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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________________________________________________________
FORM 10-Q
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☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2020
or
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☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _______ to
_______
Commission file number: 001-14667
________________________________________________________________________________________________________
Mr. Cooper Group Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
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91-1653725 |
(State or other jurisdiction of incorporation or
organization) |
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(I.R.S. Employer Identification No.) |
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8950 Cypress Waters Blvd, Coppell, TX
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75019 |
(Address of principal executive offices) |
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(Zip Code) |
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(469) 549-2000
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Registrant’s telephone number, including area code |
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Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common stock, $0.01 par value per share |
COOP |
The Nasdaq Stock Market |
____________________________________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
to such filing requirements for the past 90
days. Yes x No ¨
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such
files). Yes x No ¨
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12(b)-2 of the Exchange Act.
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Large Accelerated Filer |
¨ |
Accelerated Filer |
x |
Non-Accelerated Filer |
¨ |
Smaller reporting company |
☐ |
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Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
¨
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No x
Number of shares of common stock, $0.01 par value, outstanding as
of October 23, 2020 was
90,853,569.
MR. COOPER GROUP INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
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Page |
PART I |
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Item 1. |
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Item 2. |
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Item 3. |
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Item 4. |
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PART II |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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PART I. Financial Information
Item 1. Financial Statements
MR. COOPER GROUP INC.
CONSOLIDATED BALANCE SHEETS
(millions of dollars, except share data)
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September 30, 2020 |
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December 31, 2019 |
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(unaudited) |
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Assets |
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Cash and cash equivalents |
$ |
946 |
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$ |
329 |
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Restricted cash |
229 |
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283 |
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Mortgage servicing rights, $2,663 and $3,496 at fair value,
respectively
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2,669 |
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3,502 |
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Advances and other receivables, net of reserves of $191 and $175,
respectively
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745 |
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|
988 |
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Reverse mortgage interests, net of purchase discount of $125 and
$114, respectively
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5,460 |
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6,279 |
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Mortgage loans held for sale at fair value |
3,817 |
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4,077 |
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Property and equipment, net of accumulated depreciation of $84 and
$55, respectively
|
114 |
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|
112 |
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Deferred tax assets, net |
1,344 |
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|
1,345 |
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Other assets |
6,431 |
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|
1,390 |
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Total assets |
$ |
21,755 |
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$ |
18,305 |
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Liabilities and Stockholders’ Equity |
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Unsecured senior notes, net |
$ |
2,167 |
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$ |
2,366 |
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Advance and warehouse facilities, net |
4,851 |
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4,997 |
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Payables and other liabilities |
6,590 |
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|
2,016 |
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MSR related liabilities - nonrecourse at fair value |
1,091 |
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|
1,348 |
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Mortgage servicing liabilities |
44 |
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61 |
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Other nonrecourse debt, net |
4,671 |
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5,286 |
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Total liabilities |
19,414 |
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16,074 |
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Commitments and contingencies (Note 15) |
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Preferred stock at $0.00001 - 10 million shares authorized, 1.0
million shares issued and outstanding, respectively; aggregate
liquidation preference of ten dollars, respectively
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— |
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— |
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Common stock at $0.01 par value - 300 million shares authorized,
92.0 million and 91.1 million shares issued,
respectively
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1 |
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1 |
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Additional paid-in-capital |
1,120 |
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|
1,109 |
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Retained earnings |
1,243 |
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1,122 |
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Treasury shares at cost - 1.2 million and zero shares,
respectively
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(24) |
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— |
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Total Mr. Cooper stockholders’ equity |
2,340 |
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2,232 |
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Non-controlling interests |
1 |
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(1) |
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Total stockholders’ equity |
2,341 |
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2,231 |
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Total liabilities and stockholders’ equity |
$ |
21,755 |
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$ |
18,305 |
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See accompanying notes to the consolidated financial statements
(unaudited).
MR. COOPER GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(millions of dollars, except for earnings per share
data)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2020 |
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2019 |
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2020 |
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2019 |
Revenues: |
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Service related, net |
$ |
227 |
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$ |
258 |
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$ |
186 |
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$ |
479 |
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Net gain on mortgage loans held for sale |
645 |
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360 |
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1,594 |
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788 |
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Total revenues |
872 |
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618 |
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1,780 |
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1,267 |
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Expenses: |
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Salaries, wages and benefits |
275 |
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250 |
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769 |
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703 |
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General and administrative |
156 |
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228 |
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525 |
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710 |
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Total expenses |
431 |
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478 |
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1,294 |
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1,413 |
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Interest income |
56 |
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163 |
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250 |
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459 |
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Interest expense |
(165) |
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(196) |
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(534) |
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(572) |
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Other income (expense), net |
(51) |
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— |
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(50) |
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16 |
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Total other expenses, net |
(160) |
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(33) |
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(334) |
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(97) |
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Income (loss) before income tax expense (benefit) |
281 |
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107 |
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152 |
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(243) |
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Less: Income tax expense (benefit) |
67 |
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24 |
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36 |
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(52) |
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Net income (loss) |
214 |
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83 |
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116 |
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(191) |
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Less: Net income (loss) attributable to non-controlling
interests |
5 |
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(1) |
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2 |
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(2) |
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Net income (loss) attributable to Mr. Cooper |
209 |
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|
84 |
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114 |
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(189) |
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Less: Undistributed earnings attributable to participating
stockholders |
2 |
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1 |
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1 |
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— |
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Net income (loss) attributable to common stockholders |
$ |
207 |
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$ |
83 |
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$ |
113 |
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$ |
(189) |
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Net income (loss) per common share attributable to Mr.
Cooper: |
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Basic |
$ |
2.26 |
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$ |
0.91 |
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$ |
1.23 |
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$ |
(2.08) |
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Diluted |
$ |
2.18 |
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$ |
0.90 |
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$ |
1.20 |
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$ |
(2.08) |
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See accompanying notes to the consolidated financial statements
(unaudited).
MR. COOPER GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(millions of dollars, except share data)
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Preferred Stock |
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Common Stock |
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Shares
(in thousands) |
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Amount |
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Shares
(in thousands) |
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Amount |
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Additional Paid-in Capital |
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Retained Earnings |
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Treasury Share Amount |
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Total Mr. Cooper Stockholders’ Equity |
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Non-controlling Interests |
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Total Stockholders’
Equity |
Balance at June 30, 2019 |
|
1,000 |
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$ |
— |
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91,061 |
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|
$ |
1 |
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$ |
1,100 |
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$ |
575 |
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$ |
— |
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$ |
1,676 |
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$ |
2 |
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$ |
1,678 |
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Shares issued under incentive compensation plan |
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— |
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— |
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26 |
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— |
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1 |
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— |
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— |
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1 |
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— |
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1 |
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Share-based compensation |
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— |
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— |
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— |
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— |
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5 |
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— |
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— |
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5 |
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— |
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5 |
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Net income (loss) |
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— |
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— |
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— |
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— |
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— |
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|
84 |
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— |
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|
84 |
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(1) |
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|
83 |
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Balance at September 30, 2019 |
|
1,000 |
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$ |
— |
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|
91,087 |
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$ |
1 |
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$ |
1,106 |
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$ |
659 |
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$ |
— |
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$ |
1,766 |
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$ |
1 |
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$ |
1,767 |
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Balance at June 30, 2020 |
|
1,000 |
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|
$ |
— |
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|
92,022 |
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$ |
1 |
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$ |
1,114 |
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$ |
1,034 |
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$ |
— |
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$ |
2,149 |
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$ |
(4) |
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$ |
2,145 |
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Shares issued under incentive compensation plan |
|
— |
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— |
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19 |
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— |
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— |
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— |
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— |
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— |
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— |
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|
— |
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Share-based compensation |
|
— |
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|
— |
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— |
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— |
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6 |
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— |
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— |
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6 |
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— |
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6 |
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Repurchase of common stock |
|
— |
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— |
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(1,187) |
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— |
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— |
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— |
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|
(24) |
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|
(24) |
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— |
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|
(24) |
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Net income |
|
— |
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|
— |
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|
— |
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|
— |
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|
— |
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|
209 |
|
|
— |
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|
209 |
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|
5 |
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|
214 |
|
Balance at September 30, 2020 |
|
1,000 |
|
|
$ |
— |
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|
90,854 |
|
|
$ |
1 |
|
|
$ |
1,120 |
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|
$ |
1,243 |
|
|
$ |
(24) |
|
|
$ |
2,340 |
|
|
$ |
1 |
|
|
$ |
2,341 |
|
See accompanying notes to the consolidated financial statements
(unaudited).
MR. COOPER GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(millions of dollars, except share data)
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Preferred Stock |
|
Common Stock |
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Shares
(in thousands) |
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Amount |
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Shares
(in thousands) |
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Amount |
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Additional Paid-in Capital |
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Retained Earnings |
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Treasury Share Amount |
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Total Mr. Cooper Stockholders’ Equity |
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Non-controlling Interests |
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Total Stockholders’
Equity |
Balance at January 1, 2019 |
|
1,000 |
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|
$ |
— |
|
|
90,821 |
|
|
$ |
1 |
|
|
$ |
1,093 |
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|
$ |
848 |
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|
$ |
— |
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|
$ |
1,942 |
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$ |
3 |
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$ |
1,945 |
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Shares issued / (surrendered) under incentive compensation
plan |
|
— |
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|
— |
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|
266 |
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|
— |
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(1) |
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|
— |
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|
— |
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|
(1) |
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|
— |
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|
(1) |
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Share-based compensation |
|
— |
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|
— |
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|
— |
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|
— |
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|
14 |
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|
— |
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|
— |
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|
14 |
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|
— |
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|
14 |
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Net loss |
|
— |
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|
— |
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|
— |
|
|
— |
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|
— |
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|
(189) |
|
|
— |
|
|
(189) |
|
|
(2) |
|
|
(191) |
|
Balance at September 30, 2019 |
|
1,000 |
|
|
$ |
— |
|
|
91,087 |
|
|
$ |
1 |
|
|
$ |
1,106 |
|
|
$ |
659 |
|
|
$ |
— |
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|
$ |
1,766 |
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|
$ |
1 |
|
|
$ |
1,767 |
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Balance at January 1, 2020 |
|
1,000 |
|
|
$ |
— |
|
|
91,118 |
|
|
$ |
1 |
|
|
$ |
1,109 |
|
|
$ |
1,122 |
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|
$ |
— |
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|
$ |
2,232 |
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$ |
(1) |
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|
$ |
2,231 |
|
Shares issued / (surrendered) under incentive compensation
plan |
|
— |
|
|
— |
|
|
923 |
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|
— |
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(5) |
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|
— |
|
|
— |
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|
(5) |
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|
— |
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|
(5) |
|
Share-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
16 |
|
|
— |
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|
— |
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|
16 |
|
|
— |
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|
16 |
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Cumulative effect adjustments pursuant to the adoption of ASU
2016-13 |
|
— |
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|
— |
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|
— |
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|
— |
|
|
— |
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|
7 |
|
|
— |
|
|
7 |
|
|
— |
|
|
7 |
|
Repurchase of common stock |
|
— |
|
|
— |
|
|
(1,187) |
|
|
— |
|
|
— |
|
|
— |
|
|
(24) |
|
|
(24) |
|
|
— |
|
|
(24) |
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
114 |
|
|
— |
|
|
114 |
|
|
2 |
|
|
116 |
|
Balance at September 30, 2020 |
|
1,000 |
|
|
$ |
— |
|
|
90,854 |
|
|
$ |
1 |
|
|
$ |
1,120 |
|
|
$ |
1,243 |
|
|
$ |
(24) |
|
|
$ |
2,340 |
|
|
$ |
1 |
|
|
$ |
2,341 |
|
See accompanying notes to the consolidated financial statements
(unaudited).
MR. COOPER GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions of dollars)
|
|
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|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
Operating Activities |
|
|
|
Net income (loss) |
$ |
116 |
|
|
$ |
(191) |
|
Adjustments to reconcile net income (loss) to net cash attributable
to operating activities: |
|
|
|
Deferred tax benefit |
(1) |
|
|
(53) |
|
Net gain on mortgage loans held for sale |
(1,594) |
|
|
(788) |
|
Interest income on reverse mortgage loans |
(158) |
|
|
(241) |
|
Provision for servicing and non-servicing reserves |
18 |
|
|
53 |
|
Fair value changes and amortization/accretion of mortgage servicing
rights/liabilities |
1,258 |
|
|
998 |
|
Fair value changes in excess spread financing |
(132) |
|
|
(190) |
|
Fair value changes in mortgage servicing rights financing
liability |
10 |
|
|
15 |
|
Fair value changes in mortgage loans held for
investment |
— |
|
|
(3) |
|
Amortization of premiums, net of discount accretion |
45 |
|
|
(38) |
|
Depreciation and amortization for property and equipment and
intangible assets |
56 |
|
|
67 |
|
Share-based compensation |
16 |
|
|
14 |
|
Loss on redemption of unsecured senior notes |
52 |
|
|
— |
|
Other loss |
17 |
|
|
5 |
|
Repurchases of forward loan assets out of Ginnie Mae
securitizations |
(3,173) |
|
|
(1,823) |
|
Mortgage loans originated and purchased for sale, net of
fees |
(38,709) |
|
|
(27,673) |
|
Sales proceeds and loan payment proceeds for mortgage loans held
for sale and held for investment |
43,040 |
|
|
27,916 |
|
Changes in assets and liabilities: |
|
|
|
Advances and other receivables |
228 |
|
|
264 |
|
Reverse mortgage interests |
1,031 |
|
|
1,700 |
|
Other assets |
(4,797) |
|
|
9 |
|
Payables and other liabilities |
4,555 |
|
|
(69) |
|
Net cash attributable to operating activities |
1,878 |
|
|
(28) |
|
|
|
|
|
Investing Activities |
|
|
|
Acquisitions, net of cash acquired |
— |
|
|
(85) |
|
Property and equipment additions, net of disposals |
(43) |
|
|
(38) |
|
Purchase of forward mortgage servicing rights, net of liabilities
incurred |
(39) |
|
|
(454) |
|
Proceeds on sale of forward and reverse mortgage servicing
rights |
44 |
|
|
298 |
|
Net cash attributable to investing activities |
(38) |
|
|
(279) |
|
Continued on following page. See accompanying notes to the
consolidated financial statements (unaudited).
MR. COOPER GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(millions of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
Financing Activities |
|
|
|
(Decrease) increase in advance and warehouse facilities |
(135) |
|
|
1,835 |
|
Repayment of notes payable |
— |
|
|
(294) |
|
Proceeds from HECM securitizations |
516 |
|
|
398 |
|
Proceeds from sale of HECM securitizations |
— |
|
|
20 |
|
Repayment of HECM securitizations |
(508) |
|
|
(568) |
|
Proceeds from issuance of participating interest financing in
reverse mortgage interests |
139 |
|
|
220 |
|
Repayment of participating interest financing in reverse mortgage
interests |
(845) |
|
|
(1,472) |
|
Proceeds from the issuance of excess spread financing |
24 |
|
|
469 |
|
Settlements and repayments of excess spread financing |
(159) |
|
|
(182) |
|
Issuance of unsecured senior debt |
1,450 |
|
|
— |
|
Repayment of nonrecourse debt – legacy assets |
— |
|
|
(29) |
|
Redemption and repayment of unsecured senior notes |
(1,686) |
|
|
— |
|
Repayment of finance lease liability |
(1) |
|
|
(3) |
|
Surrender of shares relating to stock vesting |
(5) |
|
|
(1) |
|
Repurchase of common stock |
(24) |
|
|
— |
|
Debt financing costs |
(43) |
|
|
(5) |
|
Net cash attributable to financing activities |
(1,277) |
|
|
388 |
|
Net increase in cash, cash equivalents, and restricted
cash |
563 |
|
|
81 |
|
Cash, cash equivalents, and restricted cash - beginning of
period |
612 |
|
|
561 |
|
Cash, cash equivalents, and restricted cash - end of
period(1)
|
$ |
1,175 |
|
|
$ |
642 |
|
|
|
|
|
Supplemental Disclosures of Cash Activities |
|
|
|
Cash paid for interest expense |
$ |
180 |
|
|
$ |
166 |
|
Net cash paid (refunded) for income taxes |
$ |
40 |
|
|
$ |
(4) |
|
(1)The
following table provides a reconciliation of cash, cash equivalents
and restricted cash to amount reported within the consolidated
balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
September 30, 2019 |
Cash and cash equivalents |
$ |
946 |
|
|
$ |
371 |
|
Restricted cash |
229 |
|
|
271 |
|
Total cash, cash equivalents, and restricted cash |
$ |
1,175 |
|
|
$ |
642 |
|
See accompanying notes to the consolidated financial statements
(unaudited).
MR COOPER GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(millions of dollars, unless otherwise stated)
1. Nature of Business and Basis of Presentation
Nature of Business
Mr. Cooper Group Inc., collectively with its consolidated
subsidiaries, (“Mr. Cooper,” the “Company,” “we,” “us” or “our”)
provides servicing, origination and transaction-based services
related to single family residences throughout the United States
with operations under its primary brands: Mr. Cooper® and Xome®.
Mr. Cooper is one of the largest home loan originators and
servicers in the country focused on delivering a variety of
servicing and lending products, services and technologies. Xome
provides real estate services including real estate brokerage,
title, closing, valuation and field services to lenders, investors
and consumers. The Company’s corporate website is located at
www.mrcoopergroup.com.
The Company has provided a glossary of terms, which
defines certain industry-specific and other terms that are used
herein, in the MD&A section of this Form 10-Q.
On February 1, 2019, the Company completed the acquisition of all
the limited liability units of Pacific Union Financial, LLC
(“Pacific Union”), a California limited liability company. The
final purchase price was $116, paid in cash, and the purchase price
allocation was finalized as of December 31, 2019. Pacific Union was
a privately held company that was engaged in the origination, as
well as servicing of residential mortgage loans, and operated
throughout the United States. The acquisition allows the Company to
expand its servicing portfolio and increase its mortgage lending
volume and capabilities.
Basis of Presentation
The consolidated interim financial statements of the Company have
been prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”) for interim financial information and in
accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X as promulgated by the SEC. Accordingly, the
financial statements do not include all of the information and
footnotes required by GAAP for complete financial statements and
should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company’s
Annual Reports on Form 10-K for the year ended December 31,
2019.
The interim consolidated financial statements are unaudited;
however, in the opinion of management, all adjustments, consisting
of normal recurring items, considered necessary for a fair
presentation of the results of the interim periods have been
included. Dollar amounts are reported in millions, except per
share data and other key metrics, unless otherwise
noted.
The Company evaluated subsequent events through the date these
interim consolidated financial statements were issued.
Basis of Consolidation
The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries, other entities in which the
Company has a controlling financial interest and those variable
interest entities (“VIE”) where the Company’s wholly-owned
subsidiaries are the primary beneficiaries. Assets and liabilities
of VIEs and their respective results of operations are consolidated
from the date that the Company became the primary beneficiary
through the date the Company ceases to be the primary beneficiary.
The Company applies the equity method of accounting to investments
where it is able to exercise significant influence, but not
control, over the policies and procedures of the entity and owns
less than 50% of the voting interests. Investments in certain
companies over which the Company does not exert significant
influence are accounted for as cost method investments.
Intercompany balances and transactions on consolidated entities
have been eliminated. Business combinations are included in the
consolidated financial statements from their respective dates of
acquisition.
Use of Estimates
The preparation of the consolidated financial statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could
differ from these estimates due to factors such as adverse changes
in the economy, changes in interest rates, secondary market pricing
for loans held for sale and derivatives, strength of underwriting
and servicing practices, changes in prepayment assumptions,
declines in home prices or discrete events adversely affecting
specific borrowers, uncertainties in the economy from the COVID-19
pandemic, and such differences could be material.
Recent Accounting Guidance Adopted
Accounting Standards Update No. 2016-13, Financial Instruments -
Credit Losses (Topic 326), (“ASU 2016-13”) requires expected credit
losses for financial instruments held at the reporting date to be
measured based on historical experience, current conditions and
reasonable and supportable forecasts, which is referred to as the
current expected credit loss (“CECL”) methodology. The update
eliminates the initial recognition of credit losses on an incurred
basis in current GAAP and instead reflects an entity’s current
estimate of all expected credit losses over the life of the asset.
Previously, when credit losses were measured under GAAP, an entity
generally only considered past events and current conditions in
measuring the incurred loss. The new standard will reflect
management’s best estimate of all expected credit losses for the
Company’s financial assets that are recognized at amortized cost.
The guidance was effective for the Company as of January 1, 2020,
with a cumulative-effect adjustment to retained earnings as of that
date.
Based upon management’s scoping analysis, the Company determined
that reverse mortgage interests, net of reserves, advances and
other receivables, net of reserves, and certain financial
instruments included in other assets are within the scope of ASU
2016-13. Certain financial instruments within these respective line
items have been determined to have limited expected credit-related
losses due to the contractual servicing agreements with agencies
and loan product guarantees. For advances and other receivables,
net, the Company determined that the majority of estimated losses
are due to servicing operational errors and credit-related losses
are not significant because of the contractual relationships with
the agencies. For reverse mortgage interests the Company determined
that the guarantee from Federal Housing Administration (“FHA”) on
Home Equity Conversion Mortgage (“HECM”) loan products limits
credit-related losses to an immaterial amount with substantially
all losses related to servicing operational errors. For other
assets, primarily trade receivables, the Company determined that
these are short-term in nature (less than one year), and the
estimated credit-related losses over the life of these receivables
are similar to those resulting from the Company’s existing loss
reserve process. For each of the aforementioned financial
instruments carried at amortized cost, the Company enhanced its
processes to consider and include the requirements of ASU 2016-13,
as applicable, into the determination of credit-related
losses.
On January 1, 2020, the Company adopted
ASU 2016-13 using the modified retrospective method for the
above-mentioned financial assets. Results for reporting periods
after January 1, 2020 are presented under ASU 2016-13 while prior
period amounts continue to be reported in accordance with
previously applicable GAAP. The Company recorded transition
adjustments aggregating to a net increase of $9, or $7 after tax,
to retained earnings and a reduction of $7 to the advances and
other receivables reserve and a $2 reduction in the other assets
reserves, as of January 1, 2020 for the cumulative effect of
adopting ASU 2016-13.
In connection with adoption of ASU 2016-13, the Company updated its
accounting policies as follows:
For certain financial instruments included in advances and other
receivables, net, and certain trade receivables and accrued
revenues included in other assets that are within the scope of ASU
2016-13, the reserve methodology was revised to consider CECL
losses. The revised CECL methodology considers expected lifetime
loss rates calculated from historical data using a weighted average
life to determine the current expected credit loss required. Due to
the nature of the financial instrument, reverse mortgage interests,
net of reserves, and advances and other receivables had limited
impact from the adoption of CECL to the reserve methodology.
See
Note 3, Advances and Other Receivables, Net,
and
Note 4, Reverse Mortgage Interests, Net,
for additional information.
Factors that influenced management’s current estimate of expected
credit losses for certain advances and other receivables and
certain trade receivables and accrued revenues included the
following: historical collection and loss rates, passage of time,
weighted average life of receivables, and various qualitative
factors including current economic conditions.
Factors that influenced management’s current estimate of expected
credit related losses for certain reverse mortgage interests
included the following: historical collection and loss rates,
foreclosure timelines, and values of underlying
collateral.
Accounting Standards Update No. 2018-13, Fair
Value Measurement (Topic 820)
- Changes to the Disclosure Requirements for Fair Value
Measurement, (“ASU
2018-13”) removes the requirement to disclose the amount of and
reasons for transfers between Level 1 and Level 2 fair value
measurement methodologies, the policy for timing of transfers
between levels and the valuation processes for Level 3 fair value
measurements. It also adds a requirement to disclose changes in
unrealized gains and losses for the period included in other
comprehensive income for recurring Level 3 fair value measurements
held at the end of the reporting period and the range and weighted
average of significant unobservable inputs used to develop Level 3
measurements. For certain unobservable inputs, entities may
disclose other quantitative information in lieu of the weighted
average if the other quantitative information would be a more
reasonable and rational method to reflect the distribution of
unobservable inputs used to develop Level 3 fair value
measurements. The Company adopted ASU 2018-13 on January 1,
2020. The guidance does not have a material impact to the
disclosures currently provided by the Company.
2. Mortgage Servicing Rights and Related Liabilities
The following table sets forth the carrying value of the Company’s
mortgage servicing rights (“MSRs”) and the related liabilities. In
estimating the fair value of all servicing rights and related
liabilities, the impact of the COVID-19 pandemic was considered in
the determination of key assumptions.
|
|
|
|
|
|
|
|
|
|
|
|
MSRs and Related Liabilities |
September 30, 2020 |
|
December 31, 2019 |
Forward MSRs - fair value |
$ |
2,663 |
|
|
$ |
3,496 |
|
Reverse MSRs - amortized cost |
6 |
|
|
6 |
|
Mortgage servicing rights |
$ |
2,669 |
|
|
$ |
3,502 |
|
|
|
|
|
Mortgage servicing liabilities - amortized cost |
$ |
44 |
|
|
$ |
61 |
|
|
|
|
|
Excess spread financing - fair value |
$ |
1,044 |
|
|
$ |
1,311 |
|
Mortgage servicing rights financing - fair value |
47 |
|
|
37 |
|
MSR related liabilities - nonrecourse at fair value |
$ |
1,091 |
|
|
$ |
1,348 |
|
Mortgage Servicing Rights
The following table sets forth the activities of forward
MSRs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
Forward MSRs - Fair Value |
2020 |
|
2019 |
|
|
|
Fair value - beginning of period |
$ |
3,496 |
|
|
$ |
3,665 |
|
|
|
|
Additions: |
|
|
|
|
|
|
Servicing retained from mortgage loans sold |
412 |
|
|
298 |
|
|
|
|
Purchases of servicing rights(1)
|
30 |
|
|
732 |
|
|
|
|
Dispositions: |
|
|
|
|
|
|
Sales of servicing assets |
— |
|
|
(317) |
|
|
|
|
Changes in fair value: |
|
|
|
|
|
|
Changes in valuation inputs or assumptions used in the valuation
model |
(782) |
|
|
(716) |
|
|
|
|
Other changes in fair value |
(493) |
|
|
(323) |
|
|
|
|
Fair value - end of period |
$ |
2,663 |
|
|
$ |
3,339 |
|
|
|
|
(1)Purchases
of servicing rights during the nine months ended September 30, 2019
includes $271 of mortgage servicing rights that were acquired from
Pacific Union. See
Note 1, Nature of Business and Basis of
Presentation,
for further discussion. In addition, in 2019, the Company entered
into a subservicing contract, resulting in additional $253
servicing rights in the second quarter of 2019.
During the nine months ended September 30, 2020 and 2019, the
Company sold $94 and $25,639 in unpaid principal balance (“UPB”) of
forward MSRs, of which none and $20,560 were retained by the
Company as subservicer, respectively.
MSRs measured at fair value are primarily segregated between credit
sensitive and interest sensitive pools (referred to herein as
“acquisition pools”). Credit sensitive pools are primarily impacted
by borrower performance under specified repayment terms, which most
directly impacts involuntary prepayments and delinquency rates.
Interest sensitive pools are primarily impacted by changes in
forecasted interest rates, which in turn impact voluntary
prepayment speeds.
MSRs measured at fair value are also segregated between investor
type into agency and non-agency pools (referred to herein as
“investor pools”) based upon contractual servicing agreements with
investors at the respective balance sheet date to evaluate the MSR
portfolio and fair value of the portfolio.
The following table provides a breakdown of UPB and fair value for
the Company’s forward MSRs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
Forward MSRs - UPB and fair value breakdown |
UPB |
|
Fair Value |
|
UPB |
|
Fair Value |
Acquisition Pools |
|
|
|
|
|
|
|
Credit sensitive |
$ |
122,422 |
|
|
$ |
1,206 |
|
|
$ |
147,895 |
|
|
$ |
1,613 |
|
Interest sensitive |
144,245 |
|
|
1,457 |
|
|
148,887 |
|
|
1,883 |
|
Total |
$ |
266,667 |
|
|
$ |
2,663 |
|
|
$ |
296,782 |
|
|
$ |
3,496 |
|
|
|
|
|
|
|
|
|
Investor Pools |
|
|
|
|
|
|
|
Agency(1)
|
$ |
220,139 |
|
|
$ |
2,234 |
|
|
$ |
240,688 |
|
|
$ |
2,944 |
|
Non-agency(2)
|
46,528 |
|
|
429 |
|
|
56,094 |
|
|
552 |
|
Total |
$ |
266,667 |
|
|
$ |
2,663 |
|
|
$ |
296,782 |
|
|
$ |
3,496 |
|
(1)Agency
investors primarily consist of government sponsored enterprises
(“GSE”), such as the Federal National Mortgage Association (“Fannie
Mae” or “FNMA”) and the Federal Home Loan Mortgage Corp (“Freddie
Mac” or “FHLMC”), and the Government National Mortgage
Association (“Ginnie Mae” or “GNMA”).
(2)Non-agency
investors consist of investors in private-label
securitizations.
The Company used the following key weighted-average inputs and
assumptions in estimating the fair value of forward
MSRs:
|
|
|
|
|
|
|
|
|
|
|
|
Forward MSRs - Key inputs and assumptions |
September 30, 2020 |
|
December 31, 2019 |
Total MSR Portfolio |
|
|
|
Discount rate |
9.5 |
% |
|
9.7 |
% |
Prepayment speeds |
14.4 |
% |
|
13.1 |
% |
Average life |
5.2 years |
|
5.8 years |
|
|
|
|
Acquisition Pools |
|
|
|
Credit Sensitive |
|
|
|
Discount rate |
10.0 |
% |
|
10.4 |
% |
Prepayment speeds |
12.6 |
% |
|
12.7 |
% |
Average life |
5.6 years |
|
6.0 years |
|
|
|
|
Interest Sensitive |
|
|
|
Discount rate |
9.0 |
% |
|
9.1 |
% |
Prepayment speeds |
15.9 |
% |
|
13.5 |
% |
Average life |
4.9 years |
|
5.7 years |
|
|
|
|
Investor Pools |
|
|
|
Agency |
|
|
|
Discount rate |
8.9 |
% |
|
9.0 |
% |
Prepayment speeds |
14.5 |
% |
|
13.0 |
% |
Average life |
5.1 years |
|
5.8 years |
|
|
|
|
Non-agency |
|
|
|
Discount rate |
12.0 |
% |
|
12.6 |
% |
Prepayment speeds |
13.9 |
% |
|
13.8 |
% |
Average life |
5.5 years |
|
6.2 years |
The following table shows the hypothetical effect on the fair value
of the Company’s forward MSRs when applying certain unfavorable
variations of key assumptions to these assets for the dates
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate |
|
Total Prepayment Speeds
|
Forward MSRs - Hypothetical Sensitivities |
100 bps
Adverse
Change
|
|
200 bps
Adverse
Change
|
|
10%
Adverse
Change
|
|
20%
Adverse
Change
|
September 30, 2020 |
|
|
|
|
|
|
|
Mortgage servicing rights |
$ |
(87) |
|
|
$ |
(179) |
|
|
$ |
(157) |
|
|
$ |
(321) |
|
|
|
|
|
|
|
|
|
December 31, 2019 |
|
|
|
|
|
|
|
Mortgage servicing rights |
$ |
(127) |
|
|
$ |
(245) |
|
|
$ |
(165) |
|
|
$ |
(317) |
|
These hypothetical sensitivities should be evaluated with care. The
effect on fair value of a 10% adverse change in assumptions
generally cannot be determined because the relationship of the
change in assumptions to the fair value may not be linear.
Additionally, the impact of a variation in a particular assumption
on the fair value is calculated while holding other assumptions
constant. In reality, changes in one factor may lead to changes in
other factors, which could impact the above hypothetical
effects.
Reverse Mortgage Servicing Rights and Liabilities - Amortized
Cost
The Company services certain HECM reverse mortgage loans with an
unpaid principal balance of $20,006 and $22,725 as of
September 30, 2020 and December 31, 2019, respectively.
The following table sets forth the activities of reverse MSRs and
mortgage servicing liabilities (“MSL”):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
Reverse MSRs and Liabilities - Amortized Cost |
Assets |
|
Liabilities |
|
Assets |
|
Liabilities |
Balance - beginning of period |
$ |
6 |
|
|
$ |
61 |
|
|
$ |
11 |
|
|
$ |
71 |
|
Amortization/accretion |
— |
|
|
(17) |
|
|
2 |
|
|
(39) |
|
Adjustments(1)
|
— |
|
|
— |
|
|
(6) |
|
|
37 |
|
Balance - end of the period |
$ |
6 |
|
|
$ |
44 |
|
|
$ |
7 |
|
|
$ |
69 |
|
Fair value - end of period |
$ |
6 |
|
|
$ |
7 |
|
|
$ |
7 |
|
|
$ |
41 |
|
(1)Reverse
MSR and MSL net adjustments recorded by the Company during the nine
months ended September 30, 2019 primarily relate to the
finalization of the preliminary fair value estimates recorded in
connection with the merger of Nationstar Mortgage Holdings, Inc.
(the “Merger”).
Management evaluates reverse MSRs and MSLs each reporting period
for impairment. Based on management’s assessment at
September 30, 2020, no impairment or increased obligation was
needed.
Excess Spread Financing - Fair Value
The Company had excess spread financing liability of $1,044 and
$1,311 as of September 30, 2020 and December 31, 2019,
respectively.
The Company used the following key weighted-average assumptions in
the Company’s valuation of excess spread financing:
|
|
|
|
|
|
|
|
|
|
|
|
Excess Spread Financing Key Assumptions |
September 30, 2020 |
|
December 31, 2019 |
Discount rate |
11.9 |
% |
|
11.6 |
% |
Prepayment speeds |
13.6 |
% |
|
12.6 |
% |
Recapture rate |
19.1 |
% |
|
20.1 |
% |
Average life |
5.3 years |
|
5.8 years |
The following table shows the hypothetical effect on the Company’s
excess spread financing fair value when applying certain
unfavorable variations of key assumptions to these liabilities for
the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate |
|
Prepayment Speeds
|
Excess Spread Financing - Hypothetical Sensitivities |
100 bps
Adverse
Change
|
|
200 bps
Adverse
Change
|
|
10%
Adverse
Change
|
|
20%
Adverse
Change
|
September 30, 2020 |
|
|
|
|
|
|
|
Excess spread financing |
$ |
35 |
|
|
$ |
72 |
|
|
$ |
44 |
|
|
$ |
92 |
|
|
|
|
|
|
|
|
|
December 31, 2019 |
|
|
|
|
|
|
|
Excess spread financing |
$ |
46 |
|
|
$ |
95 |
|
|
$ |
46 |
|
|
$ |
96 |
|
These hypothetical sensitivities should be evaluated with care. The
effect on fair value of a 10% variation in assumptions generally
cannot be determined because the relationship of the change in
assumptions to the fair value may not be linear. Additionally, the
impact of a variation in a particular assumption on the fair value
is calculated while holding other assumptions constant. In reality,
changes in one factor may lead to changes in other factors, which
could impact the above hypothetical effects. Also, a positive
change in the above assumptions would not necessarily correlate
with the corresponding decrease in the net carrying amount of the
excess spread financing. Excess spread financing’s cash flow
assumptions that are utilized in determining fair value are based
on the related cash flow assumptions used in the financed MSRs. Any
fair value change recognized in the financed MSRs attributable to
related cash flows assumptions would inherently have an inverse
impact on the carrying amount of the related excess spread
financing.
Mortgage Servicing Rights Financing - Fair Value
The Company had MSR financing liability of $47 and $37 as of
September 30, 2020 and December 31, 2019,
respectively.
The following table sets forth the key weighted-average assumptions
used in the valuation of the MSR financing liability:
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Servicing Rights Financing Key Assumptions |
September 30, 2020 |
|
December 31, 2019 |
Advance financing and counterparty fee rates |
8.2 |
% |
|
8.9 |
% |
Annual advance recovery rates |
20.2 |
% |
|
18.8 |
% |
Servicing Segment Revenues
The following table sets forth the items comprising total revenues
for the Servicing segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
Total Revenues - Servicing |
2020 |
|
2019 |
|
2020 |
|
2019 |
Contractually specified servicing fees(1)
|
$ |
282 |
|
|
$ |
305 |
|
|
$ |
864 |
|
|
$ |
893 |
|
Other service-related income(1)
|
59 |
|
|
51 |
|
|
170 |
|
|
133 |
|
Incentive and modification income(1)
|
12 |
|
|
12 |
|
|
30 |
|
|
29 |
|
Late fees(1)
|
18 |
|
|
30 |
|
|
65 |
|
|
82 |
|
Reverse servicing fees |
6 |
|
|
7 |
|
|
19 |
|
|
24 |
|
Mark-to-market adjustments(2)
|
(29) |
|
|
(83) |
|
|
(673) |
|
|
(607) |
|
Counterparty revenue share(3)
|
(104) |
|
|
(86) |
|
|
(268) |
|
|
(204) |
|
Amortization, net of accretion(4)
|
(112) |
|
|
(73) |
|
|
(290) |
|
|
(152) |
|
Total revenues - Servicing |
$ |
132 |
|
|
$ |
163 |
|
|
$ |
(83) |
|
|
$ |
198 |
|
(1)The
Company recognizes revenue on an earned basis for services
performed. Amounts include subservicing related
revenues.
(2)Mark-to-market
(“MTM”) adjustments include fair value adjustments on MSR, excess
spread financing and MSR financing liabilities. The amount of MSR
MTM includes the impact of negative modeled cash flows which have
been transferred to reserves on advances and other receivables. The
negative modeled cash flows relate to advances and other
receivables associated with inactive and liquidated loans that are
no longer part of the MSR portfolio. The impact of negative modeled
cash flows was $7 and $18 during the three months ended September
30, 2020 and 2019, and $20 and $46 during the nine months ended
September 30, 2020 and 2019, respectively.
(3)Counterparty
revenue share represents the excess servicing fee that the Company
pays to the counterparties under the excess spread financing
arrangements and the payments made associated with MSR financing
arrangements.
(4)Amortization
is net of excess spread accretion of $96 and $77 and MSL accretion
of $4 and $10 during the three months ended September 30, 2020 and
2019, respectively. During the nine months ended September 30, 2020
and 2019, amortization is net of excess spread accretion of $243
and $172 and MSL accretion of $17 and $39,
respectively.
3. Advances and Other Receivables, Net
Advances and other receivables, net, consists of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
Advances and Other Receivables, Net |
September 30, 2020 |
|
December 31, 2019 |
Servicing advances, net of $92 and $131 purchase discount,
respectively
|
$ |
746 |
|
|
$ |
970 |
|
Receivables from agencies, investors and prior servicers, net of
$21 and $21 purchase discount, respectively
|
190 |
|
|
193 |
|
Reserves |
(191) |
|
|
(175) |
|
Total advances and other receivables, net |
$ |
745 |
|
|
$ |
988 |
|
The following table sets forth the activities of the servicing
reserves for advances and other receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
Reserves for Advances and Other Receivables |
2020 |
|
|
2019 |
|
2020 |
|
2019 |
Balance - beginning of period |
$ |
216 |
|
|
|
$ |
98 |
|
|
$ |
168 |
|
|
$ |
47 |
|
Provision and other additions(1)
|
13 |
|
|
|
35 |
|
|
72 |
|
|
102 |
|
Write-offs |
(38) |
|
|
|
(3) |
|
|
(49) |
|
|
(19) |
|
Balance - end of period |
$ |
191 |
|
|
|
$ |
130 |
|
|
$ |
191 |
|
|
$ |
130 |
|
(1)The
Company recorded a provision
of $7 and $18 through the MTM adjustments in revenues - service
related, net, in the consolidated statements of operations during
the three months ended September 30, 2020 and 2019, respectively,
and $20 and $46 during the nine months ended September 30, 2020 and
2019, respectively, for inactive and liquidated
loans
that are no longer part of the MSR portfolio. Other additions
represent reclassifications of required reserves provisioned within
other balance sheet accounts as associated serviced loans become
inactive or liquidate.
Purchase Discount for Advances and Other Receivables
The following tables set forth the activities of the purchase
discounts for advances and other receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020 |
|
Three Months Ended September 30, 2019 |
Purchase Discount for Advances and Other Receivables |
Servicing Advances |
|
Receivables from Agencies, Investors and Prior
Servicers |
|
Servicing Advances |
|
Receivables from Agencies, Investors and Prior
Servicers |
Balance - beginning of period |
$ |
117 |
|
|
$ |
21 |
|
|
$ |
156 |
|
|
$ |
48 |
|
Utilization of purchase discounts |
(25) |
|
|
— |
|
|
(8) |
|
|
— |
|
Balance - end of period |
$ |
92 |
|
|
$ |
21 |
|
|
$ |
148 |
|
|
$ |
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020 |
|
Nine Months Ended September 30, 2019 |
Purchase Discount for Advances and Other Receivables |
Servicing Advances |
|
Receivables from Agencies, Investors and Prior
Servicers |
|
Servicing Advances |
|
Receivables from Agencies, Investors and Prior
Servicers |
Balance - beginning of period |
$ |
131 |
|
|
$ |
21 |
|
|
$ |
205 |
|
|
$ |
48 |
|
Addition from acquisition |
— |
|
|
— |
|
|
19 |
|
|
— |
|
Utilization of purchase discounts |
(39) |
|
|
— |
|
|
(76) |
|
|
— |
|
Balance - end of period |
$ |
92 |
|
|
$ |
21 |
|
|
$ |
148 |
|
|
$ |
48 |
|
Credit Loss for Advances and Other Receivables
As described in
Note 1, Nature of Business and Basis of
Presentation,
advances and other receivables are within the scope of
ASU 2016-13, and the Company modified its accounting policy
regarding its assessment of reserves for credit-related losses in
accordance with CECL
framework. During the three and nine months ended September 30,
2020, the Company increased the CECL reserve by $13 and $27,
respectively. As of September 30, 2020, the total CECL reserve
was $44, of which $27 and $17 was recorded in reserves and purchase
discount for advances and other receivables,
respectively.
Based upon the Company’s application of ASU 2016-13, the Company
determined that the credit-related risk associated with applicable
financial instruments typically increase with the passage of time.
The CECL reserve methodology considers these financial instruments
collectible to a point in time of
39 months. Any
projected remaining balance at the end of the collection period is
considered a loss and factors into the overall CECL loss rate
required.
4. Reverse Mortgage Interests, Net
Reverse mortgage interests, net, consists of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
Reverse Mortgage Interests, Net |
September 30, 2020 |
|
December 31, 2019 |
Participating interests in HECM mortgage-backed securities
(“HMBS”) |
$ |
3,663 |
|
|
$ |
4,282 |
|
Other interests securitized |
1,002 |
|
|
994 |
|
Unsecuritized interests |
920 |
|
|
1,117 |
|
Purchase discount, net |
(125) |
|
|
(114) |
|
Total reverse mortgage interests, net |
$ |
5,460 |
|
|
$ |
6,279 |
|
Participating Interests in HMBS
The Company does not originate reverse mortgages, but during the
nine months ended September 30, 2020 and 2019, a total of
$134
and $211 in UPB associated with new draws on existing loans was
transferred to GNMA and securitized by the Company,
respectively.
In
March 2019, the Company entered into an agreement with Fannie Mae
for the transfer of reverse mortgage loans. As a result, $61 was
transferred from Fannie Mae and securitized into GNMA HMBS during
the nine months ended September 30, 2019. There was no such
activity during the nine months ended September 30,
2020.
Other Interests Securitized
The reverse mortgage
interests under other interest securitized have been transferred to
private securitization trusts and are accounted for as a secured
borrowing. During the nine months ended September 30, 2020, the
Company securitized a total of $516 UPB through Trust 2020-1 and a
total of $337 UPB from Trust 2018-2 and Trust 2018-3 was called and
the related debt was extinguished. During the nine months ended
September 30, 2019, the Company securitized a total of $398 UPB
through Trust 2019-1 and a total of $249 UPB from Trust 2017-2 was
called and the related debt was extinguished. The Company sold $20
UPB of Trust 2018-3 during the nine months ended September 30,
2019. Refer to Other Nonrecourse Debt in
Note 9, Indebtedness
for additional information.
Unsecuritized Interests
Unsecuritized interests in reverse mortgages consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
Unsecuritized interests |
September 30, 2020 |
|
December 31, 2019 |
Repurchased HECM loans (exceeds 98% of their Max Claim Amount
(“MCA”)) |
$ |
634 |
|
|
$ |
789 |
|
HECM related receivables(1)
|
213 |
|
|
250 |
|
Funded borrower draws not yet securitized |
56 |
|
|
64 |
|
Real estate owned (“REO”) related receivables |
17 |
|
|
14 |
|
Total unsecuritized interests
|
$ |
920 |
|
|
$ |
1,117 |
|
(1)HECM
related receivables consist primarily of receivables from FNMA for
corporate advances and service fees and claims receivables from the
U.S. Department of Housing and Urban Development (“HUD”) on reverse
mortgage interests.
The Company repurchased a total of $912 and $2,132 of HECM loans
out of GNMA HMBS securitizations during the nine months ended
September 30, 2020 and 2019, respectively, of which $244 and $561
were subsequently assigned to a third party in accordance with
applicable servicing agreements, respectively. To the extent a loan
is not subject to applicable servicing agreements and assigned to a
third party, the loan is either subject to assignment to HUD, per
contractual obligations with GNMA, liquidated via a payoff from the
borrower or liquidated via a foreclosure according to the terms of
the underlying mortgage. The Company assigned a total of $630 and
$1,458 of HECM loans to HUD during the nine months ended September
30, 2020 and 2019, respectively.
Purchase Discount, net, for Reverse Mortgage Interests
The following table sets forth the activities of the purchase
discounts, net, for reverse mortgage interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
Purchase discount, net, for reverse mortgage
interests(1)
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Balance - beginning of period |
$ |
(127) |
|
|
$ |
(163) |
|
|
$ |
(114) |
|
|
$ |
(164) |
|
Adjustments(2)
|
— |
|
|
— |
|
|
— |
|
|
(24) |
|
Utilization of purchase discounts(3)
|
8 |
|
|
40 |
|
|
27 |
|
|
80 |
|
Amortization, net of accretion |
(6) |
|
|
(1) |
|
|
(38) |
|
|
(16) |
|
Balance - end of period |
$ |
(125) |
|
|
$ |
(124) |
|
|
$ |
(125) |
|
|
$ |
(124) |
|
(1)Net
position as certain items are in a premium/(discount) position,
based on the characteristics of underlying tranches of
loans.
(2)Adjustments
during the nine months ended September 30, 2019 due to revised cost
to service assumption utilized in the valuation of reverse mortgage
assets and liabilities acquired from the Merger.
(3)Utilization
of purchase discounts on liquidated loans, for which the remaining
receivable was written off.
Credit Loss for Reverse Mortgage Interests
As described in
Note 1, Nature of Business and Basis of
Presentation,
reverse mortgage interests are within the scope of
ASU 2016-13, requiring an assessment of reserves regarding
credit-related losses in accordance with the CECL framework. Upon
applying ASU 2016-13, the Company determined that credit-related
losses are immaterial given the government insured nature of the
HECM loan product. Any expected credit-related losses are
contemplated in the Company’s existing reserve methodology due to
the nature of this financial instrument. Accordingly, no cumulative
effect adjustment was required upon adoption of ASU 2016-13 on
January 1, 2020 and
no additional CECL reserve was recorded as of September 30,
2020.
The credit-risk characteristics of reverse mortgage interests do
not vary with time as the financial instruments have no contractual
life or financial profile as the primary counterparty is the
government agency insuring the loans.
Reverse Mortgage Interest Income
Total interest earned on the Company’s reverse mortgage interests
was
$41 and
$74 during the three months ended September 30, 2020 and 2019,
respectively, and
$158
and $241 during the nine months ended September 30, 2020 and 2019,
respectively.
5. Mortgage Loans Held for Sale
Mortgage loans held for sale are recorded at fair value as set
forth below:
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Loans Held for Sale |
September 30, 2020 |
|
December 31, 2019 |
Mortgage loans held for sale – UPB |
$ |
3,642 |
|
|
$ |
3,949 |
|
Mark-to-market adjustment(1)
|
175 |
|
|
128 |
|
Total mortgage loans held for sale |
$ |
3,817 |
|
|
$ |
4,077 |
|
(1)The
mark-to-market adjustment includes net change in unrealized
gain/loss, premium on correspondent loans and fees on
direct-to-consumer loans. The mark-to-market adjustment is recorded
in net gain on mortgage loans held for sale in the consolidated
statements of operations.
The following table sets forth the activities of mortgage loans
held for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
Mortgage Loans Held for Sale |
2020 |
|
2019 |
Balance - beginning of period |
$ |
4,077 |
|
|
$ |
1,631 |
|
Loans sold |
(42,185) |
|
|
(27,413) |
|
Mortgage loans originated and purchased, net of fees |
38,709 |
|
|
28,209 |
|
Repurchase of loans out of Ginnie Mae securitizations |
3,173 |
|
|
1,823 |
|
Net change in unrealized gain (loss) of loans held for
sale |
36 |
|
|
2 |
|
Net transfers of mortgage loans held for sale(1)
|
7 |
|
|
15 |
|
Balance - end of period |
$ |
3,817 |
|
|
$ |
4,267 |
|
(1)Amount
reflects transfers to other assets for loans
transitioning into REO status and transfers to advances and
other receivables, net, for claims made on certain government
insurance mortgage loans. Transfers out are net of transfers in
upon receipt of proceeds from an REO sale or claim
filing.
During the nine months ended September 30, 2020 and 2019, the
Company received proceeds of $43,040 and $27,778, respectively, on
the sale of mortgage loans held for sale, resulting in gains of
$855 and $365, respectively.
The total UPB and fair value of mortgage loans held for sale on
non-accrual status was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
Mortgage Loans Held for Sale |
UPB |
|
Fair Value |
|
UPB |
|
Fair Value |
Non-accrual(1)
|
$ |
49 |
|
|
$ |
39 |
|
|
$ |
29 |
|
|
$ |
22 |
|
(1)Non-accrual
UPB includes $37 and $25 of UPB related to Ginnie Mae repurchased
loans as of September 30, 2020 and December 31, 2019,
respectively.
The total UPB of mortgage loans held for sale for which the Company
has begun formal foreclosure proceedings was $20 and $21 as of
September 30, 2020 and December 31, 2019,
respectively.
6. Loans Subject to Repurchase from Ginnie Mae
Forward loans are sold to Ginnie Mae in conjunction with the
issuance of mortgage backed securities. The Company, as the issuer
of the mortgage backed securities, has the unilateral right to
repurchase any individual loan in a Ginnie Mae securitization pool
if that loan meets certain criteria, including payments not being
received from borrowers for greater than 90 days. Once the Company
has the unilateral right to repurchase a delinquent loan, it has
effectively regained control over the loan and recognizes these
rights to the loan on its consolidated balance sheets and
establishes a corresponding repurchase
liability regardless of the Company’s intention to repurchase the
loan. The Company had loans subject to repurchase from Ginnie Mae
of
$5,395
and $560 as
of September 30, 2020 and December 31, 2019,
respectively, which are included in both other assets and payables
and other liabilities in the consolidated balance sheets.
Loans subject to repurchase from Ginnie Mae as of
September 30, 2020 include
$5,095
loans in forbearance related to
the Coronavirus Aid, Relief, and Economic Security Act (“CARES
Act”)
whereby no payments have been received from borrowers for greater
than 90 days.
7. Goodwill and Intangible Assets
The Company had goodwill of $120 as of September 30, 2020 and
December 31, 2019. The Company had intangible assets of
$45
and $74 as of September 30, 2020 and December 31, 2019,
respectively. Goodwill and intangible assets are included in other
assets within the consolidated balance sheets.
8. Derivative Financial Instruments
Derivative instruments are used as part of the overall strategy to
manage exposure to market risks primarily associated with
fluctuations in interest rates related to originations. Derivative
instruments utilized by the Company primarily include interest rate
lock commitments (“IRLCs”), loan purchase commitments (“LPCs”),
forward Mortgage Backed Securities (“MBS”) purchase commitments,
Eurodollar and Treasury futures and interest rate swap
agreements.
The following tables provide the outstanding notional balances,
fair values of outstanding positions and recorded gains/(losses)
for the derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
|
|
Nine Months Ended September 30, 2020 |
Derivative Financial Instruments |
Expiration
Dates |
|
Outstanding
Notional |
|
Fair
Value |
|
|
|
Gains/(Losses) |
Assets |
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
|
|
|
|
|
|
|
|
Loan sale commitments |
2020 |
|
$ |
1,908 |
|
|
$ |
75 |
|
|
|
|
$ |
43 |
|
Derivative financial instruments |
|
|
|
|
|
|
|
|
|
IRLCs |
2020-2021 |
|
10,967 |
|
|
414 |
|
|
|
|
279 |
|
LPCs |
2020 |
|
5,217 |
|
|
38 |
|
|
|
|
26 |
|
Forward MBS trades |
2020-2021 |
|
11,452 |
|
|
23 |
|
|
|
|
17 |
|
Total derivative financial instruments - assets |
|
|
$ |
27,636 |
|
|
$ |
475 |
|
|
|
|
$ |
322 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
|
|
|
|
|
|
|
|
IRLCs |
2020 |
|
$ |
2 |
|
|
$ |
— |
|
|
|
|
$ |
— |
|
LPCs |
2020 |
|
598 |
|
|
2 |
|
|
|
|
(1) |
|
Forward MBS trades |
2020-2021 |
|
15,974 |
|
|
42 |
|
|
|
|
30 |
|
Total derivative financial instruments - liabilities |
|
|
$ |
16,574 |
|
|
$ |
44 |
|
|
|
|
$ |
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
Nine Months Ended September 30, 2019 |
Derivative Financial Instruments |
Expiration
Dates |
|
Outstanding
Notional |
|
Fair
Value |
|
Gains/(Losses) |
Assets |
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
|
|
|
|
|
|
Loan sale commitments |
2019 |
|
$ |
1,508 |
|
|
$ |
35 |
|
|
$ |
9 |
|
Derivative financial instruments |
|
|
|
|
|
|
|
IRLCs |
2019 |
|
4,964 |
|
|
144 |
|
|
84 |
|
LPCs |
2019 |
|
1,397 |
|
|
18 |
|
|
17 |
|
Forward MBS trades |
2019 |
|
3,054 |
|
|
8 |
|
|
6 |
|
Eurodollar futures |
2019-2021 |
|
6 |
|
|
— |
|
|
— |
|
Total derivative financial instruments - assets |
|
|
$ |
9,421 |
|
|
$ |
170 |
|
|
$ |
107 |
|
Liabilities |
|
|
|
|
|
|
|
Derivative financial instruments |
|
|
|
|
|
|
|
IRLCs |
2019 |
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
— |
|
LPCs |
2019 |
|
547 |
|
|
3 |
|
|
3 |
|
Forward MBS trades |
2019 |
|
5,667 |
|
|
16 |
|
|
(8) |
|
Eurodollar futures |
2019-2021 |
|
8 |
|
|
— |
|
|
— |
|
Total derivative financial instruments - liabilities |
|
|
$ |
6,237 |
|
|
$ |
19 |
|
|
$ |
(5) |
|
Associated with the Company’s derivatives are
$14
and $6 in collateral deposits on derivative instruments recorded in
other assets in the Company’s consolidated balance sheets as of
September 30, 2020 and December 31, 2019, respectively.
The Company does not offset fair value amounts recognized for
derivative instruments with amounts collected or deposited on
derivative instruments in the consolidated balance
sheets.
9. Indebtedness
Notes Payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
|
Interest Rate |
|
Maturity Date |
|
Collateral |
|
Capacity Amount |
|
Outstanding |
|
Collateral Pledged |
|
Outstanding |
|
Collateral Pledged |
Advance Facilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$875 advance facility(1)
|
|
CP+2.5% to 6.5%
|
|
April 2021 |
|
Servicing advance receivables |
|
$ |
875 |
|
|
$ |
144 |
|
|
$ |
169 |
|
|
$ |
37 |
|
|
$ |
88 |
|
$640 advance facility(2)
|
|
LIBOR+3.9%
|
|
August 2022 |
|
Servicing advance receivables |
|
640 |
|
|
144 |
|
|
196 |
|
|
— |
|
|
— |
|
$425 advance facility(3)
|
|
LIBOR+2.8% to 6.5%
|
|
October 2021 |
|
Servicing advance receivables |
|
425 |
|
|
206 |
|
|
261 |
|
|
224 |
|
|
285 |
|
$250 advance facility(4)
|
|
LIBOR+1.5% to 2.6%
|
|
December 2020 |
|
Servicing advance receivables |
|
250 |
|
|
— |
|
|
— |
|
|
98 |
|
|
167 |
|
$100 advance facility |
|
LIBOR+2.5%
|
|
January 2021 |
|
Servicing advance receivables |
|
100 |
|
|
75 |
|
|
102 |
|
|
63 |
|
|
125 |
|
Advance facilities principal amount |
|
|
|
|
|
569 |
|
|
728 |
|
|
422 |
|
|
665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse Facilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,500 warehouse facility |
|
LIBOR+1.7%
|
|
June 2021 |
|
Mortgage loans or MBS |
|
1,500 |
|
|
666 |
|
|
634 |
|
|
759 |
|
|
733 |
|
$1,200 warehouse facility |
|
LIBOR+1.5% to 3.0%
|
|
November 2020 |
|
Mortgage loans or MBS |
|
1,200 |
|
|
564 |
|
|
610 |
|
|
683 |
|
|
724 |
|
$1,050 warehouse facility(5)
|
|
LIBOR+1.8% to 3.9%
|
|
September 2022 |
|
Mortgage loans or MBS |
|
1,050 |
|
|
627 |
|
|
679 |
|
|
589 |
|
|
656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
|
Interest Rate |
|
Maturity Date |
|
Collateral |
|
Capacity Amount |
|
Outstanding |
|
Collateral Pledged |
|
Outstanding |
|
Collateral Pledged |
$750 warehouse facility |
|
LIBOR+1.8%
|
|
August 2021 |
|
Mortgage loans or MBS |
|
750 |
|
|
574 |
|
|
591 |
|
|
— |
|
|
— |
|
$750 warehouse facility |
|
LIBOR+1.7% to 2.8%
|
|
October 2021 |
|
Mortgage loans or MBS |
|
750 |
|
|
472 |
|
|
481 |
|
|
411 |
|
|
425 |
|
$750 warehouse facility(6)
|
|
LIBOR+2.3%
|
|
September 2022 |
|
Mortgage loans or MBS |
|
750 |
|
|
105 |
|
|
135 |
|
|
54 |
|
|
78 |
|
$700 warehouse facility(7)
|
|
LIBOR+1.3% to 2.2%
|
|
November 2020 |
|
Mortgage loans or MBS |
|
700 |
|
|
488 |
|
|
505 |
|
|
469 |
|
|
488 |
|
$600 warehouse facility |
|
LIBOR+2.2%
|
|
February 2021 |
|
Mortgage loans or MBS |
|
600 |
|
|
156 |
|
|
185 |
|
|
174 |
|
|
202 |
|
$500 warehouse facility |
|
LIBOR+2.5% to 4.0%
|
|
May 2021 |
|
Mortgage loans or MBS |
|
500 |
|
|
— |
|
|
— |
|
|
336 |
|
|
349 |
|
$300 warehouse facility |
|
LIBOR+1.4%
|
|
January 2021 |
|
Mortgage loans or MBS |
|
300 |
|
|
258 |
|
|
258 |
|
|
136 |
|
|
136 |
|
$250 warehouse facility(8)
|
|
LIBOR+1.4% to 2.3%
|
|
December 2020 |
|
Mortgage loans or MBS |
|
250 |
|
|
— |
|
|
— |
|
|
762 |
|
|
783 |
|
$200 warehouse facility |
|
LIBOR+1.8%
|
|
April 2021 |
|
Mortgage loans or MBS |
|
200 |
|
|
72 |
|
|
74 |
|
|
27 |
|
|
27 |
|
$200 warehouse facility |
|
LIBOR+1.3%
|
|
November 2020 |
|
Mortgage loans or MBS |
|
200 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
$50 warehouse facility |
|
LIBOR+1.8% to 4.8%
|
|
April 2021 |
|
Mortgage loans or MBS |
|
50 |
|
|
43 |
|
|
45 |
|
|
11 |
|
|
15 |
|
$40 warehouse facility |
|
LIBOR+3.3%
|
|
January 2021 |
|
Mortgage loans or MBS |
|
40 |
|
|
3 |
|
|
4 |
|
|
5 |
|
|
6 |
|
Warehouse facilities principal amount |
|
4,028 |
|
|
4,201 |
|
|
4,416 |
|
|
4,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSR Facilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$450 warehouse facility(9)
|
|
LIBOR+5.1%
|
|
May 2021 |
|
MSR |
|
450 |
|
— |
|
— |
|
150 |
|
945 |
$260 warehouse facility(2)
|
|
LIBOR+3.9%
|
|
August 2022 |
|
MSR |
|
260 |
|
256 |
|
659 |
|
— |
|
— |
$200 warehouse facility(10)
|
|
LIBOR+3.5%
|
|
August 2021 |
|
MSR |
|
200 |
|
— |
|
187 |
|
— |
|
200 |
$150 warehouse facility(5)
|
|
LIBOR+3.8%
|
|
September 2022 |
|
MSR |
|
150 |
|
— |
|
149 |
|
— |
|
130 |
$50 warehouse facility |
|
LIBOR+2.8%
|
|
November 2020 |
|
MSR |
|
50 |
|
10 |
|
80 |
|
10 |
|
84 |
MSR facilities principal amount |
|
266 |
|
1,075 |
|
160 |
|
1,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance, warehouse and MSR facilities principal amount |
|
4,863 |
|
|
$ |
6,004 |
|
4,998 |
|
|
$ |
6,646 |
|
Unamortized debt issuance costs |
|
|
|
|
|
|
|
(12) |
|
|
|
(1) |
|
|
|
Advance and warehouse facilities, net |
|
$ |
4,851 |
|
|
|
$ |
4,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pledged Collateral for warehouse and MSR facilities: |
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
|
|
|
|
|
|
$ |
3,560 |
|
|
$ |
3,637 |
|
|
$ |
3,826 |
|
|
$ |
3,931 |
|
Reverse mortgage interests |
|
|
|
|
|
|
|
468 |
|
|
564 |
|
|
590 |
|
|
691 |
|
MSR |
|
|
|
|
|
|
|
266 |
|
|
1,075 |
|
|
160 |
|
|
1,359 |
|
(1)The
capacity amount for this advance facility increased from $125 to
$875 in April 2020.
(2)Total
capacity for this facility is $900, of which $640 is internally
allocated for Advance financing and $260 is internally allocated
for MSR financing; capacity is fully fungible and is not restricted
by these allocations.
(3)The
capacity amount for this advance facility increased from $325 to
$425 in April 2020.
(4)This
advance facility was terminated and transferred to another advance
facility in April 2020.
(5)Total
capacity amount for this facility is
$1,200,
of which
$150
is a sublimit for MSR financing. The capacity amount increased
from
$800
to
$1,200
in September 2020.
(6)The
capacity amount for this warehouse facility increased from $200 to
$750 in September 2020.
(7)The
capacity amount for this warehouse facility was subsequently
increased to $1,500 in October 2020 with a maturity date of October
2021.
(8)The
capacity amount for this warehouse facility decreased from $1,000
to $250 in May 2020.
(9)This
MSR facility was terminated in August 2020.
(10)The
capacity amount for this MSR facility decreased from $400 to $200
in August 2020.
Unsecured Senior Notes
Unsecured senior notes consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured senior notes |
September 30, 2020 |
|
December 31, 2019 |
$850 face value, 5.500% interest rate payable semi-annually, due
August 2028(1)
|
$ |
850 |
|
|
$ |
— |
|
$750 face value, 9.125% interest rate payable semi-annually, due
July 2026
|
750 |
|
|
750 |
|
$600 face value, 6.000% interest rate payable semi-annually, due
January 2027(2)
|
600 |
|
|
— |
|
$600 face value, 6.500% interest rate payable semi-annually, due
July 2021(3)
|
— |
|
|
492 |
|
$300 face value, 6.500% interest rate payable semi-annually, due
June 2022(3)
|
— |
|
|
206 |
|
$950 face value, 8.125% interest rate payable semi-annually, due
July 2023(4)
|
— |
|
|
950 |
|
Unsecured senior notes principal amount |
2,200 |
|
|
2,398 |
|
Unamortized debt issuance costs, premium and discount |
(33) |
|
|
(32) |
|
Unsecured senior notes, net |
$ |
2,167 |
|
|
$ |
2,366 |
|
(1)On
August 6, 2020, the Company completed an offering of $850 aggregate
principal amount of 5.500% Senior Notes due 2028 (the “2028
Notes”)
(2)On
January 16, 2020, the Company completed an offering of $600
aggregate principal amount of 6.000% Senior Notes due 2027 (the
“2027 Notes”).
(3)This
note was redeemed in full on February 15, 2020 using the net
proceeds of the 2027 Notes offering, together with cash on
hand.
(4)This
note was redeemed in full on August 13, 2020 using the net proceeds
of the 2028 Notes offering, together with cash on
hand.
The indentures provide that on or before certain fixed dates, the
Company may redeem up to 40% of the aggregate principal amount of
the unsecured senior notes with the net proceeds of certain equity
offerings at fixed redemption prices, plus accrued and unpaid
interest, to the redemption dates, subject to compliance with
certain conditions. In addition, the Company may redeem all or a
portion of the unsecured senior notes at any time on or after
certain fixed dates at the applicable redemption prices set forth
in the indentures plus accrued and unpaid interest, to the
redemption dates. During the nine months ended September 30, 2020,
the Company repaid $100 in principal of outstanding notes.
Additionally, the Company redeemed $950 and $1,548 in principal of
outstanding notes during the three and nine months ended September
30, 2020, resulting in a net loss of $53 and $52, respectively.
No
notes were repurchased or redeemed during the three and nine months
ended September 30, 2019.
As of September 30, 2020, the expected maturities of the Company’s
unsecured senior notes based on contractual maturities are as
follows:
|
|
|
|
|
|
|
|
|
Year Ending December 31, |
|
Amount |
2020 through 2024 |
|
$ |
— |
|
Thereafter |
|
2,200 |
|
Total unsecured senior notes principal amount |
|
$ |
2,200 |
|
Other Nonrecourse Debt
Other nonrecourse debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
Other nonrecourse debt |
Issue Date |
|
Maturity Date |
|
Interest Rate |
|
Class of Note |
|
Collateral Amount |
|
Outstanding |
|
Outstanding |
Participating interest financing(1)
|
— |
|
— |
|
0.3%-5.6%
|
|
— |
|
$ |
— |
|
|
$ |
3,664 |
|
|
$ |
4,284 |
|
Securitization of nonperforming HECM loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust 2020-1 |
September 2020 |
|
September 2030 |
|
1.3%-7.5%
|
|
A, M1, M2, M3, M4, M5 |
|
519 |
|
|
516 |
|
|
— |
|
Trust 2019-2 |
November 2019 |
|
November 2029 |
|
2.3%-6.0%
|
|
A, M1, M2, M3, M4, M5 |
|
275 |
|
|
259 |
|
|
333 |
|
Trust 2019-1 |
June 2019 |
|
June 2029 |
|
2.7%-6.0%
|
|
A, M1, M2, M3, M4, M5 |
|
248 |
|
|
226 |
|
|
302 |
|
Trust 2018-3(2)
|
November 2018 |
|
November 2028 |
|
3.6%-6.0%
|
|
A, M1, M2, M3, M4, M5 |
|
— |
|
|
— |
|
|
209 |
|
Trust 2018-2(2)
|
July 2018 |
|
July 2028 |
|
3.2%-6.0%
|
|
A, M1, M2, M3, M4, M5 |
|
— |
|
|
— |
|
|
148 |
|
Other nonrecourse debt principal amount |
|
|
|
|
|
|
|
|
|
|
4,665 |
|
|
5,276 |
|
Unamortized debt issuance costs, premium and discount |
|
|
|
|
|
|
|
|
|
|
6 |
|
|
10 |
|
Other nonrecourse debt, net |
|
|
|
|
|
|
|
|
|
|
$ |
4,671 |
|
|
$ |
5,286 |
|
(1)Amounts
represent the Company’s participating interest in GNMA HMBS
securitized portfolios.
(2)As
discussed in
Note 4, Reverse Mortgage Interests, Net,
Trust 2018-3 and Trust 2018-2 were collapsed and the related debt
was extinguished during the nine months ended September 30,
2020.
Financial Covenants
The Company’s credit facilities contain various financial covenants
which primarily relate to required tangible net worth amounts,
liquidity reserves, leverage requirements, and profitability
requirements, which are measured at the Company’s operating
subsidiary, Nationstar Mortgage LLC. The Company was in compliance
with its required financial covenants as of September 30,
2020.
10. Securitizations and Financings
Variable Interest Entities
In the normal course of business, the Company enters into various
types of on- and off-balance sheet transactions with special
purpose entities (“SPEs”) determined to be VIEs, which primarily
consist of securitization trusts established for a limited purpose.
Generally, these SPEs are formed for the purpose of securitization
transactions in which the Company transfers assets to an SPE, which
then issues to investors various forms of debt obligations
supported by those assets.