of dollars each year as well as threatens the entire mortgage market. Mortgage
fraud is one of the fastest growing white collar crimes in the U.S., and in recent years received
attention from the FBI, the Internal Revenue Service (IRS), HUD, and federal and state
regulators (Bankers Edge, 2016). Therefore, the ethical behavior of Nationstar as well as their
third party service providers, consumers, real estate brokers, loan officers, and loan processors
must be considered through the entire process for the borrower and the overall operations of the
business.
B. Alignment of Nationstar’s Corporate Strategy, Brand Development, and
Decision-Making Processes to Business Ethics and Regulatory Issues
Alignment of Nationstar’s corporate strategies, brand development, and decision making
process to ethics and regulatory issues should include social causes, methods of intervention, and
partnerships that fit with their existing business and resources underlying the Company’s success
(Roth, 2014). A primary strategy for this will involve building an ethical rebrand to align with
the Company’s mission and values. The Nationstar brand is “a promise delivered” and ethical
initiatives should deliver this promise by serving as a growth foundation for the customer,
products, and services (Roth, 2014). The brand name for Nationstar’s servicing and loan
originations will soon be changed to “Mr. Cooper”, but the legal name and stock ticker will
12
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
remain Nationstar (Nationstar Mortgage, 2015). The brand name shows that Nationstar plans to
align the entire Company around customer advocacy and creating a strong ethical foundation.
Nationstar should also continue to use philanthropy in its public relations and
advertisements to promote the Company brand. Philanthropic investments have a powerful
impact on ethics, competitiveness, financial performance, and cost effectiveness (Porter &
Kramer, 2002). Nationstar already uses current resources to form partnerships with nonprofit
organizations and to collaborate efforts for the benefit of society (Porter & Kramer, 2002). Two
methods of achieving this are through the Company’s Random Acts of Kindness Project and
continuing participation with Habitat for Humanity. These initiatives create more personalized
relationships with Nationstar consumers while also safeguarding their best interests (Nationstar
Mortgage, 2015).
C. Sustainability of Nationstar’s Corporate Strategy, Brand Development, and Decision-
Making Processes in Response to Business Ethics and Regulatory Issues
Sustainability of Nationstar’s corporate strategy, brand development, and decision-
making should recognize the importance of continuity in regard to providing jobs and the
Company impact on people, planet, and profits (Simply CSR, 2008). Nationstar commits a large
amount of resources toward government loan modification programs under the Home Affordable
Refinance Program (HARP), the Home Affordable Modification Program (HAMP), and the
Making Home Affordable plan (MHA). Participation in these programs not only helps to
preserve profits for shareholders, but also promotes ethical responsibilities and regulatory
compliance which helps the Nationstar customers.
Government loans are especially important for sustainability as it aims to increase the
number of new homebuyers who would not otherwise qualify for a mortgage (Russell, 2015).
13
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
This additionally minimizes the negative impacts on the economy as government assistance
reduces the number of foreclosures in the U.S. housing market (Russell, 2015). Responsibly
expanding access to credit will help creditworthy low income borrowers and traditionally
underserved populations, thus expanding credit access sustainability (Evidence Matter, 2016).
Lastly, offering VA loans are crucial to sustainability as there have recently been a high number
of discharged U.S. soldiers looking to buy homes. With this in mind, HUD has released new
guidelines to provide protections for military members seeking to purchase their first home
(Russell, 2015).
Section IV. Decision Making
A. Nationstar Mortgage Holdings, Inc.: Decisions in Response to
Potential Ethics and Regulatory Issues
Making ethical business decisions in response to potential ethical and regulatory issues is
critical to the long term success of Nationstar. An effective strategy for this will allow
Nationstar to set standards for the mortgage servicing industry, while gaining a strong, positive
reputation in the market, and securing a loyal customer base. Therefore, Nationstar’s approach
may involve refinement of governance, business, and risk-management practices to support the
dream of homeownership for their customers and communities (Nationstar Mortgage, 2015).
Some core principles in support of this strategy will include putting customers first, valuing and
supporting team members, investing in communities, and strengthening the economy and
housing market. As a result, the following highlights and efforts should be made to promote
resiliency and sustainability within the communities that Nationstar serves:
Anti-Predatory Lending Policies and Practices
14
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Predatory lending practices are not clearly defined under federal law and state definitions
may vary in how they define predatory lending practices (Freddie Mac, 2016). Some general
examples may include: excessive costs, equity stripping, failure to report borrower credit
information to limit eligibility for a lower interest rate, steering into higher cost mortgages, and
credit insurance products are that financed up front (Freddie Mac, 2016). Nationstar’s position
on predatory lending will be to remain dedicated in eliminating these abusive and unfair lending
practices. As the number one servicer in the United States (U.S.), Nationstar needs to be a leader
in development and promotion of responsible lending practices. Nationstar establishes policies
restricting the origination of loans that are considered predatory, as well as works with other
responsible companies that ensure customers have access to affordable mortgage financing
(Nationstar Mortgage, 2015).
To address predatory lending issues, Nationstar must implement a set of measures that
will protect consumers such as corporate policies, targeted mortgage products, and educational
programs in communities across the U.S. (Freddie Mac, 2016). For instance, Nationstar may
implement a financial education program that helps empower consumers in understanding how
to build and maintain good credit (Freddie Mac, 2016). Nationstar may establish and strengthen
existing policies that refrain from doing business with others who engage in predatory practices
and also conduct on-site audits to ensure compliance (Freddie Mac, 2016). In addition,
Nationstar may refrain from acquiring servicing portfolios from servicers who do not report full-
file data to the credit bureaus so borrowers with good payment histories can qualify for lower
cost mortgages (Freddie Mac, 2016).
Nationstar’s rebrand to Mr. Cooper should also assist in anti-predatory lending practices
as it will offer more innovative loan products aimed at giving borrowers greater mortgage
15
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
choices with initiatives that help borrowers avoid predatory lending. A key goal of Mr. Cooper
should be to offer products that promote responsible lending while bringing liquidity and
stability to the mortgage market. These practices will allow Nationstar to go above what is
required under federal and state predatory and deceptive lending laws. Most specifically,
Nationstar must comply with the federal Dodd-Frank Title XIV-Mortgage Reform and Anti-
Predatory Lending Act, which was passed in response to the 2008 housing bubble (Dodd Frank,
2016). Title XIV amends the Truth in Lending Act (TILA) to establish duty of care for all
mortgage companies. Subtitle B sets minimum standards for all mortgage loans and forbids
creditors from making a loan unless they can reasonably determine that a borrower has the
ability to repay (Dodd Frank, 2016). Title XIV was implemented to prohibit certain predatory
lending tactics and provide a certain level of disclosure to borrowers so they are aware of risks
associated with a mortgage (Dodd Frank, 2016).
Implementing Foreclosure Prevention Programs and Practices
Nationstar should continue to implement programs and practices that help homeowners
avoid foreclosure. Foreclosure prevention programs will be especially important with Obama’s
Make Home Affordable (MHA) program coming to an end, and the mortgage industry will need
to take on more responsibility in assisting struggling homeowners through loan modifications
and other loss mitigation programs (ABA, 2016). During the periods of April 2009 and May
2016, the MHA program successfully allowed lenders to approve 10.5 million homeowners for
loan modifications or other mortgage assistance which help them avoid foreclosure (ABA,
2016). With President Trump in office, is it unclear as to whether or not MHA or other
government programs will continue. Subsequently, Nationstar may need to improve on their
foreclosure response strategies by joining in with states, cities, suburban communities, task
16
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
forces, and coalitions to coordinate and improve local responses to the foreclosures. Some basic
approaches may include getting organized for foreclosure response, strengthening the state and
local policy environment, and periodically assessing progress (Kingsley, Smith, & Price, 2009).
Mortgage Fraud Prevention Policies and Best Practices
As an industry player, Nationstar is responsible for the prevention, detection,
investigation, resolution, and reporting of fraud and other suspicious activity in the mortgage
industry (Nationstar Mortgage, 2016). Reliable and effective fraud prevention and detection
programs are essential to this, long with cooperation with legal authorities in investigating and
prosecution of mortgage fraud and related crimes (Freddie Mac, 2016). Therefore, Nationstar
must continue to build on existing mortgage fraud prevention programs which manage risks to
stakeholders and protect consumers from victimization. Some best practices may include
employee training and awareness programs, prudent underwriting standards, quality control
programs that help with oversight, and targeted training opportunities (Freddie Mac, 2016). In
addition, Nationstar should provide fraud prevention education to employees and consumers so
they can learn to identify common schemes and how to report suspected incidents of fraud.
Advocating and Doing what is Right for the Customer
In order to be number one in the industry, Nationstar must be the best in credit and risk
management to support their creditworthy customers when they need home financing. The
fundamental principle of sound credit is to “know your customers” and “understand their unique
needs” (Nationstar Mortgage, 2015). Nationstar should ensure that their loan originators are well
trained, knowledgeable, and use common sense when working with customers. It is important to
always consider whether the credit decision makes sense for both the borrower and the
Nationstar stakeholders. Four suggested best practices may include ensuring loan terms are fully
17
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
disclosed and competitive, offering customers enough information so they can make informed
decisions, ensuring every loan makes sense, and exercising due diligence determining the
customers are able to repay the loan (Wells Fargo, 2016). Nationstar recognizes that all
stakeholders do better when local communities and economies are strong and resilient
(Nationstar Mortgage, 2015). Therefore, investing in underserved communities, exploring ways
to expand customer access to quality and responsible mortgage products, services, and education
are important in the Nationstar ethical decision making process.
Addressing Nationstar’s Past Lawsuits and Minimizing Legal Risks
Nationstar must implement business decisions that address any potential lawsuits in
which they may be routinely and currently involved in (Nationstar Mortgage, 2015). These
lawsuits may range from a single party to class action lawsuits with multiple parties involved and
are generally due to alleged violations of consumer protections, securities, employment, contract,
tort, common law as well as many other laws that regulate the mortgage industry (Nationstar
Mortgage, 2015). Preserving Nationstar’s reputation will consist of effectively communicating
and building solid relationships with stakeholder (Brown, 2007). Minimizing reputational risk is
managed through strong corporate governance and setting a tone from the top. It may include
issuing timely and accurate financial reports, informational newsletters, and excellent customer
services to win the trust of stakeholders (Brown, 2007). Internally, Nationstar must maintain
timely communications, establish strong policies and procedures, instill ethics by enforcing a
code of conduct, comply with current laws and regulations, and respond promptly to oversight
professionals (Brown, 2007).
B. Culture: How Nationstar Business Decisions and Processes Impact
Sustainability and Elements of Corporate Culture
18
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Nationstar’s business decisions and processes must positively impact sustainability as
well as the elements of their corporate culture. The recent issues surrounding corporate culture
in the mortgage lending industry mainly addresses two concerns: restoring public trust and
enhancing financial stability in the housing market. This is due to a majority of the problems and
failures during the subprime lending crisis and economic downturn being rooted in poor cultural
foundations (Deloitte, 2016). As a result, culture in the mortgage industry places emphasis on
the organizations’ norms, attitudes, and behaviors related to risk awareness, risk taking and risk
management in the Nationstar culture (Thaker, 2016). Whereas, in the past the front line culture
had traditionally been less focused on risk management and more focused on business activities
that generate revenue and reduce expenses (Deloitte, 2016).
A sound cultural and ethical framework may help to reduce regulatory issues, fines and
litigation (Deloitte, 2016). In addition, an appropriate culture should not only consider legalities
but also the consistency of Nationstar values in ethical treatment of their customers and the
community. Nationstar CSR efforts should work with stakeholders in achieving a culture that
contributes to better economic, environment, and social performance. Consumers have a
tendency to distrust lenders, thus a commitment to CSR is one way of dealing with a lack of
trust. The improved trust driven by a commitment to CSR may also enhance the reputation and
brand value of Nationstar. Additional benefits arise though corporate citizenship and
engagement with communities, which can lead to innovations in new mortgage products and
production processes that generate new revenue or expand mortgage markets (Deloitte, 2016).
Over time, this can provide a significant competitive advantage for Nationstar.
Nevertheless, creating strong, sustainable communities with quality affordable housing
and affordable mortgage payments will provide a positive cultural framework that will help carry
19
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
out Nationstar’s vision and mission. For one, it will play a critical role in helping U.S. families
keep their homes and stabilize neighborhoods, while ensuring that the underserved have access
to credit while managing risk (HUD, 2014). This will work to put Nationstar in a strong position
to minimize any losses from future market disruptions. Moreover, supporting the dream of
homeownership contributes to stable housing, thus provides an ideal platform in coordinating
access to credit, supporting community living, and preventing homelessness. Many of the
neighborhoods with the highest rates of foreclosure have been “racially isolated” within
neighborhoods with access to little economic opportunities, long commutes to jobs, and homes
that pose health risks and poor quality school systems (HUD, 2014). Therefore, it is critical to
promote a culture in which “place” influences outcomes, that supports policies related to
community development, transportation, climate change, energy efficiency, and disaster
readiness (HUD, 2014).
C. Stakeholders: How Nationstar Stakeholder Groups
Will be affected by Ethical Business Decisions and Processes
Nationstar stakeholder groups may have conflicting views on the Company’s ethical
business decisions and process. This is because the mortgage industry is very complex and
stakeholders will often debate over what constitutes doing good business. In addition, certain
rules and regulations impact the industry, consumers, and other external stakeholders in
numerous ways, leaving it difficult to always have a win-win outcome. In the past, most
stakeholders have generally agreed that some subprime loans may be good for the economy
because they fill a particular niche market in the lending industry (Delgadillo, Erickson, &
Piercy, 2008). However, when these loans become delinquent, stakeholders such as investors are
20
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
mostly in favor of foreclosure over loss mitigation because non-performing assets are highly
expensive to service (Nationstar Mortgage, 2015).
On the contrary, subprime loans help provide financing for millions of homebuyers with
few credit options and some stakeholders believe this segment is critical to the economy
(Delgadillo, et.al.). Therefore, not all stakeholders will agree with what constitutes predatory
lending which will be a challenge for Nationstar make implementing some of these decisions
(Delgadillo, et.al.). For instance, loans with hidden prepayment penalties may be considered
predatory, however loans with higher interest rates do not always fit the definition (Delgadillo,
et.al, 2008). In addition, research has defined predatory lending as consumer loans with
potentially aggressive and deceptive marketing, that disregard a borrower’s ability to repay, with
high rates with excessive fees, and high prepayment penalties (Delgadillo, et.al, 2008). While
most consumer advocate groups tend to focus on victims of these practices, lenders are mostly
concerned about how predatory loans may influence profits (Delgadillo, et.al.2008). Therefore,
the differing viewpoints among stakeholders is a challenge for the mortgage industry.
Section V. Impact
A. Nationstar Mortgage Holdings, Inc.: Community
Evaluation of Business Ethics, Regulatory Issues and Best Practices in CSR
Nationstar ethical decisions and responses to regulatory issues are likely to have a
positive impact on the community and the general public. In recent years, mortgage servicers
have been under increasing pressure to make socially responsible and ethically sound decisions,
while also complying with industry regulations and generating sufficient profits (Kemper &
Martin, n.d). CSR strategies are helpful in this aspect as it may increase the likelihood that the
Company can improve profits while also creating positive outcomes for society (Kemper &
21
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Martin, n.d). Therefore, some best practices that Nationstar should consider building on basic
strategies. First, Nationstar strategies must be viable in order to create an effective approach to
issues faced in society and the home mortgage environment (Kemper & Martin, n.d). Second,
Nationstar must meet their legal and regulatory commitments to government authorities,
investors, and other stakeholders (Kemper & Martin, n.d). Third, Nationstar must meet
expectations of the mortgage industry and the communities in which they operate (Kemper &
Martin, n.d). These general practices provide for a good foundation in maintaining the Nationstar
reputation as the leading mortgage servicer in the U.S.
Predatory Lending, Mortgage Fraud, and Its Impact on the Community
Protecting borrowers from predatory lending should have a positive impact on both the
community and the business of Nationstar. Consumer mortgage debt has a widespread impact
on the economy with at least three quarters of all American families having some sort of debt
(Wolff, 2015). The economic recession offers a clear example of how abusive lending practices
can not only impact the macro economy but also communities. Problems in subprime mortgage
lending had caused 12.5 million homes go into foreclosure between 2007 and 2012 (Wolff,
2015). This resulted in declines in home equity for many homeowners, including those who
owned their homes outright (Wolff, 2015). In addition, certain types of families and
communities such as minorities and the lower income, have seen higher concentrations of
abusive loans. For instance, African American and Hispanic borrowers with credit scores above
660 were three times more likely than white borrowers with the same credit score to receive a
high cost mortgage (Wolff, 2015).
Mortgage fraud can additionally have a serious adverse impact for consumers which may
lead to, higher interest rates, identity theft, compromised credit reports, high property taxes,
22
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
defaulted loans, and foreclosed properties (FBI, 2010). In addition, mortgage lenders are also
victims of mortgage fraud and lose millions of dollars every year due to fraud related issues
(FBI, 2010). Mortgage lenders are faced with either absorbing the loss by reducing earnings,
which ends up harming stockholders or charging customers higher fees to offset those losses
(FBI, 2010). Government insured loans may also fall victim and eventually end up being paid by
taxpayers (FBI, 2010).
Impact of Foreclosure Prevention on Nationstar, Borrowers, and Communities
Borrowers who lose their homes to foreclosure not only lose out on their existing home
equity, but also lose out on the opportunity to save money through affordable credit for several
years (Wolff, 2015). For instance, the prior economic recession had led to a high number of low-
income and minority neighborhoods, with about one-fourth of loans in low-income
neighborhoods and one-fifth of loans in minority neighborhoods, to either serious delinquency or
foreclosure (Wolff, 2015). The impact on foreclosure in these communities resulted in long-term
economic problems such as home equity loss from declined property value, increased crime, and
neighborhood deterioration (Wolff, 2015).
In addition, there were many issues with lenders of foreclosed properties failing to invest
in property maintenance and property upkeep in minority neighborhoods (Wolff, 2015). These
foreclosed properties are often locations of criminal activity, which can further bring down
property values, and increase costs while reducing revenues for local communities (OCC, 2007).
This can in turn impact stakeholders in the mortgage industry. For instance, foreclosures can
lessen the market value of securities thus impacting investors and insurers. As a result prevention
is an interest to all stakeholders because it is the best way to minimize credit losses, preserve
customer relationships, stabilize neighborhoods, and minimize the effects that vacant properties
23
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
have on crime and value (OCC, 2007). Lenders may also face negative publicity over rising
foreclosure rates and negative bank servicing ratings from rating agencies, which is also a
concern (OCC, 2007).
B. Global Environment: How Nationstar Business Ethics and Regulator Issues Impact
the Global Environment and Best Practices in CSR
To succeed as a global business, Nationstar must help strengthen the communities they
serve and address any challenges related to business ethics, regulatory issues, and CSR activities.
In the past, the effects of the global environment have been overlooked in the U.S. mortgage
industry since real estate has been historically viewed as a localized phenomenon (Bardhan &
Kroll, 2007). The industry itself is a conglomerate of U.S. companies dominating U.S. markets
and foreign companies in foreign markets, yet globalization has increased the extension of
business to international markets (Bardhan & Kroll, 2007). The shift is mainly due to changes in
technology and the internet, which has extended the mortgage business to a global clientele base.
Foreign investments and securitization of mortgages with different loan instruments has
expanded debt and real estate equity to global markets (Bardhan & Kroll, 2007). This has
allowed for foreign investors an opportunity to invest in U.S. financial assets which increased
portfolio diversifications and impacted risk returns (Bardhan & Kroll, 2007). As a result, more
consumers are now buying homes globally and there have been a growing number of foreign
nationals applying for mortgages in the U.S.
Furthermore, mortgage servicing companies have increasingly outsourced parts of their
servicing segments to offshore companies which has impacted the economy and real estate
market in those countries (Panchuk, 2013). These global factors have impacted Nationstar in a
number of ways. For instance, globalization influenced the U.S. job market and income since
24
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
offshoring jobs to lower wage countries has decreased incomes and jobs in the U.S. (Panchuk,
2013). In addition, globalization reduced income equality between developed and developing
countries, which increased income inequality in the U.S. As a result, Americans have had less
money to spend on housing hence making it difficult to achieve the goal of homeownership
(Panchuk, 2013).
Nationstar currently contracts with vendors whom have operations in India and the
Philippines. Nationstar also announced plans to grow their global operations in order to reduce
mortgage servicing costs in the U.S. (Nationstar Mortgage, 2015). Two key ethical issues with
this will include the ethics of working conditions and the ethics of low wages particularly with
the countries in which Nationstar does business. On a positive note, in countries like India and
the Philippines, income earned through foreign businesses has led to increased wealth, which has
an overall positive effect on social welfare, health, education, and society in general, and has
taken these countries out of poverty (Jones, 2014). However, the business leaders of Nationstar
should ensure proper ethical decisions and CSR best practices are made to prevent exploitation
of foreign workers.
In many foreign countries, it is common to engage in business practices that are illegal in
the U.S., as regulated under the Foreign Corrupt Practices Act of 1977 (FCPA), and this could
adversely impact business and Nationstar’s reputation (Nationwide Mortgage, 2015). Congress
had enacted the FCPA in 1977 in response to issues of widespread bribery of foreign officials by
U.S. businesses (DOJ & SEC, 2016). The act was passed to stop corrupt practices, create honest
companies, and restore integrity in the foreign marketplace. Corruption is a serious global issue
that can hinder economic growth by diverting public resources needed to better society, like
health and education, and can threaten international stability and security (DOJ & SEC, 2016).
25
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Corruption also facilitates crime both within the U.S. and overseas, through terrorism, human
trafficking, weapons and drugs, and through supporting third party venders, borrowers, investors,
who are involved in such activity (DOJ & SEC, 2016). This can be very bad for the business of
Nationstar. Therefore, in order to compete in a global marketplace, an effective compliance
program will be a critical part of Nationstar when minimizing adverse impacts.
Section VI. Outcomes
A. Nationstar Mortgage Holdings, Inc.: Efforts
Cultural Awareness and Civic Engagement Activities
Nationstar engages in various cultural awareness and civic engagement efforts which
have positively influenced their business outcomes. Nationstar also recognizes that cultural
awareness is the foundation of communication with its employees, customers, and other
stakeholders. In today’s mortgage industry, demographics are changing from being
predominantly white male focused, to having more women and minorities being promoted into
well-deserved leadership and management roles (Baer, 2016). With employees originating from
a wide range of cultural backgrounds, establishing a shared workplace of norms and values
should be an ongoing priority (Baer, 2016).
Many financial institutions, mortgage servicers, and other firms serving the mortgage
industry have already been working toward implementing best practices of diversity and
inclusion. This includes Nationstar whose customer base is significantly diverse thus the
Company believes it is important for their employees to reflect diversity as well (Nationstar
Mortgage, 2016). Both Nationstar and other industry competitors have worked very hard in
recent years to make these improvements within the mortgage workforce. For instance, as a part
26
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
of these initiatives, Nationstar began actively participating in The Five Star Institute which was
launched by the American Mortgage Diversity Council (AMDC) (Honea, 2016).
The AMDC is a member-based organization comprised of industry leaders and
advocates focused on diversity and inclusion in the mortgage industry (Honea, 2016). The goal
is to support and promote the industry’s best practices in cultural diversity as outlined under
Section 342 of the Dodd Frank Act, which calls for greater diversity in the mortgage workforce
(Honea, 2016). Therefore, Nationstar must bring together a talent pool that embraces culture as a
key component of effective and sustainable diversity and inclusion practices as a part of their
everyday business (Honea, 2016). In 2017, Nationstar must continue to attract diverse talent and
bring together employees from various, cultural, lifestyle, spiritual, ethnic and other groups.
Nationstar must also focus on including more minorities, women, the disabled, Veterans, gay-
lesbian, bisexual, and transgender owned businesses in all of their contracting activities (Fannie
Mae, 2011).
The Nationstar Artists-in-Residence Program
As a part of Nationstar’s cultural diversity and inclusion initiatives, the Company also
sponsors an Artists-in-Residence Program for employees at its North Texas headquarters
(Nationstar Mortgage, 2016). Throughout the year, the Artists-in-Residence Program brings in
three professional artists from diverse backgrounds for a 30 year period to present art on blank
walls within the Nationstar building. The themes are centered on an artist’s interpretation of
what a home means to them, which provides for a variety of interpretations from artists around
the world (Carlisle, 2015). Artists-in-residencies are known for being an effective program in
aiming at art from diverse groups while also providing the time and space for creative work of
artists from all backgrounds and disciplines (Carlisle, 2015).
27
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Nationstar and Civic Engagement Efforts
Nationstar is aware that giving back to the community on a corporate level is important
for the customers that they serve (About Nationstar, 2016). That is why the Company goes one
step further in incorporating civic engagement into their company culture. The outcome of civic
engagement and giving back to the community can also be a big boost for Nationstar’s business
and reputation with stakeholders. As a result, Nationstar reaches out to the community in several
different ways. For example, the Company regularly participates in Habitat for Humanity,
corporate giving, volunteerism, as well as implemented both the Random Acts of Kindness
Project and Community Outreach Team (About Nationstar, 2016).
Nationstar and Habitat for Humanity
A large part of Nationstar’s involvement in the community consists of working with
Habitat for Humanity. Habitat for Humanity is a non-profit organization founded in 1976 that
centered on individuals whom are in need of adequate and affordable housing (Habitat for
Humanity, 2016). The organization is involved in over 1,400 communities both across the U.S.
and globally in 70 countries, and helped 6.8 million people to achieve safe, decent, and
affordable shelter (About Habitat, 2016). Habitat for Humanity also partners with businesses in
local communities to help improve the quality of housing. Habitat homeowners often assist in the
process by building their own homes alongside volunteers as well as pay an affordable mortgage,
which is effective in stabilizing businesses while also giving back to the communities (About
Habitat, 2016). With Nationstar support, Habitat homeowners can achieve the “strength,
stability, and independence they need to build a better life for themselves and their families”
(About Habitat, 2016).
Nationstar Corporate Giving and Employee Volunteerism
28
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Nationstar routinely participates in corporate giving and volunteerism through company-
wide food and toy drives and various community involvement activities (About Nationstar,
2016). These activities allow for Nationstar and employees to give in-kind food or toy items,
make cash donations, or contribute volunteer services in connection with the drives. Since
Nationstar already partners with various organizations in the community, they may consider
enhancing these efforts by adding grant investments to nonprofit organizations that help
struggling homeowners (Fannie Mae, 2011). Giving back to the community is an effective way
for Nationstar to build relationships by making genuine connections with employees and
customers, then finding ways to contribute. This includes providing volunteers with resources,
programs, and recognition opportunities to encourage community involvement in causes that are
most important to them (Wells Fargo, 2016).
The Nationstar Random Acts of Kindness (RAK) Project
Nationstar implemented a Random Acts of Kindness Project (RAK) which randomly
selects customers in financial distress to offer free mortgage payments for twelve months
(Nationstar Mortgage, 2015). The concept of RAK originated in the 1980’s and is celebrated by
an unofficial holiday celebrated each year on February 17 (Wonderopolis, 2014). The
philosophy behind RAK is “altruism” which is the selfless concern for the welfare of other
people without expecting anything in return (Wonderopolis, 2014). The RAK Project has been
effective in showing kind gestures to Nationstar customers in communities across the U.S. The
RAK Project also encourages customers and employees to get out and pay forward and is
something Nationstar intends to continue in upcoming years. These projects further intend to use
technology and social media in building brand awareness while creating a “wow” factor
(Wonderopolis, 2014).
29
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
The Nationstar Community Outreach Team
Nationstar founded the Community Outreach Team in 2013 in order to reach out to
distressed homeowners through a department infrastructure that partners with several
communities in order to build relationships (Nationstar Mortgage, 2014). The Community
Outreach Team is designed so that struggling families can walk into a local event and speak with
both Nationstar staff along with a local housing counselor in finding an affordable mortgage
payment solution. The objective of the program is for Nationstar to show commitment to the
communities in which their customers reside. To achieve this, Nationstar partners with
government, national, and local agencies to advocate and provide solutions to homeowners
(Nationstar Mortgage, 2014). The primary goal is to help as many families as possible to stay in
their homes, protect property values, and to build a stronger U.S. housing market (Nationstar
Mortgage, 2014).
Providing Affordable Housing and Preventing Homelessness
Nationstar is aware that despite their foreclosure prevention efforts, some foreclosures
cannot be avoided. That is why when foreclosure is the end result, Nationstar must take efforts
to rehabilitate and sell these properties as quickly as possible (Fannie Mae, 2011). One way to
accomplish this is through making prompt repairs to foreclosed properties so that they are more
attractive to homebuyers (Fannie Mae, 2011). The outcome of these efforts are to preserve
property values and promote neighborhood stabilization. Nationstar may also work directly with
real estate agents through its Xome platform in order to market these properties to consumers.
Xome makes available to the public, every Nationstar owned property available for sale
(Nationstar Mortgage, 2016). As an additional part of supporting affordable housing, Nationstar
may consider increasing financing projects that specifically target areas with shortages of low
30
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
income housing for families and the elderly (Fannie Mae, 2011). Nationstar may consider
supporting non-profit buyers who build such affordable housing under programs like the Section
8 federal rental subsidies (Fannie Mae, 2011). These non-profits are dedicated to providing
housing in low income families and to senior citizens who would otherwise become displaced or
homeless (Fannie Mae, 2011).
Nationstar Green Initiatives
Nationstar should engage in green initiatives in order to assist both single and multi-
family property owners seeking to reduce their utility costs, operate their homes more efficiently,
and reduce their impact on the environment (Fannie Mae, 2011). By focusing on green
initiatives, Nationstar would help to maintain quality and affordable housing through reducing
energy and water costs to homeowners. Working toward this goal may involve establishing a
green housing task force to bring together industry experts in providing information needed for
the strategy. Moreover, Nationstar may integrate energy efficient metrics in underwriting green
loan products. By investing these, Nationstar is helping to keep housing affordable while
improving the quality of the properties available for sale (Fannie Mae, 2011).
B. Alignment: How Nationstar Efforts Align to the Corporate Mission, Vision, and Values
Cultural diversity and civic engagement efforts are central to the Nationstar mission of
providing a quality customer experience with its mortgage lending and servicing operations
(Nationstar Mortgage, 2015). As an essential part of the customer experience, Nationstar
recognizes that culture and empowering employees to become active in the community is
significant in aligning to their corporate mission, vision, and values. These efforts align to create
partnerships that help build communities for the customers which Nationstar serves. Creating a
diverse and inclusive workforce will additionally leverage the dedication needed from Nationstar
31
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
employees in order to achieve superior business results. Nationstar intends to attract, develop,
and retain the best talent from all walks of life and backgrounds (About Nationstar, 2016). This
requires for the Company to facilitate a culture of inclusion where all employees feel respected,
are treated fairly, are provided a work-life balance, and have an opportunity to advance in their
careers (About Nationstar, 2016).
Nationstar is committed to keeping the dream of homeownership alive thus partnering
with both government and non-profit organizations, aligns with helping people to stay in their
homes to minimize the effects that foreclosures have on people and the community (Nationstar
Mortgage, 2015). It’s better for the customer and the business of Nationstar to find ways to
modify troubled loans in order to prevent foreclosures (Our Commitment, 2016). This is why
Nationstar aims to be a helpful resource and building a track record of even small improvements
can lead to big impacts on customers and other stakeholders (Our Commitment, 2016).
Nationstar’s mission is an important asset in improving organizational performance and profits
which will align their brand and culture with a purpose (Groscurth, 2014). To instill the purpose
of Nationstar, managers must be accountable for addressing employee and customer needs. This
leads to greater focus on aligning mission, culture, and brand to empowerment of employee
engagement as a key driver of performance and business success (Groscurth, 2014).
C. Impact: How Alignment of Cultural Awareness and Civic Engagement Efforts
With Corporate Mission, Vision, and Values Will Improve
Nationstar Corporate Exposure and Profits
Impact of Nationstar Cultural Awareness and the Artists-In-Residence Program
Nationstar efforts made toward cultural awareness with both employees and customer
will have a positive impact on people and profits. The Artists-in-Residence Programs in
32
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
particular is a form of corporate exposure that specifically aligns with both Nationstar business
interests and having a positive social impact. Nationstar employees want to live and work in a
vibrant environment and community. Therefore, art programs can retain the employees needed
to build market share, brand, as well as reach out in engaging ways. The arts can additionally
create an environment that impacts background, ethnicities, and cultures, which are effective in
showing employee appreciation (Stearn, 2013).
Corporations and arts programs achieve impact in key areas such as social change,
storytelling, and employee engagement. Art programs contribute to positive social change such
as increased awareness and understanding, change in attitudes, increased civic participation, and
policy change (Stearn, 2013). Nationstar support for arts endeavors will also tell the story of the
“underrepresented” such as the homeless and victims of foreclosure to help make a powerful
difference (Stearn, 2013). This creates visual presentations that help corporations tell their own
story of CSR in specific ways. Furthermore, art programs in cultural diversity helps corporations
in development of healthy work communities to attract and retain employees, while fostering
cross-cultural understanding in today’s diverse workforce (Stearn, 2013).
Impact of Nationstar Contributions to Habitat for Humanity
Nationstar contributions to Habitat for Humanity positively impacts the need for safe,
quality, and affordable housing. Families in need of affordable housing exist across both the U.S.
and the world, from small towns, villages, and cities, to local communities (Impact, 2016).
Unstable and inadequate housing impacts nearly half of all Americans within their lifetime, and
more than half of all adults have to take a second job, cut back on health care and food, and
move to unsafe neighborhoods in order to pay their rent or mortgage (Impact, 2016). Housing
instability also leads to unstable communities due to frequent moves, overcrowding, evictions,
33
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
and foreclosures, while also creating stress and depression for many families (Impact, 2016).
Therefore, Habitat for Humanity combats these challenges by providing opportunities and self-
reliance to individuals. An affordable mortgage also provides homeowners with a better chance
to save and invest in retirement and education (Impact, 2016). By partnering with Nationstar,
families become empowered and are able to acquire access, skills, and the financial education
needed to be successful homeowners (Impact, 2016).
Impact of Nationstar Corporate Giving and Employee Volunteerism
Corporate giving and volunteerism of Nationstar employees may not only have a positive
impact on the community, but may also distinguish the business from competitors which will
lead to loyal customers and happier employees. In a study conducted by Cone Research, it was
found that roughly 82 percent of U.S. consumers consider CSR activities when deciding to
purchase products or services from a company (Lavine, 2016). Corporate giving can also
empower millions of Americans by promoting happy, healthy, and productive lives which
enables them to become productive contributors to the future of society and the economy.
Providing employees with an avenue to give back builds morale and creates collaborative
inspired teams so that they love what they are doing and do a better job (Lavine, 20160).
Volunteering also provides leadership opportunities for Nationstar employees, which leads to
improved staff performance and increased productivity and sales. Caring for and helping
communities has a positive impact of the culture of Nationstar and ultimately provide a
tremendous support within communities (About Nationstar, 2016).
Impact of Random Acts of Kindness (RAK) Programs on CSR
Since the economic recession, businesses have become increasingly committed to
altering their practices in order to remain profitable and retain their employees (Agudelo, 2015).
34
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
As a result, there have been a growing number of businesses engaged in doing random nice
things for their customers to make a difference in their lives. These acts of kindness have helped
to improve brand loyalty while leading to a profitable impact on products and services. In
addition, RAKs have become an effective method of doing more for customers, which often
results in positive social media and public relations (PR), increased loyalty, and financial
benefits to the company’s bottom line results (Agudelo, 2015).
Impact of Nationstar Community Outreach Team
The Nationstar Community Outreach Team impacts profits by preserving homes and
improving relationships with customers through homeowner education, in-person and telephone
contact, as well as direct mail to inform their homeowners of alternatives to foreclosure
(Nationstar Mortgage, 2016). Over the last year, Nationstar helped more than 65,000 customers
stay in their homes as a result (Nationstar, 2016). Nationstar also participated in 50 community
events in order to meet face-to-face with more than 700 customers who needed assistance
(Nationstar, 2016). This has allowed for over 39,000 customers to transition from delinquency
to being current on their mortgages (Nationstar, 2016). Therefore, the outcome of outreach
efforts have brought stability to the housing market while minimizing the negative impact of
foreclosure on families and communities (Fannie Mae, 2011).
Nationstar’s Community Outreach Team and Foreclosure Prevention
Nationstar’s goal in foreclosure prevention is to help customers stay in their homes, by
modifying troubled loans and doing whatever possible to avoid foreclosure. Nationstar
participates in community outreach by offering workshops to meet homeowners face to face to
address specific needs (Nationstar Mortgage, 2015). The Company participated in 50
community events to assist more than 700 customers who need help (Nationstar Mortgage,
35
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
2015). Helping customers to stay current on their loan payments is a win-win for everyone. In
2015, Nationstar partnered with several government and non-profit organizations to help find
solutions in keeping customers in their homes. In 2015, Nationstar helped more than 65,000
customers stay in their homes and avoid foreclosure through government modifications and
HARP refinances (Nationstar Mortgage, 2015).
Impact of Homelessness Programs, Affordable Housing, and Green Initiatives
Helping the homeless is a public awareness effort that impacts the community through
contributing funds that support working in prevention of homelessness throughout the U.S.
(Fannie Mae, 2011). Nationstar’s initiative also encourages employee volunteerism in serving
the homeless and people at risk of becoming homeless (Fannie Mae, 2011). Nationstar may
positively impact the homeless in communities by supporting service providers that offer
permanent affordable housing, transitional housing, prevention, social services, and emergency
shelters to selected agencies (Fannie Mae, 2011). In addition, housing recovery programs as a
part of the initiative can impact affordability by leading to energy efficient and cost effective
housing (HUD Exchange, 2014). This can aid in providing relief and opportunities to
communities still attempting to recover from the economic recession. Lastly, purchasing and re-
developing foreclosed and abandoned homes will have a significant impact in Nationstar profits
by creating affordable housing and prevention of homelessness (HUD Exchange, 2014).
Section VII. Conclusion
Nationstar Mortgage Holdings, Inc. (NYSE: NSM), is a leading U.S. mortgage servicer
that earns fees through the delivery of quality loan servicing, originations, and transaction based
services to over 2.7 million customers (Nationstar Mortgage, 2016). In light of the foregoing
research, it appears that Nationstar may benefit from further strengthening and improvement of
36
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
their current CSR activities, as well as make available to the public an annual published report
advising stakeholders on their CSR progress. Corporate social responsibility (CSR) is an
important form of self-regulation in today’s business models that ensures active compliance with
laws, regulations, and ethical standards (Prathima, 2015). Implementation of CSR must go
beyond the minimum requirements to meet compliance to engage in actions that further social
good as a priority with the interests of the firm being secondary (Prathima, 2015). CSR also
aims to provide a positive impact on the environment and stakeholders such as customers,
employees, investors, communities, and others (Prathima, 2015). Therefore, the outcome of a
CSR program would provide both intrinsic and extrinsic rewards to Nationstar and their
stakeholders.
Intrinsic Rewards
The intrinsic rewards of implementing CSR activities will ultimately result in customer
and employee appreciation, which can help Nationstar create long-term and enduring
relationships by discovering their needs and delivering the most beneficial services, products,
and guidance. Using this approach along with Nationstar’s broad level of mortgage expertise
enables profitability while also providing quality services to customers. Organizations that
attempt to keep their employees motivated are likely to increase performance of employees
which leads to overall success for both the business and the employees (Khan, Latif, Jalal,
Anjum, & Rizwan, 2014). Improving workplace culture and employee retention will be critical
in support of these upcoming trends. Nationstar will need to attract and retain the best workforce
by proving they are committed to purpose and social good (Russell, 2016). A company’s culture
has a significant effect on ethical behavior of employees, and a poor culture can cause many
problems from illegal activity to high rates of turnover (Mack, 2016). Strengthening CSR in
37
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
the workplace would be effective in counteracting this as it would encourage employees to put
more efforts into Company values, which would boost work morale (Russell, 2016). Expanding
employee volunteerism will also drive Nationstar to expand their impact in addressing social
issues and the needs of the community.
Extrinsic Rewards
Nationstar should also consider the extrinsic rewards that CSR activities will provide in
local communities and partnerships that will additionally motivate employees for commitment to
the organization. Extrinsic rewards may lead to motivation of the employees and greater service
value to customers which would benefit both the Nationstar stakeholders and community
(Noked, 2011). Philanthropy and business practices in CSR activities are two common sources
of extrinsic value since they involve ethical benefits of helping others in need while serving as a
means of improving the Company’s reputation in the public (Noked, 2011). For instance,
Nationstar participation in community foreclosure prevention events homeowners led to positive
recognition by Fannie Mae and was ranked number one in preventing delinquencies and
foreclosures. Nationstar should also continuously encourage employees to give back to the
community and develop programs that promote a culture of caring. Incorporating these CSR
activities would support ethical business and can greatly enhance Nationstar stakeholder value.
References:
About Nationstar. (2016). Nationstar Mortgage. Retrieved on October 30, 2016, from
http://nationstarholdings.com/
38
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
ABA. (2016). Agencies Release White Paper on Future of Foreclosure Prevention. ABA
Banking Journal. Retrieved from: http://bankingjournal.aba.com/2016/07/agencies-
release-white-paper-on-future-of-foreclosure-prevention/
Bajic, E. (2015). Why Companies Need to Build More Diverse Boards. Forbes. Retrieved from:
http://www.forbes.com/sites/elenabajic/2015/08/11/why-companies-need-to-build-more-
diverse-boards/#337ead6317ef
Bank of America. (2013). Corporate Social Responsibility 2013 Report. Retrieved from:
http://about.bankofamerica.com/assets/pdf/Bank-of-America-2013-Corporate-Social-
Responsibility-Report.pdf
Bardhan, A. & Kroll, C.A. (2007). Globalization and the Real Estate Industry: Issues,
Implications, Opportunities. Haas School of Business, UC Berkeley Paper Prepared for
the Sloan Industry Studies Annual Conference Cambridge, April 2007
Brown, W.J. (2007). Understanding Reputational Risk: Identify, Measure, and Mitigate the Risk.
SRC Insights: Fourth Quarter 2007. Retrieved from:
https://www.philadelphiafed.org/bank-resources/publications/src-insights/2007/fourth-
quarter/q4si1_07
Business Wire (2016). Nationstar Reports Third Quarter 2016 Financial Results. Business Wire.
A Berkshire Hathaway Company. Retrieved from:
http://www.businesswire.com/news/home/20161102005767/en/Nationstar-Reports-
Quarter-2016-Financial-Results
Careers. (2016). Nationstar Mortgage. Retrieved October 29, 2016, from
http://www.nationstarholdings.com/careers
Corporate Profile. (2016). Nationstar Mortgage. Retrieved on October 29, 2016, from
http://investors.nationstarholdings.com/CorporateProfile
39
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Corporate Social Responsibility. (n.d). Retrieved November 23, 2016, from
http://ccc.bc.edu/corporate-social-responsibility.htm
Deloitte. (2016). Forward look Top regulatory trends for 2016 in banking. Deloitte. Retrieved
from: https://www2.deloitte.com/content/dam/Deloitte/us/Documents/finance/us-
outlooks-top-regulatory-trends-for-2016-in-banking-reg.PDF
Delgadillo, L.M., Erickson, L.V. & Piercy, K.W. (2008). Disentangling the Differences between
Abusive and Predatory Lending: Professionals' Perspectives. Journal of Consumer
Affairs. Pg. 313 Vol. 42 No. 3.
Dodd-Frank: Title XIV - Mortgage Reform and Anti-Predatory Lending Act. (2016). Legal
Information Institution. Retrieved from: https://www.law.cornell.edu/wex/dodd-
frank_title_XIV
Employee Culture. (2016). Nationstar Mortgage. Retrieved October 29, 2016, from
http://www.nationstarholdings.com/careers/culture
Evidence Matters. (2016). Pressing Challenges in Housing Finance: Credit Access and Seniors’
Mortgage Debt. Office of Policy Development and Research (PD&R). U.S. Department
of Housing and Urban Development.
FBI. (2010). Mortgage Fraud Report 2010. Retrieved from:
https://www.fbi.gov/stats-services/publications/mortgage-fraud-2010
FFIEC. (2009). The Detection and Deterrence of Mortgage Fraud Against Financial
Institutions: A White Paper. FFIEC Fraud Investigations Symposium. Retrieved from:
https://www.ffiec.gov/Exam/Mtg_Fraud_wp_Feb2010.pdf
Finklestein, B. (2016). Serious Delinquencies at Lowest Point in Nine Years: Core Logic.
National Mortgage News.
40
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
http://www.nationalmortgagenews.com/news/servicing/serious-delinquencies-at-lowest-
point-in-nine-years-corelogic-1090455-1.html
Fontinelle, A. (2015). Green Mortgages Save Money and The Environment. Investopedia.
Retrieved from: http://www.investopedia.com/articles/mortgages-real-estate/09/green-
mortgages.asp
Freddie Mac. (2016). We’ve been here before. Outlook October 20, 2016. Retrieved from:
http://www.freddiemac.com/finance/report/20161020_been_here_before.html
Freddie Mac. (2016). Combating Predatory Lending. Retrieved from:
http://www.freddiemac.com/singlefamily/anti-predatory-faq.html
Freddie Mac. (2016). Fraud Mitigation Best Practices. Freddie Mac. Retrieved from:
http://www.freddiemac.com/singlefamily/pdf/fraudprevention_practices.pdf
Frost, S. (2016). The Case for Sustainability Grows Stronger. Scotsman Guide. The Leading
Resource for Mortgage Originations. Retrieved from:
http://www.scotsmanguide.com/Residential/Articles/2011/08/The-Case-for-
Sustainability-Grows-Stronger/
Glassdoor. (2016). Nationstar Ratings and Trends. Retrieved from:
https://www.glassdoor.com/Reviews/Nationstar-Mortgage-Reviews-E17849.htm#
Goals and Reporting. (2016). 2015 Corporate Social Responsibility Report. Wells Fargo.
Retrieved October 28, 2016, from https://www.wellsfargo.com/about/corporate-
responsibility/goals-and-reporting/
Helping Homeowners. (2016). Nationstar Mortgage. Long History of Providing Solutions To
Our Customers. Retrieved on October 29, 2016 from:
http://nationstarholdings.com/helping-homeowners
41
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Herzig, C.; Moon, J. (n.d). Corporate Social Responsibility, The Financial Sector and Economic
Recession. Financial Services Research Forum. The University of Nottingham.
International Centre for Corporate Social Responsibility.
Hoyles, B. & Chan, H. (2016). Here are the Top 5 Ways Technology Reinvents Getting a
Mortgage. Housing Wire.
HUD. (2014). U.S. Department of Housing and Urban Development Strategic Plan 2014-2018.
Retrieved from: http://portal.hud.gov/hudportal/documents/huddoc?
id=hudstrategicplan2014-2018.pdf
Jones, S.L. (2014). The Ethics of Offshoring. Smart Company. Retrieved from:
http://www.smartcompany.com.au/growth/35919-the-ethics-of-offshoring-and-
outsourcing/
Khan, A., Latif, F., Jalal, W., Anjum, R., & Rizwan, M. (2014). The Impact of Rewards &
Corporate Social Responsibility (CSR) on Employee Motivation. Macrothink Institute.
International Journal of Human Resource Studies. Vol 4. No.3.
Leadership. (2016). Nationstar Mortgage. Retrieved October 29, 2016, from
http://www.nationstarholdings.com/leadership/
Mac Eachern, A. (2014). What is the Difference Between a Shareholder and s Stakeholder?
Investopedia. Retrieved from: http://www.investopedia.com/ask/answers/08/difference-
between-a-shareholder-and-a-stakeholder.asp
Mack, S. (2016). The Effects of Negative Corporate Culture on Ethical Behavior. Chron. Small
Business. http://smallbusiness.chron.com/effects-negative-corporate-culture-ethical-
behavior-65787.html
Mortgage Lending: The Impact. (2016). Center for Responsible Lending. Retrieved from:
http://www.responsiblelending.org/issues/mortgage-lending/mortgage-lending-impact
42
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Nationstar Mortgage. (2016). 2015 Annual Report. Nationstar Mortgage. Retrieved from:
http://www.wikihow.com/Cite-an-Annual-Report-in-APA-Style
Nationstar Mortgage. (2015). Nationstar Mortgage 2015 Annual Report. Retrieved from:
http://investors.nationstarholdings.com/Cache/1500083864.PDF?
O=PDF&T=&Y=&D=&FID=1500083864&iid=4288863
Porter, M.E. and Kramer, M.R. (2002). The Competitive Advantage of Corporate Philanthropy.
Harvard Business Review. Retrieved from: https://hbr.org/2002/12/the-competitive-
advantage-of-corporate-philanthropy
Prathima, D.S. (2015). The 10 Companies with Best CSR Reputations. Proceedings of the
Second European Academic Research Conference on Global Business, Economics,
Finance and Banking. Retrieved from:
http://globalbizresearch.org/Swiss_Conference/pdf/Z5100.pdf
Roth, D. (2014). Connecting Company and Cause for Sustainable CSR. ReBoot. Retrieved from:
http://reboot.org/2014/02/26/connecting-company-and-cause-for-sustainable-csr/
Russell, O. (2016). Corporate Social Responsibility: 2016 Outlook and Trends. Retrieved from:
http://www.oliverrussell.com/insights/blog/article/2016-csr-trends
Russell, S.L. (2015). Government Program Loans Are Crucial to Mortgage Market
Sustainability. New American Funding. Retrieved from:
http://www.newamericanfunding.com/blog/post/2015/01/13/Government-program-
Loans-are-Crucial-to-Mortgage-Market-Sustainability.aspx
Simply CSR. (2008) What is sustainable business? Simply CSR Responsible Business Planning.
Retrieved from: http://www.simplycsr.co.uk/what-is-sustainable-business.html
43
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
The News Desk (2016). Mortgage Lenders Lowering Loan Approval Standards Rapidly. The
Mortgage Reports. http://themortgagereports.com/20495/federal-reserve-senior-loan-
officer-survey-mortgage-quidelines-2016-q1
Kemper, A. & Martin, R. (n.d.). Best Practices in Corporate Social Responsibility. Q Finance.
Retrieved from: http://www.financepractitioner.com/contentFiles/QF02/g1xtn5q6/12/0/
best-practices-in-corporate-social-responsibility.pdf
Kingsley, G.T., Smith, R., & Price, D. (2009). The Impacts Of Foreclosures On Families And
Communities. The Urban Institute. Washington, D.C. Retrieved from:
http://www.urban.org/sites/default/files/alfresco/publication-pdfs/411909-The-Impacts-
of-Foreclosures-on-Families-and-Communities.PDF
OCC. (2007). Foreclosure Prevention: Improving Contact with Borrowers. Community Affairs
Department. Community Developments Insights. Retrieved from:
https://www.occ.gov/topics/community-affairs/publications/insights/insights-foreclosure-
prevention.pdf
Panchuk, K.A. (2013). Globalization could be stunting the housing recovery. Housing Wire.
Retrieved from: http://www.housingwire.com/blogs/1-rewired/post/27895-globalization-
could-be-stunting-the-housing-recovery
Thaker, A. (2016). Corporate Culture in Banking. Retrieved from:
https://www.newyorkfed.org/medialibrary/media/research/epr/2016/epr_2016-corporate-
culture_thakor.pdf?la=en
U.S. Department of Justice (DOJ) & U.S. Securities and Exchange Commission (SEC). 2012. A
Resource Guide to the U.S. Foreign Corrupt Practices Act. Retrieved from:
https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf
44
MBA 635 Final Project: Nationstar Mortgage Holdings, Inc. CSR Addendum
Wells Fargo. (2016). Our Culture. Retrieved from:
https://www.wellsfargo.com/about/corporate/vision-and-values/our-culture/
Wolff, S.D. (2015). The State of Lending in America & Its Impact on U.S. Households. Center
for Responsible Lending. Center for Responsible Lending. Retrieved from:
http://www.responsiblelending.org/state-of-lending/reports/13-Cumulative-Impact.pdf
45