Market Overview

Mr. Cooper Group Reports Second Quarter 2019 Financial Results

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  • Generated record Originations pretax income of $118 million on record funded volume of $10 billion
  • Grew servicing portfolio to $644 billion, up 2% quarter-over-quarter
  • Xome reported pretax income of $7 million and pretax operating income of $10 million, due to significant progress in integrating Assurant Mortgage Solutions (AMS)
  • Reported pretax loss of $(117) million or EPS of $(0.96) per share driven by $(231) million mark-to-market and pretax operating income of $118 million
  • Completed integration of Pacific Union and Seterus

Mr. Cooper Group Inc. (NASDAQ:COOP) (the "Company"), which principally operates under the Mr. Cooper® and Xome® brands, reported a second quarter net loss of $(87) million, $(0.96) per diluted share, driven predominately by a net fair value mark-to-market on the MSR portfolio of $(231) million. Excluding the mark-to-market and other items, the Company reported pretax operating income of $118 million. Items excluded from operating income were $(231) million in mark-to-market, net of the add back of $26 million in fair value amortization that is included in the mark-to-market, $17 million in merger related costs, and $13 million in intangible amortization.

Chairman and CEO Jay Bray commented, "The Originations segment made a major contribution this quarter, posting record pretax profits of $118 million on record funding of $10 billion. This strong performance is the result of several years of operational focus and technology investments, as well as the Pacific Union acquisition. The Originations segment now acts as a much stronger macro hedge for our servicing operation, and we believe it will play a major role in helping us achieve our profitability and shareholder return targets."

Chris Marshall, vice chairman and CFO added, "In addition to strong Originations results, Xome produced a significant increase in profits, reflecting the successful migration of the Assurant back-office, strong refinance-driven results in Title & Close, and third-party client wins in the Auction Exchange. We believe Xome has the potential to contribute significantly to the Company's returns over time."

Servicing

The Servicing segment is focused on providing a best-in-class home loan experience for our 3.8 million customers while simultaneously strengthening asset performance for investors. In the second quarter, Servicing recorded pretax loss of $(135) million primarily driven by a net fair value mark-to-market on the MSR portfolio of $(231) million. During the quarter the total servicing portfolio grew 2% quarter-over-quarter to $644 billion UPB. Servicing earned pretax operating income excluding the mark-to-market of $96 million, equivalent to a servicing margin of 6.0 bps. At quarter end, the carrying value of the MSR was $3.5 billion, equivalent to 111 bps of MSR UPB, and the original cost basis was 85 bps.

 

Quarter Ended

($ in millions)

Q1'19

 

Q2'19

 

$

BPS

 

$

BPS

Operational revenue

$

324

 

22.5

 

 

$

314

 

19.6

 

Amortization, net of accretion

(23

)

(1.6

)

 

(56

)

(3.5

)

Mark-to-market

(293

)

(20.3

)

 

(231

)

(14.4

)

Total revenues

8

 

0.6

 

 

27

 

1.7

 

Expenses

(195

)

(13.6

)

 

(189

)

(11.8

)

Total other income (expenses), net

1

 

0.1

 

 

27

 

1.7

 

Loss before taxes

(186

)

(12.9

)

 

(135

)

(8.4

)

Mark-to-market

293

 

20.3

 

 

231

 

14.4

 

Accounting items

(9

)

(0.6

)

 

 

 

Pretax operating income excluding mark-to-market and accounting items

$

98

 

6.8

 

 

$

96

 

6.0

 

 

 

 

 

 

 

 

Quarter Ended

 

Q1'19

 

Q2'19

Ending UPB ($B)

$

632

 

 

$

644

 

Average UPB ($B)

$

576

 

 

$

639

 

60+ day delinquency rate

2.4

%

 

2.3

%

Annualized CPR

8.2

%

 

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