Mr.
Cooper
Group was
profitable
in
2023,
a
year
marked
by
its
acquisition
of Home
Point
Capital and Roosevelt
Management
Co.,
along
with
the
fallout
from
a
cyberattack.
Mr.
Cooper’s
strong
performance
was
mainly
due
to
its
servicing
business,
which
benefited
from
a
higher
interest
rate
environment.

During
a
call
with
analysts
on
Friday
morning,
company
executives
addressed
some
of
the
concerns
raised
by Treasury
Secretary Janet
Yellen,
who
said
this
week
that
U.S.
regulators
are monitoring
risks stemming
from
nonbank
mortgage
lenders,
especially
failures
resulting
from
market
strains.

Dallas-based
Mr.
Cooper
is
expected
to
reach
$1.1
trillion
of
unpaid
principal
balance
(UPB)
in
mortgage
servicing
rights
(MSR)
by
the
end
of
March,
a
target
announced
in
July
2021
when
the
portfolio
was
at
$650
billion.

“While
the
overall
portfolio
has
grown
considerably,
and
we
expect
it
to
grow
by
another
25%
this
year,
only
half
of
it
is
owned
MSR.
The
other
half
is
subservice
for
a
number
of
clients,”
vice
chairman
Chris
Marshall
told
analysts.

“If
there
are
any
limitations
on
concentration,
I
think
it
would
be
focused
more
on
people,
on
owned
MSR.
So,
I
think
we
have
quite
a
bit
of
room
for
us
to
grow
before
that
becomes
a
concern
for
anybody.”

At
the
end
of
December,
Mr.
Cooper
had
$992
billion
in
MSR,
up
14%
year
over
year.
Of
that
total,
59%
was
in
owned
MSR,
5%
was
in
special
servicing
and
35%
was
in
subservicing.
According
to
Marshall,
the
company
seeks
a
balance
of
50%
owned
MSR
and
50%
subservicing. 

“And
if
you
look,
in
total,
we’re
still
in
kind
of
a
single-digit
market
share,”

Chairman
and
CEO
Jay
Bray
said.

“It’s
a
scale
business.
You
have
to
build
and
invest
in
technology.
So,
we

don’t
have
any
concerns
about
continuing
to
grow
the
platform.
The
key
for
us
is
sustainability.”

Executives
also
added
that,
in
terms
of
capital,
the
target
for
the
company

is

“so
much
far
ahead
of
what
is
required
of
banks”

that


“it’s
not
a
concern,”

according
to
Marshall.

“I
can’t
even
imagine
it
becoming
anything
of
a
conversation.
(…)
You
should
think
of
us
as
having
a
rock-solid
balance
sheet.”

Overall,
Mr.
Cooper
delivered
$500
million
in
net
income
in
2023.
Its
almost
$1
trillion
servicing
portfolio
generated
$869
million
in
pretax
operating
income
last
year.
And
by
funding
$12.6
billion
in
loans,
it
had
a
$100
million
pretax
operating
income. 

“A
key
theme
for
2023
was
operating
leverage.
We
grew
the
portfolio
at
a
double-digit
pace
during
the
year
while
at
the
same
time
cutting
costs
companywide,”
Bray
said.

“In
fact,
since
2018,
we’ve

cut
servicing
costs
by
30%.”

Bray
said
the

company
will
return
its
focus
to
equity,
which
is
expected
to
grow
to
14%
to
18%
by
the
end
of
2025,
compared
to
its
current
level
of
12.5%. 

Cyberattack,
changes
in
leadership 

Mr.
Cooper
generated
$46
million
in
net
income
in
the
fourth
quarter.
That
compares
to $275
million
in
the
third
quarter of
2023
and
$1
million
in
Q4
2022
when
it
had
a
negative
mark-to-market
of
$58
million.

The
earnings
in
Q4
2023
included,
among
other
things,
mark-to-market
net
hedges
of
$41
million
and
$27
million
related
to
a
cyberattack
it
suffered
in
October.
The
company
had
the
data
of
nearly
15
million
current
and
former
clients exposed
in
a
hacking
incident,
which
resulted
in
at
least four
class-action
suits.  

Despite
the
cyber
incident,
the
company
kept
its
servicing
and
origination
businesses
profitable.
With
4.6
million
customers,
the
servicing
division
brought
in
$229
million
in
pretax
operating
income
in
Q4,
compared
to
$301
million
in
Q3. 

Meanwhile,
the
originations
division
—
which
focuses
on
acquiring
loans
from
correspondent
originators
and
refinancing
existing
loans
in
the
direct-to-consumer
channel
—
brought
in
$10
million
in
pretax
operating
income
in
Q4,
compared
to
$29
million
in
the
previous
quarter. 

“Bear
in
mind
that
these
numbers
were
impacted
by
the
cyber
event,”
Marshall
said.

“Excluding
that
impact,
we
estimate
EBT
[earnings
before
taxes]

would
have
doubled.
For
similar
reasons,
refi
recaptures
dipped
slightly
during
the
quarter
but
are
now
back
up
over
80%.”

The
company’s

total
funded
volume
declined
to
$2.7
billion
in
Q4,
down
from
$3.4
billion
in
the
previous
three-month
period.
Cash-out
refinances
represented
61%
of
the
total,
followed
by
purchase
loans
(25%),
second-lien
refinances
(12%)
and
rate-and-term
refinances
(2%). 
 

In
January,
the
company announced Mike
Weinbach,
a
former Wells
Fargo and JPMorgan
Chase executive,
as
its
new
president.
He
is
succeeding
Marshall,
who
was named
executive
chairman at
servicing
fintech Sagent. 

Mr.
Cooper’s

liquidity
reached
$2.4
billion
in
Q4,
with
$571
million
in
unrestricted
cash.

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