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Mr. Cooper Group Earnings Plunge 77% In 2Q

David Krechevsky
Jul 27, 2022
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Earnings also down 65.6% from the same quarter last year.

KEY TAKEAWAYS
  • Reported total net income of $151 million, down from $658 million in 1Q.
  • Servicing unpaid principle balance grew to $804 billion, up 23% YOY.
  • The company repurchased 2.3 million common shares for $100 million.

Mr. Cooper Group, a mortgage originator and one of the nation’s largest mortgage servicers, today posted a 77% drop in earnings in the second quarter from the previous quarter.

The Dallas-based company reported second-quarter net income of $151 million, or $2.03 per diluted share, compared to net income of $658 million, or $8.59 per diluted share, in the first quarter of this year. 

Year over year, net income fell 65.6% from $439 million, or $4.85 per diluted share, in the second quarter of 2021. That beat the consensus of analysts surveyed by Zaks Equity Research, which predicted a 73.5% year-over-year decline.

The company reported second-quarter total revenue of $599 million, down 43% from $1.052 billion in the first quarter, but up 4.4% from $574 million in the first quarter of 2021. Total expenses also fell, totaling $328 million in the second quarter, down 3% from $338 million in the first quarter. 

Net income included a $135 million mark-to-market charge, which excludes fair value amortization of $45 million. Excluding mark-to-market and other items, the company reported pretax operating income of $227 million. Other items were $7 million in severance charges related to corporate actions; $485 million in gain on the sale of Title365, net of transaction costs; $16 million in discontinued operations related to the reverse portfolio; and $3 million of intangible amortization.

In the second quarter, servicing recorded pretax income of $226 million, including other mark-to-market of $196 million. The forward servicing portfolio ended the quarter at $804 billion in unpaid principal balance (UPB), up 23% year over year. Servicing generated pretax operating income, excluding other mark-to-market, of $30 million. At the end of the quarter, the carrying value of its mortgage servicing rights (MSR) was $6.15 billion.

Loan originations earned pretax income of $61 million and pretax operating income of $63 million, which excluded $2 million in severance charges, the company said. In June, Mr. Cooper laid off 420 people, or about 5% of its staff, with the majority working in loan originations.

The company reported funding 29,154 loans in the second quarter, totaling approximately $7.8 billion UPB, comprised of $4.5 billion in direct-to-consumer and $3.3 billion in correspondent loans. Funded volume decreased 33% quarter-over-quarter, while pull-through adjusted volume decreased 37% quarter-over-quarter to $6.5 billion, the company said.

“The company’s originations and servicing teams continue to do a great job with execution,” said Chairman and CEO Jay Bray. “I was extremely pleased to see us grow the servicing portfolio to $804 billion; welcome the team from our new default servicing platform, rebranded to Right Path Servicing, to our family; buy back $100 million in stock; and end the quarter with exceptional capital and liquidity.”

Bray said the company repurchased 2.3 million common shares of its stock for $100 million in the second quarter, saying he believes "the stock is cheap." The stock was up about 10% in trading this morning to $44.66 per share, nearly 15% below its 52-week high of $52.34, set on Feb. 16, 2022.

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