Proxy Statement - Notice of Shareholders Meeting (preliminary) (pre 14a)

2019 PROXY STATEMENT For Annual Meeting of Stockholders Mr. CooperGroupSM

April 11, 2019

Dear Stockholders,

On behalf of your Board of Directors, I want to invite you to attend our 2019 Annual Meeting of Stockholders. The meeting will be held on Thursday, May 16, 2019, at 9:00 a.m., central time, at the Dallas/Fort Worth Airport Marriott, 8440 Freeport Parkway, Irving, Texas 75063. Please RSVP at secretary@mrcooper.com by 5:00 p.m. central time on May 15, 2019, if you plan to attend the meeting in person. Details regarding the business to be conducted at the annual meeting are more fully described in the accompanying materials.

I would like to personally thank you for your continued investment in Mr. Cooper Group. We look forward to welcoming you to our annual meeting. Your vote is important to us - even if you do not plan to attend the meeting in person, we hope that you vote your proxy promptly so your shares are represented.

		Sincerely,
		Jay Bray
		Chairman, President & Chief Executive Officer

		8950 Cypress Waters Blvd. Coppell, Texas 75019

April 11, 2019

NOTICE OF THE 2019 ANNUAL MEETING OF STOCKHOLDERS

 

		9:00 a.m., central time, Thursday, May 16, 2019
		Dallas/Fort Worth Airport Marriott 8440 Freeport Parkway Irving, Texas 75063
		(1)  Election of Directors; (2)  Advisory vote on executive compensation (Say on Pay); (3)  Advisory vote on the frequency of Say on Pay votes; (4)  Approval of the 2019 Omnibus Incentive Plan; (5)  Ratification of Ernst & Young LLP as independent auditors; (6)  Ratification of a bylaw amendment to designate an exclusive forum for certain legal actions; and (7)  Any other business that may properly come before the meeting.
		Holders of our common stock and our Series A Convertible Preferred Stock at the close of business on March 18, 2019 are entitled to vote at the annual meeting.
		Please complete, sign, date and return your proxy card or submit your proxy by following the instructions contained in this Proxy Statement and on your proxy card. Even if you plan on attending in person and voting, you are encouraged to submit your proxy to ensure your vote is counted if you are unable to attend. You may revoke your proxy and vote in person at the annual meeting if you choose to do so.
		If you plan to attend the meeting in person, please RSVP at secretary@mrcooper.com by 5:00 p.m. central time on May 15, 2019.

 

		By order of the Board of Directors,
		Elizabeth K. Giddens
		Senior Vice President, Deputy General Counsel & Corporate Secretary

Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to Be Held on May 16, 2019: This Proxy Statement is available free of charge on the Investors section of our website ( investors.mrcoopergroup.com ). In addition, you may access the Proxy Statement free of charge at www.proxyvote.com , a site that does not have “cookies” that identify visitors to the site.

EXECUTIVE SUMMARY

This proxy statement and the accompanying materials are being made available to Mr. Cooper Group Inc. stockholders beginning on or about April 11, 2019. You should read the entire proxy statement carefully before voting. For additional information about the 2019 Annual Meeting, please see “General Information About the Annual Meeting and Voting” at the end of the proxy statement.

This executive summary highlights many of our accomplishments in 2018, which we view as a transformative year. We completed the Merger with Nationstar Mortgage Holdings Inc. (“Nationstar”) in July 2018 (the “Merger”), completed a 1-for-12 reverse stock split and changed our name to Mr. Cooper Group. With our industry-leading executive team and a new ownership structure brought about through the Merger, we have and will continue to take steps to more closely align our governance and compensation programs with our strategy and with the long-term interests of stockholders. We are in the process of reviewing our compensation program and have committed to making significant revisions.

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PERFORMANCE HIGHLIGHTS

Following the financial crisis the servicing market shifted to non-banks as the government agencies and large banks recognized the importance of servicers with specialized expertise in working with customers with financial stress. From a start of $21 billion Unpaid Principal Balance (“UPB”) in 2008, we’ve grown our portfolio to $548 billion, making us the leader among nonbank servicers. Much of this growth reflects the trust of mortgage investors in our capability to work with distressed borrowers. We have returned on average 26% of delinquent loans to performing status, which is more than double the industry average. Additionally, we have built a very efficient operating platform, with direct servicing costs well below our peers. We have also established a true customer-centric culture, which includes rebranding the company as Mr. Cooper. This culture is transforming the experience for both team members and customers, resulting in the highest team member retention and satisfaction rates in our history. Finally, we have built a number of service offerings for our customers through Xome and recapture, creating a competitive advantage. Provided below are 2018 highlights with respect to each of our operating segments on a combined basis ¹ .

¹ See “Basis of Presentation” in Management’s Discussion and Analysis of Financial Condition and Results of Operation in our Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of the presentation of results on a combined basis.

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COMPENSATION HIGHLIGHTS

We view 2018 as a transformative year for Mr. Cooper Group. Prior to and through the Merger discussions, the Company has been led by mortgage industry veterans with decades of combined tenure at the Company. We have continued to build an outstanding executive team. In the past twelve months alone, we have brought on board a new Chief Executive Officer of Xome, a Chief Business and Product Officer and a new Chief Financial Officer.

With our industry-leading executive team, a reconstituted Compensation Committee, new Compensation Committee chair and a new ownership structure brought about through the Merger, we have and will continue to take steps to more closely align our compensation program with our strategy and with the long-term interests of stockholders.

In connection with the Merger, we are in the process of reviewing our compensation program and have committed to making significant revisions to our executive compensation program. Below are some highlights of steps taken thus far.

We believe these actions and our commitment to change the compensation program will ensure that our executive team members are compensated for their critical role in building the industry leader in mortgage servicing and driving stockholder value over the years to come.

We took further steps to ensure alignment between our executives and stockholders by adopting minimum levels of equity ownership for our officers and Board members. The ownership guidelines are consistent with industry peers.

To ensure that we have the equity we need to motivate and retain our officers, we are asking stockholders to approve a new employee equity plan. The plan has been updated to include provisions that are considered best practices. Under the terms of the proposed plan, the shares available in the current plans are no longer available for issuance. We anticipate that the shares requested in the proposed plan, 20 million fungible units or 10 million full-value shares, will meet our requirements to appropriately align management and stockholders’ interest for the next four to five years. The proposed upsizing combined with the current shares already awarded will represent approximately 15% of the total shares outstanding. We estimate that this level is at approximately the 50 ^th percentile of our peer group.

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Below are some highlights of our compensation program:

CORPORATE GOVERNANCE HIGHLIGHTS

We believe that good corporate governance promotes the long-term interests of our stockholders, strengthens our Board and management accountability and leads to better business performance. After the Merger, we evaluated our corporate governance practices and made significant changes from the practices of Nationstar. We have also moved to diversify our Board through the appointment of Busy Burr, who is standing for election at the 2019 Annual Meeting. We are committed to maintaining strong corporate governance practices and will continually evaluate these practices going forward. Additionally, we value our stockholders’ continued interest and feedback and are committed to maintaining an active dialogue to understand the priorities and concerns of our stockholders on a variety of topics, as well as to understand stockholders’ perspectives on our executive compensation program, our decision-making processes, our disclosure and recent trends and events. This outreach program ensures that the Committee and Board consider the issues that matter most to our stockholders so we can address them effectively.

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Below are some highlights of our corporate governance practices. Practices in blue are either new practices that were adopted post-Merger or our practices pre-Merger that were different from Nationstar’s.

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Key Areas Of Board Oversight

Our Board is responsible for, and committed to, the oversight of the business and affairs of our company. In carrying out this responsibility, our Board advises our senior management to help drive success for us and for long-term value creation for our stockholders. Our Board discusses and receives regular updates on a wide variety of matters affecting us. Our Board met 20 times in 2018.

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Key Qualifications

The following chart sets forth information for each of our director nominees detailing their skills which illustrates the high level of experience and skills each brings to the Board.

 

Senior Leadership

✓

✓

✓

✓

✓

✓

✓

Financial Services Industry

✓

✓

✓

✓

✓

✓

✓

Accounting and Finance

✓

✓

✓

✓

✓

✓

Risk Management

✓

✓

✓

✓

✓

Technology

✓

✓

✓

Mergers and Acquisitions

✓

✓

✓

✓

✓

✓

✓

✓

Public Company Board and Corporate Governance

✓

✓

✓

✓

✓

✓

✓

Government Relations, Regulatory or Legal

✓

✓

✓

✓

✓

✓

✓

✓

Compensation and Human Resources

✓

✓

✓

✓

✓

✓

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2019 PROXY STATEMENT

We view 2018 as a transformative year. We completed the Merger with Nationstar, completed a 1-for-12 reverse stock split and changed our name to Mr. Cooper Group. In connection with the Merger, we evaluated many of our governance and compensation practices and made significant changes from the practices of Nationstar. We expect to further develop our governance and compensation practices going forward to better align with the long-term interests of our stockholder.

In this proxy statement, “Mr. Cooper Group,” “Company,” “we,” “us” or “our” refers to Mr. Cooper Group Inc. or to it and one or more of its subsidiaries. This proxy statement contains information on the matters to be presented at our 2019 Annual Meeting of Stockholders to be held on May 16, 2019, to assist you in voting your shares.

CORPORATE GOVERNANCE

Governing Documents

The following primary documents make up our corporate governance framework:

These documents are accessible on our website at www.mrcoopergroup.com by clicking on “Corporate Governance” under the “Investor” tab. You may also obtain a free copy of any of these documents by sending a written request to Mr. Cooper Group Inc., 8950 Cypress Waters Boulevard, Coppell, Texas 75019, Attention: Corporate Secretary. Any substantive amendment to or grant of a waiver from a provision of the Code of Ethics requiring disclosure under applicable Securities and Exchange Commission (“SEC”) or National Association of Securities Dealers Automatic Quotations (“NASDAQ”) rules will be posted on our website.

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Corporate Governance Guidelines

This document sets forth the Company’s primary principles and policies regarding corporate governance. The Corporate Governance Guidelines are reviewed from time to time as deemed appropriate by the Board. The matters covered by the Corporate Governance Guidelines include the following:

Board Leadership Structure

We have a strong and active Board composed predominately of independent directors who understand our business and who work closely with our Chairman, President and Chief Executive Officer and other members of senior management. The Board has no fixed policy on whether to have an independent chairman. Currently, Jay Bray, our President & Chief Executive Officer, serves as Chairman of the Board. Our Board has determined that, at this time, this current structure, with a combined Chairman and Chief Executive Officer role and an independent lead director, is in the best interests of the Company and its stockholders. The Board believes the combined role of Chairman of the Board and Chief Executive Officer promotes unified leadership and execution of our strategic plan, facilitates information flow between management and

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the Board and enables Mr. Cooper Group to benefit from Mr. Bray’s significant institutional and industry knowledge and experience. This combined role is both supplemented and enhanced by the effective oversight and independence of our Board and the leadership provided by our independent lead director. Our Board has appointed Roy Guthrie to serve as our independent lead director.

The independent lead director has broad responsibility and has authority to:

In general, our independent lead director serves as the liaison between our Chairman and our independent directors. He is available to consult with our Chairman about the concerns of the Board and is available to consult with senior management regarding their concerns. Having an independent lead director fosters a Board culture of open discussion and deliberation, with a thoughtful evaluation of risk, to support sound decision-making. It encourages communication among the directors, and between management and the Board, to facilitate productive working relationships. Working with our Chairman and other Board members, our independent lead director also ensures there is an appropriate balance and focus among key Board responsibilities such as strategy development, review of operations, risk oversight and management succession planning. The Board believes it is important to maintain flexibility with the Board’s leadership structure. The Board will continue to regularly review its leadership structure and exercise its discretion in recommending an appropriate and effective framework to assure effective governance and accountability, taking into consideration the needs of the Board and the Company.

Board’s Role in Risk Oversight

Senior management has the responsibility to develop and implement our strategic plans and to identify, evaluate, manage, and mitigate the risks inherent in those plans. It is the responsibility of the Board to understand and oversee our strategic plans, the associated risks, and the steps that our Chief Risk and Compliance Officer and senior management are taking to manage and mitigate those risks. The Board takes an active approach to its role in overseeing the development and execution of our business strategies as well as its risk oversight role. This approach is bolstered by the Board’s leadership and committee structure, which ensures proper consideration and evaluation of potential enterprise risks by the full Board. In addition to receiving information from its committees, the Board also receives updates directly from Mr. Bray who due to his position as both Chairman of the Board and President and Chief Executive Officer of the Company is particularly important in communicating with other members of management and keeping the Board updated on the important aspects of our operations. Additionally, our Board receives updates from our independent lead director who is also the chairman of the Audit & Risk Committee. As part of its strategic risk management oversight, the full Board conducts a number of reviews throughout the year to ensure that our strategy and risk management is appropriate and prudent, including:

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The Board has delegated certain risk management oversight responsibilities to specific Board committees, each of which reports regularly to the full Board as follows:

Further, the Audit & Risk Committee has engaged certain third-party consultants to review and assess our compliance and risk management structure, programs and practices, including our enterprise-wide compliance risk management system.

Independent Directors

We recognize the importance of having an independent Board that is accountable to Mr. Cooper Group and its stockholders. Accordingly, our Corporate Governance Guidelines provide that a majority of our directors shall be independent in accordance with NASDAQ listing standards. Currently, nearly 90% of our Board is independent.

Board, Committee and Annual Meeting Attendance

The Board held 20 meetings during 2018. Each director attended at least 75% of the total number of meetings of the Board and committees held during the period he or she served. Directors are invited and encouraged but are not required to attend our annual meeting of stockholders. In 2018, all of our directors serving at that time attended our annual meeting of stockholders.

Presiding Non-Management Director and Executive Sessions

Our non-management and independent directors meet in executive session without management at least twice per year. Our independent lead director presides at each executive session.

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Board and Committee Evaluations

Our Board is committed to continuous improvement and recognizes the importance of a robust evaluation process to enhance board performance and effectiveness. Our Nominating & Corporate Governance Committee (the “NCG Committee”) oversees the annual performance evaluation of the Board and ensures that each of the Board’s committees conducts an annual self-evaluation. In general, covered areas include Board alignment, governance, strategy, culture, composition, information, meetings and leadership. In 2018, the Board and its committees concluded that they were operating effectively. In 2019, the NCG Committee has engaged a third-party provider to administer online assessment questionnaires for both the Board and its committees. After completing the questionnaire, the Board and its committees will receive a full report with tailored analyses, summarized assessment results, including areas of concern for discussion, and highlights of effective practices and recommendations for ongoing development.

Communications with the Board

Any Mr. Cooper Group stockholder or other interested party who wishes to communicate with the Board or any of its members, including our independent lead director, may do so by writing to: Board of Directors (or one or more named directors) c/o Mr. Cooper Group Inc., 8950 Cypress Waters Boulevard, Coppell, Texas 75019, Attention: Corporate Secretary. Relevant communications will be distributed to the Board, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communication. Communications that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as annual report requests, business solicitations, advertisements and job inquiries. Any communication that is screened as described above will be made available to any director upon his or her request.

Communications with the Audit & Risk Committee

Complaints and concerns relating to our accounting, financial reporting, internal accounting controls or auditing matters (together, “Accounting Matters”) should be communicated to the Audit & Risk Committee of the Board. Any such communications may be made on an anonymous basis. Employee concerns or complaints may be reported to the Audit & Risk Committee through a third-party vendor, The Network, Inc., which has been retained by the Audit & Risk Committee for this purpose. The Network, Inc. may be contacted toll-free at 866-919-3222 or via The Network, Inc.’s website at www.nationstar.ethicspoint.com . Outside parties, including stockholders, may bring issues regarding Accounting Matters to the attention of the Audit & Risk Committee by writing to: Audit & Risk Committee c/o Executive Vice President & General Counsel, Mr. Cooper Group Inc., 8950 Cypress Waters Boulevard, Coppell, Texas 75019.

All complaints and concerns will be reviewed under the direction of the Audit & Risk Committee and oversight by the general counsel and other appropriate persons as determined by the Audit & Risk Committee. The general counsel reports to the Audit & Risk Committee on such communications.

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Criteria and Procedures for Selection of Director Nominees and Board Diversity

Although the Board retains ultimate responsibility for nominating members for election to the Board, the NCG Committee conducts the initial screening and evaluation process. As provided in our Corporate Governance Guidelines, director nominees, including those directors eligible to stand for re-election, are selected based upon requirements of applicable laws and NASDAQ listing standards and among other things, the following factors:

Although we do not have a formal policy on diversity the NCG Committee appreciates the benefits that diversity, including gender diversity, can bring to a board of directors. Last year, the NCG Committee embarked on a search for female candidates with skills that would complement our Board’s strategic oversight role and engaged an independent director search firm to assist in identifying and recruiting female Board candidates and who subsequently identified and recommended Ms. Burr to the NCG Committee. In early 2019, upon recommendation of the NCG Committee, the Board appointed Ms. Burr to our Board.

In conducting the screening and evaluation of potential director nominees, the NCG Committee considers candidates recommended by directors and our management, as well as recommendations from our stockholders. To recommend a candidate for election to the Board, a stockholder must submit the information required by our Bylaws, including, among other things, the following information, to Mr. Cooper Group Inc., 8950 Cypress Waters Boulevard, Coppell, Texas 75019, Attention: Corporate Secretary, generally not less than 90 days nor more than 120 days in advance of the one-year anniversary of the date on which our proxy statement was released to stockholders in connection with the previous year’s annual meeting of stockholders:

In considering candidates recommended by stockholders, the NCG Committee will take into consideration the needs of the Board and the qualifications of the candidate. While a stockholder may submit a director nominee pursuant to these criteria and procedures, the nomination would continue to remain subject to the rights of Kohlberg Kravis Roberts & Co. L.P. (“KKR”) as discussed below under the caption “Certain Relationships and Related-Party Transactions—Our Relationship with KKR.”

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OTHER GOVERNANCE POLICIES AND PRACTICES

Stockholder Engagement

We believe that effective corporate governance includes regular, active dialogue with analysts, investors in our equity and senior notes, and other market participants, and we take into account their feedback on our executive compensation program as well as the Company’s strategy, financial results and disclosures, and industry and market trends. In connection with the Merger and our transition from controlled company status to a more diversified investor base, we have invested additional resources into our investor relations program, including hiring experienced staff. We are working to further improve our engagement by increasing our participation in investor conferences and non-deal roadshows, revising selected disclosures to increase clarity, and improving the consistency and effectiveness of our communications.

Employee Diversity and Inclusion Initiatives

Our success as a business is directly tied to our ongoing efforts to attract and retain diverse talent and maintain an inclusive and progressive environment where each employee can thrive. Defined broadly, diversity can include any number of characteristics that make us unique including age, disability status, culture, sexual orientation, gender identity, race, color, gender, religion, national origin, parental status, educational background, socioeconomic status, intellectual perspective, organizational level and more. To formalize our values of embracing and leveraging diversity, we created the Office of Diversity and Inclusion to serve as a driver and a resource for our team members. Since its inception, the Office of Diversity and Inclusion has spearheaded numerous programs including a diversity and inclusion campaign and also assisted team members with the formation of several Cooper Resource Teams which are comprised of team members who have similar interests and backgrounds that serve as a resource for their members and the Company by fostering a diverse and inclusive workplace aligned with our mission, values, goals, business practices, and objectives. Embracing and leveraging diversity through an inclusive work environment fosters new ideas, new insights, and constant innovation, which will allow us to keep the dream of homeownership alive. For more information please visit www.mrcooper.com/corporate_responsibility/outreach .

Corporate Responsibility and Sustainability

Corporate responsibility and sustainability play an important role in our business, operating strategies and long-term value creation for our stockholders, customers and team members. We believe that environmental, social and governance (ESG) practices are critical to attracting and retaining the best talent, meeting the evolving needs of our customers and being good stewards of our communities.

We are committed to our customers and homeownership, so alongside government and non-profit housing organizations, we regularly visit local communities to meet homeowners face-to-face to answer their housing questions, provide free-counseling and education, build and donate properties and organize local assistance programs. Additionally, we encourage our team members to volunteer their time and efforts to support their local communities either as part of a company initiative or on their own with their non-profit organization of choice. All Mr. Cooper Group team members are given time off for volunteer activities – full-time team members are eligible for up to eight hours of pay, and part-time employees are eligible for up to four hours of pay in a calendar year.

We are committed to conducting operations and activities in a manner that provides and maintains safe and healthful working conditions, protects the environment and conserves natural resources. We maintain practices so that our operations are managed and operated in compliance with applicable laws and regulations. As part of our green initiatives, we promote environment-friendly solutions within our buildings for team members to access, including a recycling program and a reduction in paper products. For our customers, we offer electronic statements and communications rather than relying on paper.

We recognize the importance of ESG considerations and are firmly committed to conducting business in a responsible manner. For more information please visit www.mrcooper.com/corporate_responsibility/outreach .

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BOARD OF DIRECTORS

Prior to the completion of the Merger, our Board consisted of Steve Scheiwe (Chairman), William Gallagher, Diane Glossman, Christopher Harrington, Tagar Olson, Michael Renoff and Michael Willingham. In connection with the Merger, Ms. Glossman and Messrs. Gallagher, Renoff and Willingham resigned from the Board, and Jay Bray, Robert Gidel, Roy Guthrie and Michael Malone joined our Board and in March our Board appointed Ms. Burr to the Board. Our Amended and Restated Certificate of Incorporation provides that the Board consist of not more than 11 directors, or such greater number as may be determined by the Board. As of the date of this proxy statement, the Board consists of eight members who are elected each year at the Annual Meeting of Stockholders to hold office until the next annual meeting. Our current Board is as follows:

The Board has determined that each of the directors, other than Mr. Bray, satisfies our independence standards and further that each of them is independent of us and our management within the meaning of NASDAQ’s listing standards.

Our Amended and Restated Certificate of Incorporation does not provide for cumulative voting in the election of directors, and in 2018, we amended our bylaws to provide that directors are elected by a majority of the votes present in person or by proxy entitled to vote.

Committees of the Board

The Board currently has three principal standing committees – Audit & Risk, Compensation and NCG. The Corporate Strategy and Development Committee, whose general purpose was to assist the Board with the identification of potential acquisition candidates and other strategic or business investment opportunities, was disbanded in connection with the Merger. The Board has determined that each member of these committees is “independent,” as defined under NASDAQ’s listing standards and for the purpose of the committees upon which such directors serve.

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Equity Plan & Incentive Awards Committees

In August 2018, our Compensation Committee formed a subcommittee, the Equity Plan Committee, comprised of its non-employee directors, Messrs. Gidel, Guthrie and Malone. The primary purpose of the Equity Plan Committee is to administer our incentive compensation plan and to grant equity awards thereunder primarily to our Section 16 officers, without limiting the authority of our Compensation Committee. The Compensation Committee has further delegated to the Incentive Awards Committee, which consists of Jay Bray, our Chairman, President & Chief Executive Officer, the authority to make certain awards under our incentive compensation plan to our employees who are not executive officers.

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Compensation Advisor

The Compensation Committee has the authority, in its sole discretion, to retain and terminate compensation advisors, including approval of the terms and fees of any such arrangement. Nationstar’s Compensation Committee engaged Pearl Meyer to assist the Compensation Committee with its responsibilities related to developing our executive and Board compensation programs for 2018. After the Merger, in October 2018, the Compensation Committee retained Gressle & McGinley LLC (“Gressle & McGinley”) to serve as the Compensation Committee’s independent compensation advisor. Neither Pearl Meyer nor Gressle & McGinley provides other services to Mr. Cooper Group. Additionally, based on (a) standards promulgated by the SEC and NASDAQ to assess compensation advisor independence, which are identified in the Compensation Committee’s Charter and (b) the analysis conducted by each of Pearl Meyer and Gressle & McGinley in its independence review, the Compensation Committee concluded that each of Pearl Meyer and Gressle & McGinley is an independent advisor to Mr. Cooper Group and that the work performed by Pearl Meyer and Gressle & McGinley did not raise any conflicts of interest. For more information on the compensation advisor, see “Role of Compensation Advisor” in the Compensation Discussion and Analysis section of this proxy statement.

The following table sets forth certain information regarding the compensation paid in 2018 to our independent directors. Mr. Harrington and Mr. Olson, as employees of KKR, do not receive any compensation for their services on our Board:

Fees to independent directors may be made by issuance of Mr. Cooper Group common stock, based on the value of common stock at the date of grant, rather than in cash, provided that any such issuance does not prevent a director from being independent and the shares are granted pursuant to a stockholder approved plan. Directors who are also our employees receive no additional compensation for their services on the Board. All members of the Board are reimbursed for reasonable costs and expenses related to attending Board or committee meetings or other meetings with management and for expenses related to director education programs.

Director Stock Ownership Guidelines

In February 2019, our Board revised our stock ownership guidelines. Under our revised guidelines, non-employee directors are expected to accumulate, within five years of their election to the board, shares of Mr. Cooper Group stock equal in value to at least five times the amount of their annual cash retainer. Shares counted toward these guidelines include any shares held by the director directly or indirectly, including deferred vested awards, and unvested restricted stock units. Our

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Board established this particular level of stock ownership for our non-employee directors to have the interests of our non-employee directors to be aligned with the investment interests of our stockholders.

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21

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25

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COMPENSATION DISCUSSION AND ANALYSIS ¹

Executive Summary

We view 2018 as a transformative year for Mr. Cooper Group. Operating performance has been strong as highlighted at the outset of this proxy. At the same time, the Merger with Nationstar provides an opportunity for the Board and management to bring clarity to our strategic intent and focus to our execution.

Prior to and through the Merger discussions, the Company has been led by mortgage industry veterans with decades of combined tenure at the Company, and we have continued to build an outstanding executive team. In the past twelve months alone, we have brought on board a new Chief Executive Officer of Xome, a Chief Business and Product Officer and a new Chief Financial Officer.

With our industry-leading executive team, a reconstituted Compensation Committee, new Compensation Committee chair and a new ownership structure brought about through the Merger, we have and will continue to take steps to more closely align our compensation program with our strategy and with the long-term interests of stockholders.

Since its initial public offering Nationstar had a stakeholder who owned approximately 70% its outstanding equity. Under the leadership of this stakeholder, the compensation program was heavily weighted toward an annual cash bonus award tied to financial and operating metrics. This program served us well in a time when it was critical that we meet annual financial objectives, as well as, compliance and customer needs. At the same time, equity compensation was low compared to our peers.

With the completion of the Merger in July of last year, our stockholders are more diverse (our largest stockholder owns approximately 17% of the equity). Now it is critical that we craft and execute a strategy that creates stockholder value at a challenging time for our industry. It is our objective that our compensation program complement our strategic intent.

In connection with the Merger, we are in the process of reviewing our compensation program and have committed to making significant revisions to our executive compensation program. Below are some highlights of steps taken thus far.

¹ Since we had limited operations prior to the Merger and acquired Nationstar at the end of July 2018, the Compensation Committee analyzed the compensation of our executive officers and decided to continue Nationstar’s compensation program post-Merger for the remainder of 2018. Accordingly, as it relates to 2018 compensation decisions, this Compensation Discussion and Analysis primarily focuses on the Nationstar compensation program as continued by Mr. Cooper Group.

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equity will vest ratably over the next five years beginning in March 2020. For the other executives the vesting period is three years.

We believe these actions and our commitment to change the compensation program will ensure that our executive team is compensated for their critical role in building the industry leader in mortgage servicing and driving stockholder value over the years to come.

We took further steps to ensure alignment between our executives and stockholders by adopting minimum levels of equity ownership for our officers and Board members. The ownership guidelines are consistent with industry peers.

To ensure that we have the equity we need to compensate, motivate and retain our officers, we are asking stockholders to approve a new employee equity plan. The plan has been updated to include provisions that are considered best practices. Under the terms of the proposed plan, the shares available in the current plans are no longer available for issuance. We anticipate that the shares requested in the proposed plan, 20 million fungible units or 10 million full-value shares, will meet our requirements to appropriately align management and stockholders’ interest for the next four to five years. The proposed upsizing combined with the current shares already awarded will represent approximately 15% of the total shares outstanding. We estimate that this level is at approximately the 50 ^th percentile of our peer group.

On an important and related matter, we have moved to diversify our Board through the appointment of Busy Burr. She will stand for election along with all other Board members at our annual meeting this May.

We proactively meet with our largest stockholders from time to time in order to discuss a variety of topics regarding the Company and to give these investors an opportunity to raise questions and provide our management team with feedback. Based on these discussions, we believe that these investors understand we are in the process of revising our executive compensation program and have a favorable view of how we intend to align compensation and performance through the use of performance-based and time-based equity.

Consideration of Say on Pay Results

At our 2018 Annual Meeting of Stockholders approximately 98% of the votes cast were in favor of our executive officers’ compensation (“Say on Pay”). Our 2018 compensation program for the second half of 2018 is primarily focused on the Nationstar compensation program. Nationstar did not hold a Say on Pay vote in 2018 because it held triennial Say on Pay votes. However, at Nationstar’s last Say on Pay vote approximately 92% of the votes cast were in favor of Nationstar’s named executive officers compensation, and given the results of that vote, Nationstar’s Compensation Committee did not make any significant changes to the compensation of the Nationstar executive officers when designing the program for 2018 or after the Merger.

This year, we are providing stockholders with an opportunity to indicate how frequently we should seek an advisory vote on the compensation of our named executive officers, and have recommended a vote for one year. Say on Pay votes allow stockholders to provide the Compensation Committee with measurable feedback on our compensation program, and we will always consider the input of our stockholders. Additionally, we are committed to maintaining an active dialogue with stockholders to understand stockholders’ perspectives on our executive compensation program, and we plan to continue this dialogue in 2019. Stockholders are always welcome to communicate their views as described under “Communications with the Board” in this proxy statement.

True to our philosophy, 96% of our President, Chairman and CEO’s 2018 compensation is tied to Company and individual performance. On average 87% of our named executive officers’ compensation is also tied to the Company’s and their individual performance.

COMPENSATION MIX

Process for Setting Executive Officer Compensation

Role of Compensation Committee

The Compensation Committee administers our compensation plans, programs and policies relating to our named executive officers. The Compensation Committee conducts periodic reviews, at least annually, and monitors our overall compensation strategy to ensure that executive compensation supports our business objectives. It also conducts an annual evaluation of our Chairman, President and Chief Executive Officer’s performance. As part of this compensation setting process, the Compensation Committee, with assistance from its compensation advisor, reviews the compensation (including base salary, annual cash incentives, long-term incentives and other benefits) of similarly-situated executive officers in our comparator group.

Role of Named Executive Officers

Other than the Chairman, President and Chief Executive Officer and the Chief Financial Officer, our named executive officers do not, either individually or as a group, play a direct role in determining executive compensation. The Chairman, President and Chief Executive Officer advises the Compensation Committee from time to time of his own evaluation of the job performance of the other named executive officers and, together with the Chief Financial Officer, offers for consideration recommendations as to their compensation levels. The Compensation Committee considers these recommendations but makes all compensation decisions related to our executive officers.

Role of Compensation Advisor

The Compensation Committee has the authority under its charter, in its sole discretion, to engage the services of a compensation advisor or other advisors to assist the Compensation Committee in the performance of its duties. Nationstar’s Compensation Committee retained Pearl Meyer to serve as the Compensation Committee’s independent compensation advisor on matters related to executive and board of director compensation for the majority of 2018. The compensation advisor regularly attended Compensation Committee meetings and reported directly to the Compensation Committee on matters relating to the compensation of our executive officers and directors, including compensation related to the Merger.

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During 2018, the Compensation Committee requested that our compensation advisor:

The Compensation Committee annually reviews and establishes the scope of the engagement of the compensation advisor, which is reflected in an engagement letter between the compensation advisor and the Compensation Committee.

After the Merger, commencing October 1, 2018, the Compensation Committee retained Gressle & McGinley LLC (“Gressle & McGinley”) to serve as the Compensation Committee’s independent compensation advisor on matters related to executive and board of director compensation.

Compensation Peer Group

The Compensation Committee with assistance from our compensation advisor annually assesses market conditions through a review of compensation from a group of comparator companies (the “Comparator Group”). In the second half of 2017, Nationstar’s Compensation Committee reviewed the composition of the Comparator Group to be used to calibrate our executive compensation program at the beginning of 2018 and did not make any changes from the previous year. In October 2018, PHH Corporation was removed from the group due to its acquisition by Ocwen Financial Corporation. In November 2018, the Compensation Committee adopted a revised Comparator Group. The revised peer sample includes 17 companies that the Compensation Committee has selected for purposes of benchmarking executive pay and comparing compensation practices. Of the 17 companies in the peer sample, six companies were used in the 2018 peer sample. The Compensation Committee also uses additional peer benchmarking for certain compensation decisions, including the salary adjustments for certain executive officers described below. The Compensation Committee used findings from the compensation review to assess our named executive officers’ pay position, our overall program design and program leverage relative to peers. The Compensation Committee does not target any particular range of pay relative to pay of the Comparator Group.

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Elements of Compensation

The total compensation of our named executive officers in 2018 consisted of three principal elements:

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The goal of the Compensation Committee is to set overall compensation at an appropriate level to be able to attract and retain top talent. In this regard, the Compensation Committee considers which different compensation elements are at-risk in setting the levels for each other element. For example, a named executive officer’s base salary is considered when determining the amount of any cash bonus or equity award. The relationship among the elements, however, is not strictly formulaic due to the need to evaluate the likelihood that the at-risk components of compensation will actually be paid at any particular level. The overall compensation packages of each of our named executive officers are variable from year to year and are based on their respective experience and individual performance, current market conditions, business trends and overall Company performance.

Base Salary

Base salaries are set depending on the scope of each named executive officer’s respective responsibilities and what is necessary to recruit and retain skilled executives. Base salaries are reviewed annually in accordance with our named executive officer’s annual performance evaluation and may be modified from time to time in view of our named executive officer’s individual responsibilities, individual and company performance, and experience. Periodic base salary adjustments are intended to reward individual performance and are also intended to ensure that the individual’s base salary, in conjunction with the other compensation elements, remains competitive for the position and responsibilities. Base salaries are intended to complement the performance-oriented components (non-equity annual incentive and long-term incentive awards) of our compensation program by assuring that our named executive officers will receive an appropriate minimum level of compensation. In general, base salary is the smallest component of the overall compensation package, representing approximately 20% of total direct compensation.

In determining base salary for our named executive officers for 2018 from Nationstar, Nationstar’s Compensation Committee considered our pay-for-performance culture, our philosophy to have low fixed and high performance-based compensation, and the performance of the given named executive officer. At the beginning of 2018, Nationstar’s Compensation Committee decided that none of the named executive officers would receive a base salary increase in 2018. However, as a result of the Merger, the Compensation Committee reviewed the base salaries of the Chairman, President and Chief Executive Officer, Chief Financial Officer and Chief Operating Officer and requested that Gressle & McGinley analyze a potential increase for these officers. Based on compensation survey data and a peer group analysis, Gressle & McGinley determined that the proposed increases in base salaries for these officers were at market level. As a result, the Compensation Committee approved increases in base salary for Messrs. Bray, Patel and Ebers to reflect their continued role in building and managing the largest non-bank mortgage servicer in the country. The increases which were effective on the date of the Merger and are reflected below. The following table sets forth information regarding our named executive officers’ annual base salaries for 2018.

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Annual Incentive Bonus Opportunities

In 2018, our named executive officers participated in our Executive Management Incentive Plan (“EMIP”). The annual bonus opportunity for each named executive officer under the EMIP is linked to achieving challenging financial and strategic objectives of the Company. Individual performance and its impact on financial, strategic, business unit or individual objectives may also be considered.

EMIP Overview

The EMIP is entered into pursuant to the provisions of the Company’s Incentive Plan and is an annual bonus program for our executive officers. The EMIP is designed to motivate and reward achievement of the Company’s business goals and to attract and retain highly talented individuals. Generally, bonuses under this plan are performance-based and are paid only to the extent that the performance goals are achieved. Under the EMIP, the Compensation Committee approves the amount of the annual bonus paid to each named executive officer based on application of any objective or subjective criteria that the Compensation Committee may select at any time prior to payment of the annual bonuses, including the corporate goals discussed below. The Compensation Committee may adjust awards in a non-uniform manner among the participants.

2018 Corporate Goals

The Compensation Committee reviews the achievement of corporate goals by each named executive officer, which were established at the beginning of the year by the Compensation Committee. Following year end, the named executive officers are rated on the results for each corporate goal on a scale of one to five. The rating is multiplied by the weight of each corporate goal to obtain a weighted score, with five being the highest possible score. The weighted score is converted into a percentage, which is multiplied by the named executive officer’s bonus opportunity (set in terms of a percentage of base salary) and base salary to result in an annual bonus amount. For 2018, in developing the corporate goals and their weightings the Compensation Committee and management considered the importance of shared goals for all the named executive officers, and analyzed the relative importance of each goal to the Company’s business strategy and the anticipated difficulty of achieving the goals in the aggregate.

At the end of 2018, the Compensation Committee reviewed actual performance against the corporate goals, and the respective weightings for each goal, for each named executive officer. The achievement of the corporate goals was, on average, 3 on a scale of 1 to 5, with 5 being the highest. The following table shows the 2018 corporate goals, their relative weighting for each named executive officer and levels of achievement:

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For the financial targets:

Adjusted EBT is a non-GAAP measure that begins with the GAAP pre-tax income of the total Company and excludes non-GAAP adjustment items and any changes in fair value. Servicing Profitability (Adjusted EBT bps) begins with GAAP pre-tax income for the segment and excludes non-GAAP adjustment items and any changes in fair value, and bps is calculated as adjusted EBT/Total average UPB X 10000. Originations adjusted EBT begins with GAAP pre-tax income for the segment and excludes any non-GAAP adjustment items.

Core Functional Expenses is a non-GAAP measure that begins with pre-allocation corporate functional expenses and excludes any non-GAAP adjustment items.

For the strategic initiatives:

Employee Engagement (a) 70% weighting on establishing an action plan focusing on identified focus areas, with a target of establishing an action plan and showing demonstrated results in a single focus area (actual results were that action plans were established and demonstrated results were achieved in all areas of focus) and (b) 30% weighting on annual voluntary turnover rate with a target of 16.6-18.8% turnover rate (actual results were a 16.8% turnover rate).

Customer (a) 50% weighting was given to reducing our customer complaint rate with a target complaint rate of 0.30 to 0.31 per 1,000 loans serviced (actual results were a complaint rate of 0.20 per 1,000 loans) and (b) 50% weighting was given to JD Power Survey results with (i) 25% of the weighting given for improving our annual ratings in our originations and servicing segments with a target of third most improved score (actual results were Originations: most improved score and Servicing: same as last year) and (ii) 75% of the weighting for achieving a quarterly ratings’ goal for our originations and servicing segments with a target of 2 out of 4 (actual results were Originations: 4 out of 4 and Servicing: 3 out of 4).

Compliance (a) 70% weighting was given to federal and state regulatory compliance examination issue resolution with the target of no repeat federal and state regulator compliance findings and issue resolution at a 85% or greater validation rate by internal audit (actual results were no repeat findings and 100% validation rate) and (b) 30% weighting was given to internal audit ratings with a target of no repeat findings and internal audit identified issues resolved at 85% or greater validation rate (actual results were no repeat findings and 94% validation rate).

Approved EMIP Payouts

In determining the amount payable to each named executive officer, the Compensation Committee may, in its sole discretion, adjust the amount of any bonus otherwise payable to any participant based on a participant’s individual performance or any other objective or subjective factor that the Compensation Committee deems relevant. Following the completion of 2018, our Chairman, President and Chief Executive Officer considered achievement under the 2018 corporate goals, the Company’s overall performance, including stock performance, the Merger, and the individual performance of each participant and recommended to the Compensation Committee bonus amounts for each named executive officer, with certain officer’s receiving a higher recommended amount than their calculated bonus due to their exceptional performance in connection with the Merger. After consideration of the Company’s pay-for-performance culture, the Chairman, President and Chief Executive Officer’s recommendation and discussion regarding the Chairman, President and Chief Executive Officer’s and the Chief Financial Officer’s performance in connection with the Merger, the Compensation Committee approved the bonus amounts as recommended.

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The following table shows for each named executive officer: (a) the calculated bonus based on the achievement of the corporate goals and (b) the final 2018 bonus amount approved by the Compensation Committee and paid to the named executive officer.

Incentive Plan

The Incentive Plan enables us to offer certain key employees, consultants and non-employee directors equity- and cash-based awards. It enhances our ability to attract, retain and reward these individuals, while strengthening the mutuality of interests between those individuals and our stockholders. Time-based awards of restricted stock units are granted to retain key talent and establish a common interest of the key executives with our stockholders through stock ownership. Each restricted stock unit is equivalent in value to one share of our common stock and generally vests in one-third installments on each of the first three anniversaries of the award, provided the participant remains continuously employed with us during that time. In addition, upon death, disability or a change in control of the Company, the unvested restricted stock units will vest. We believe that the time-based vesting requirements provide a strong retention mechanism. The ultimate value of the award, however, depends on the market value of our common stock on the vesting date, and accordingly time-based equity awards effectively align the interests of the participants with our stockholders. It is expected that time-based equity awards will continue to play a significant part of our compensation programs for named executive officers.

Annual Equity Awards

The Board, upon the recommendation of our Compensation Committee, grants equity awards to our executive officers at its regularly-scheduled meeting during the first quarter of each year, which is scheduled more than a year in advance. The grant date of these awards is the first business day of the following month. In February 2018, upon recommendation of Nationstar’s Compensation Committee, Nationstar’s Board approved awards of restricted stock units as follows:

These awards were granted on March 1, 2018 and were converted to restricted stock units for Mr. Cooper Group common stock that continue to vest in installments of 33.3%, 33.3% and 33.4% respectively on each of the first three anniversaries of the grant date of the awards.

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Retention Equity Awards

As a result of the change in control following the Merger, the majority of our executive officers’ existing equity awards vested. To incentivize these executives, encourage their long-term commitment and to build stockholder value over the long term, the Compensation Committee, in consultation with Gressle & McGinley, conducted a market analysis of retention equity awards granted to similarly-situated executives. In particular, the Compensation Committee considered the critical role Mr. Bray played in leading the servicing market shift to non-banks following the financial crisis and how he led the growth of our portfolio from a start of $21 billion UPB in 2008 to $548 billion today, making us the largest nonbank servicer. In November 2018, upon recommendation of the Compensation Committee, our Board approved awards of restricted stock units as follows:

These awards were granted on December 1, 2018 and vest in 5 equal installments beginning on March 1, 2020, except for Messrs. Rawls and Villani whose awards vest over three years beginning on March 1, 2020.

Our Board established these particular levels of stock ownership for our executive officers because we want to have the interests of our executive officers aligned with the investment interests of our shareholders. The minimum share ownership requirement must be satisfied by no later than the fifth anniversary of March 1, 2019 or the date an officer receives his or her first grant as an executive officer.

Hedging and Pledging Policy

Our directors and executive officers are prohibited from (a) engaging in certain hedging transactions involving the Company’s stock, and (b) pledging Company stock as collateral for a loan because the Board determined that such a policy is in the best interests of the Company and our stockholders. Currently, all named executive officers and directors are in compliance with the Company’s policy.

Risk Considerations

In developing and reviewing the Company’s executive incentive programs, the Compensation Committee considers the business risks inherent in the design of compensation arrangements to ensure they do not induce executives to take

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unacceptable levels of business risk for the purpose of increasing their incentive plan awards. The Compensation Committee believes that the mix of compensation components used in the determination of our named executive officers’ compensation reflects the performance of the Company and the performance of the individual employee and does not encourage our named executive officers to take unreasonable risks relating to the business. Our named executive officers’ ownership interest in the Company aligns their interests with our long-term performance and discourages excessive risk taking. The Compensation Committee does not believe our compensation programs are reasonably likely to have a material adverse effect on the Company.

Tax Considerations

Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 on the amount of compensation that we may deduct from taxable income in any given year with respect to the Chief Executive Officer and certain other of our most highly compensated executive officers. Historically, this deduction limitation did not apply to certain “performance based” compensation, and the Compensation Committee considered whether particular payments and awards to our named executive officers were deductible for federal income tax purposes, along with such other factors as was relevant in the circumstances, in establishing executive compensation programs. As a result of The Tax Cuts and Jobs Act, compensation paid to our named executive officers (including our Chief Financial Officer), which includes the payments described in the Approved EMIP Payouts section above, will be subject to the limitations on deductibility under Section 162(m), and we no longer deduct performance based compensation to our named executive officers who receive annual compensation in excess of $1,000,000. However, we intend to continue to grant performance-based awards.

Other Compensation Components

All of our named executive officers are eligible to participate in our employee benefit plans, including medical, dental, life insurance and 401(k) plans. These plans are available to all employees and do not discriminate in favor of our named executive officers. While we do not view perquisites as a significant element of our compensation structure, we believe that limited perquisites facilitate the attraction and retention of superior management talent. The value of these benefits to our named executive officers is set forth in the Summary Compensation Table under the column “All Other Compensation.” For 2018, these perquisites primarily related to contributions to a named executive officer’s 401(k) plan account.

Employment Agreements & Offer Letters

We have not entered into employment agreements with our named executive officers. We have, however, entered into offer letters with certain of our named executive officers upon their hire or promotion. In 2018, the following offer letters were in effect.

Mr.  Ebers . In connection with Mr. Ebers joining Nationstar, Mr. Ebers received an offer letter outlining the conditions of his employment with us. The offer letter provides that upon termination of Mr. Ebers’ employment by us without cause, he will receive severance benefits of (a) 12 months base salary plus a pro rata portion of his target bonus amount and (b) continuation of medical benefits for up to 12 months. Mr. Ebers is also subject to non-competition and non-solicitation provisions for the 12-month period immediately following the date of termination of his employment with us.

Mr.  Rawls . In connection with Mr. Rawls assuming the position of Executive Vice President, Servicing, Mr. Rawls received an offer letter outlining the conditions of his employment with us. The offer letter provides that upon termination of Mr. Rawls’ employment by us without cause, he will receive severance benefits of (a) 12 months base salary plus a pro rata portion of his target bonus amount and (b) continuation of medical benefits for up to 12 months. Mr. Rawls is also subject to non-competition and non-solicitation provisions for the 12-month period immediately following the date of termination of his employment with us.

Severance Pay Agreements

On February 12, 2018, in connection with the Merger, Nationstar entered into Severance Pay Agreements with our named executive officers from Nationstar. These agreements provide for certain payments and benefits upon a

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termination of the executive’s employment without Cause or by the executive for Good Reason (as both capitalized terms are defined therein) that occurs within 12 months following the effective time of a change in control, subject to the execution of a release of claims and compliance with restrictive covenants. These payments and benefits include (a) cash severance equal to the sum of (i) 12 months base salary (18 months, in the case of Mr. Bray) plus (ii) 100% of the executive’s annual bonus for the prior year, paid in installments over the 12 months following termination and (b) continuation of medical coverage at active employee rates for 12 months after the termination date or, if earlier, until the executive becomes eligible for another medical benefits program. The Severance Pay Agreements include restrictive covenants requiring the executive to maintain the confidentiality of company information at any time (including after his employment ends), and, for one year following any termination of employment, comply with provisions regarding non-competition (18 months, in the case of Mr. Bray), customer and client noninterference and non-solicitation and employee non-solicitation. Additional information regarding the severance payments, including a quantification of benefits that would have been received by our named executive officers if termination of their employment occurred on December 31, 2018, is listed in the “Potential Payments Upon Termination or Change of Control” table below.

Retention Agreements

On February 12, 2018, in connection with the Merger, Nationstar entered into Retention Bonus Agreements (the “Retention Agreements”) with our named executive officers to induce these executives to remain with us through the Merger and for a period of time thereafter. The Retention Agreements each provide for the potential to receive cash bonus payments (the “Retention Amount”) in connection with a change in control transaction in amounts based on a percentage of the final transaction value. Upon determination of the transaction value, the total bonus pool equaled an aggregate of 0.5% of the transaction value and became payable to employees covered by the Retention Bonus Agreements as set forth below. Fifty percent of the Retention Amounts was paid in August 2018, and the additional 50% was paid in February 2019.

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Compensation Objectives and Philosophy Prior to Merger

The primary objectives of the executive compensation program established prior to the Merger with Nationstar were to retain executive officers capable of: (a) identifying and assessing potential acquisition opportunities, (b) ensuring our compliance with debt-related agreements, (c) operating our reinsurance subsidiary in runoff mode and (d) complying with the periodic disclosure and other obligations of a publicly traded company. To achieve the objectives of attracting and retaining suitable executive officers, the 2018 executive compensation philosophy was comprised of the following key principles:

Mr. Gallagher was our Chief Executive Officer until the Merger. He served an integral role in assessing potential acquisitions for us and a significant portion of his compensation was linked to our successful completion of the Merger. Mr. Jaeger provided services as Interim Chief Financial Officer pursuant to an engagement agreement with us with a rate of compensation of $22,000 per month.

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