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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________________________________________________________
 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______                    
Commission file number: 001-14667
NSM-20210630_G1.JPG
________________________________________________________________________________________________________
Mr. Cooper Group Inc.
(Exact name of registrant as specified in its charter)
Delaware   91-1653725
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
8950 Cypress Waters Blvd, Coppell, TX
  75019
(Address of principal executive offices)   (Zip Code)
(469) 549-2000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
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.
Large Accelerated Filer x Accelerated Filer
Non-Accelerated Filer ¨ Smaller reporting company
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 July 22, 2021 was 86,148,567.


MR. COOPER GROUP INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
 
    Page
PART I
Item 1.
3
Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020
3
Condensed Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2021 and 2020
4
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Six Months Ended June 30, 2021 and 2020
5
Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2021 and 2020
7
9
9
16. Segment Information
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2

PART I. Financial Information

Item 1. Financial Statements
MR. COOPER GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions of dollars, except share data)
June 30, 2021 December 31, 2020
  (unaudited)  
Assets
Cash and cash equivalents $ 716  $ 695 
Restricted cash 113  135 
Mortgage servicing rights at fair value 3,307  2,703 
Advances and other receivables, net of reserves of $191 and $208, respectively
837  940 
Mortgage loans held for sale at fair value 6,961  5,720 
Property and equipment, net of accumulated depreciation of $108 and $96, respectively
110  113 
Deferred tax assets, net 1,118  1,339 
Other assets 5,211  7,173 
Assets of discontinued operations 4,935  5,347 
Total assets $ 23,308  $ 24,165 
Liabilities and Stockholders’ Equity
Unsecured senior notes, net $ 2,075  $ 2,074 
Advance and warehouse facilities, net 7,310  6,258 
Payables and other liabilities 4,895  7,159 
MSR related liabilities - nonrecourse at fair value 888  967 
Liabilities of discontinued operations 4,790  5,203 
Total liabilities 19,958  21,661 
Commitments and contingencies (Note 15)
Preferred stock at $0.00001 - 10 million shares authorized, 1.0 million shares issued and outstanding, respectively; aggregate liquidation preference of ten dollars, respectively
  — 
Common stock at $0.01 par value - 300 million shares authorized, 93.2 million and 92.0 million shares issued, respectively
1 
Additional paid-in-capital 1,120  1,126 
Retained earnings 2,434  1,434 
Treasury shares at cost - 7.1 million and 2.6 million shares, respectively
(206) (58)
Total Mr. Cooper stockholders’ equity 3,349  2,503 
Non-controlling interests 1 
Total stockholders’ equity 3,350  2,504 
Total liabilities and stockholders’ equity $ 23,308  $ 24,165 

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited).
3

MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(millions of dollars, except for earnings per share data)
  Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Revenues:
Service related, net $ (8) $ —  $ 572  $ (67)
Net gain on mortgage loans held for sale 582  618  1,261  949 
Total revenues 574  618  1,833  882 
Expenses:
Salaries, wages and benefits 277  238  554  472 
General and administrative 148  160  325  350 
Total expenses 425  398  879  822 
Interest income 51  22  97  97 
Interest expense (119) (127) (245) (266)
Other income, net 486  —  486 
Total other income (expenses), net 418  (105) 338  (168)
Income (loss) from continuing operations before income tax expense (benefit) 567  115  1,292  (108)
Less: Income tax expense (benefit) 140  38  306  (26)
Net income (loss) from continuing operations 427  77  986  (82)
Net income (loss) from discontinued operations 12  (4) 14  (16)
Net income (loss) 439  73  1,000  (98)
Less: Net loss attributable to non-controlling interests   —    (3)
Net income (loss) attributable to Mr. Cooper 439  73  1,000  (95)
Less: Undistributed earnings attributable to participating stockholders 4  9  — 
Net income (loss) attributable to common stockholders $ 435  $ 72  $ 991  $ (95)
Earnings from continuing operations per common share attributable to Mr. Cooper:
Basic $ 4.91  $ 0.82  $ 11.13  $ (0.86)
Diluted $ 4.72  $ 0.81  $ 10.65  $ (0.86)
Earnings from discontinued operations per common share attributable to Mr. Cooper:
Basic $ 0.14  $ (0.04) $ 0.16  $ (0.18)
Diluted $ 0.13  $ (0.04) $ 0.15  $ (0.18)
Earnings per common share attributable to Mr. Cooper:
Basic $ 5.05  $ 0.78  $ 11.29  $ (1.04)
Diluted $ 4.85  $ 0.77  $ 10.80  $ (1.04)
    
See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited).
4

MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(millions of dollars, except share data)
Preferred Stock Common Stock
Shares
(in thousands)
Amount Shares
(in thousands)
Amount Additional Paid-in Capital Retained Earnings Treasury Share Amount Total Mr. Cooper Stockholders’ Equity Non-controlling Interests Total Stockholders’
Equity
Balance at March 31, 2020 1,000  $ —  91,970  $ $ 1,108  $ 961  $ —  $ 2,070  $ (4) $ 2,066 
Shares issued / (surrendered) under incentive compensation plan —  —  52  —  —  —  —  —  —  — 
Share-based compensation —  —  —  —  —  —  — 
Net income —  —  —  —  —  73  —  73  —  73 
Balance at June 30, 2020 1,000  $ —  92,022  $ $ 1,114  $ 1,034  $ —  $ 2,149  $ (4) $ 2,145 
Balance at March 31, 2021 1,000  $   86,135  $ 1  $ 1,113  $ 1,995  $ (206) $ 2,903  $ 1  $ 2,904 
Shares issued / (surrendered) under incentive compensation plan     14    (1)     (1)   (1)
Share-based compensation         8      8    8 
Net income           439    439    439 
Balance at June 30, 2021 1,000  $   86,149  $ 1  $ 1,120  $ 2,434  $ (206) $ 3,349  $ 1  $ 3,350 

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited).

5

MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(millions of dollars, except share data)
Preferred Stock Common Stock
Shares
(in thousands)
Amount Shares
(in thousands)
Amount Additional Paid-in Capital Retained Earnings Treasury Share Amount Total Mr. Cooper Stockholders’ Equity Non-controlling Interests Total Stockholders’
Equity
Balance at January 1, 2020 1,000  $ —  91,118  $ $ 1,109  $ 1,122  $ —  $ 2,232  $ (1) $ 2,231 
Shares issued / (surrendered) under incentive compensation plan —  —  904  —  (5) —  —  (5) —  (5)
Share-based compensation —  —  —  —  10  —  —  10  —  10 
Cumulative effect adjustments pursuant to the
adoption of CECL-related accounting guidance
—  —  —  —  —  —  — 
Net loss —  —  —  —  —  (95) —  (95) (3) (98)
Balance at June 30, 2020 1,000  $ —  92,022  $ $ 1,114  $ 1,034  $ —  $ 2,149  $ (4) $ 2,145 
Balance at January 1, 2021 1,000  $   89,457  $ 1  $ 1,126  $ 1,434  $ (58) $ 2,503  $ 1  $ 2,504 
Shares issued / (surrendered) under incentive compensation plan     1,197    (20)     (20)   (20)
Share-based compensation         14      14    14 
Repurchase of common stock     (4,505)       (148) (148)   (148)
Net income           1,000    1,000    1,000 
Balance at June 30, 2021 1,000  $   86,149  $ 1  $ 1,120  $ 2,434  $ (206) $ 3,349  $ 1  $ 3,350 

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited).

6

MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions of dollars)
Six Months Ended June 30,
  2021 2020
Operating Activities
Net income (loss) $ 1,000  $ (98)
Less: Net income (loss) from discontinued operations 14  (16)
Net income (loss) from continuing operations 986  (82)
Adjustments to reconcile net income (loss) from continuing operations to net cash attributable to operating activities:
Deferred tax expense (benefit) 220  (49)
Net gain on mortgage loans held for sale (1,261) (949)
Provision for servicing and non-servicing reserves 21  11 
Fair value changes and amortization of mortgage servicing rights 190  1,055 
Fair value changes in MSR related liabilities 2  (89)
Depreciation and amortization for property and equipment and intangible assets 31  36 
Gain on sale of business (487) — 
Other operating activities 24  26 
Repurchases of forward loan assets out of Ginnie Mae securitizations (5,812) (2,092)
Mortgage loans originated and purchased for sale, net of fees (47,560) (23,110)
Sales proceeds and loan payment proceeds for mortgage loans held for sale 52,923  26,606 
Changes in assets and liabilities:
Advances and other receivables 48  270 
Other assets 101  (5)
Payables and other liabilities 13  (119)
Net cash attributable to operating activities - continuing operations (561) 1,509 
Net cash attributable to operating activities - discontinued operations 447  557 
Net cash attributable to operating activities (114) 2,066 
Investing Activities
Property and equipment additions, net of disposals (26) (26)
Purchase of forward mortgage servicing rights (217) (31)
Proceeds on sale of forward mortgage servicing rights 13  43 
Other investing activities (17) — 
Net cash attributable to investing activities - continuing operations (247) (14)
Net cash attributable to investing activities - discontinued operations   — 
Net cash attributable to investing activities (247) (14)
Financing Activities
Increase in advance and warehouse facilities 1,047  (520)
Settlements and repayments of excess spread financing (81) (110)
Issuance of unsecured senior notes   600 
Redemption and repayment of unsecured senior notes   (698)
Repurchase of common stock (148) — 
Other financing activities (24) (2)
Net cash attributable to financing activities - continuing operations 794  (730)
Net cash attributable to financing activities - discontinued operations (440) (633)
Net cash attributable to financing activities 354  (1,363)
Net (decrease) increase in cash, cash equivalents, and restricted cash (7) 689 
Cash, cash equivalents, and restricted cash - beginning of period 913  612 
Cash, cash equivalents, and restricted cash - end of period(1)
$ 906  $ 1,301 
Supplemental Disclosures of Non-cash Investing Activities
Consideration from sale of business $ 499  $ — 
Purchase of forward mortgage servicing rights $ 7  $ — 

7

(1)The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the condensed consolidated balance sheets.
June 30, 2021 June 30, 2020
Cash and cash equivalents $ 716  $ 1,041 
Restricted cash 113  178 
Restricted cash within assets of discontinued operations 77  82 
Total cash, cash equivalents, and restricted cash $ 906  $ 1,301 
See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited). 
8

MR COOPER GROUP INC.
NOTES TO CONDENSED 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 technology and data enhanced solutions to homebuyers, home sellers, real estate agents and mortgage companies. 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 Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Form 10-Q.

On March 12, 2021, the Company entered into a Stock Purchase Agreement with Blend Labs, Inc. (“Blend Labs”), a Delaware corporation, pursuant to which Blend Labs will acquire the title business of the Company for a purchase price of approximately $500, consisting of approximately $450 in cash, subject to certain adjustments specified therein, and a retained interest of 9.9% for the Company (the “Title Transaction”). The Title Transaction was completed on June 30, 2021, with consideration received on July 1, 2021. A receivable for consideration was recorded in other assets in the Company’s condensed consolidated balance sheets as of June 30, 2021. Pursuant to the Stock Purchase Agreement, all cash generated, subject to certain adjustments, between March 13, 2021 and the closing date of the Title Transaction, were held for the benefit of Blend Labs. A $487 gain on the Title Transaction was recorded in the second quarter of 2021 upon closing of the Title Transaction, which was included in other income, net within the condensed consolidated statements of operations. In addition, the Company recorded total transaction costs of $2 and $5 for the three and six months ended June 30, 2021, respectively. The results of the title business were previously reported under the Xome segment. The carrying amounts of assets and liabilities associated with the title business were not material to the condensed consolidated balance sheets as of December 31, 2020.

On July 1, 2021, the Company entered into a definitive agreement for the sale of its reverse servicing portfolio, operating under the Champion Mortgage brand (“Champion”), to Mortgage Assets Management, LLC and its affiliates (“MAM”). The reverse servicing operation was previously reported in the Company’s Servicing segment. The Company determined the sale of the reverse servicing portfolio qualified for reporting as discontinued operations as of June 30, 2021. As a result, the reverse servicing operation is presented as discontinued operations in the Company’s condensed consolidated statements of operations and the assets and liabilities of the reverse servicing operation are presented as discontinued operations in the Company’s condensed consolidated balance sheets for all periods presented. Unless otherwise indicated, information in this report relates to the Company’s continuing operations. Refer to Note 2, Discontinued Operations for further details.

Basis of Presentation
The interim condensed consolidated 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 Securities and Exchange Commission. 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, 2020.

The interim condensed 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.
9


Basis of Consolidation
The condensed 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.

Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed 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.

In the second quarter of 2021, the Company refined its estimation process for determining the fair value of forward MSRs by incorporating an estimate of future cash flows from existing loans that are expected to be recaptured, which is consistent with recent pricing observed from market participants. This refinement did not result in a significant change to the overall valuation of the Company’s mortgage servicing rights (“MSRs”) portfolio. See Note 3, Mortgage Servicing Rights and Related Liabilities and Note 13, Fair Value Measurements for further discussion. There were no other changes to the Company’s use of estimates for the period ended June 30, 2021.

Recent Accounting Guidance Adopted
Accounting Standards Update 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes (“ASU 2019-12”) simplifies accounting for income taxes by removing certain exceptions from the general principles in Topic 740 including elimination of the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items such as other comprehensive income. ASU 2019-12 also clarifies and amends certain guidance in Topic 740. ASU 2019-12 is effective for the Company on January 1, 2021. The adoption of the standard did not have a material impact to the Company’s condensed consolidated financial statements.


2. Discontinued Operations

On July 1, 2021, the Company entered into a definitive agreement for the sale of its reverse servicing portfolio, operating under Champion, to MAM. Upon close of the transaction, which is subject to regulatory approvals and other closing conditions, MAM will assume Champion’s reverse portfolio and related operations. The sale is expected to close prior to the end of 2021. The carrying amounts of assets and liabilities associated with the reverse servicing operation are reported under the Servicing segment. The Company determined reverse servicing operations met the criteria for classification as held for sale as of June 30, 2021 and represents a strategic shift in the Company’s operations. Therefore, the sale of the reverse servicing portfolio qualifies for reporting as discontinued operations, and the assets and liabilities of the reverse servicing portfolio are reported as discontinued operations in the condensed consolidated balance sheets and related results of operations are reported as discontinued operations in the condensed consolidated statements of operations for all periods presented.

As part of the transaction, the Company entered into a servicing agreement with MAM, under which the Company will be compensated for continuing to service these reverse loans through the date that the loans are transferred out of Company’s servicing system, which will be the date of close. In addition, the Company will retain certain loans related to the reverse servicing portfolio, primarily related to previously liquidated loans, with total assets of $112 and total liabilities of $88 as of June 30, 2021.
10

The following table sets forth the assets and liabilities included in discontinued operations:
June 30, 2021 December 31, 2020
Carrying amounts of assets of discontinued operations
Restricted cash $ 77  $ 83 
Reverse mortgage interests, net 4,910  5,253 
Other 9  11 
Loss recognized on classification as discontinued operations (61) — 
Total assets of discontinues operations $ 4,935  $ 5,347 
Carrying amounts of liabilities of discontinued operations
Advances and warehouse facilities, net $ 525  $ 505 
Payables and other liabilities 224  233 
Mortgage servicing liabilities 42  41 
Other nonrecourse debt, net 3,999  4,424 
Total liabilities of discontinued operations $ 4,790  $ 5,203 

The following table sets forth the condensed consolidated statements of operations data for discontinued operations:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Revenue - service related, net $ 1  $ 12  $ 9  $ 26 
Salaries, wages and benefits expense (8) (10) (16) (22)
General and administrative expense 71  (10) 64  (18)
Interest income 43  53  87  96 
Interest expense (30) (50) (64) (103)
Loss on classification as discontinued operations (61) —  (61) — 
Income (loss) from discontinued operations before income tax expense (benefit) 16  (5) 19  (21)
Less: Income tax expense (benefit) 4  (1) 5  (5)
Net income (loss) from discontinued operations $ 12  $ (4) $ 14  $ (16)


3. 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 mortgage servicing rights and related liabilities, the impact of the current environment was considered in the determination of key assumptions.
MSRs and Related Liabilities June 30, 2021 December 31, 2020
Forward MSRs - fair value $ 3,307  $ 2,703 
Excess spread financing - fair value $ 867  $ 934 
Mortgage servicing rights financing - fair value 21  33 
MSR related liabilities - nonrecourse at fair value $ 888  $ 967 

11

Forward Mortgage Servicing Rights
The following table sets forth the activities of forward MSRs:
Six Months Ended June 30,
Forward MSRs - Fair Value 2021 2020
Fair value - beginning of period $ 2,703  $ 3,496 
Additions:
Servicing retained from mortgage loans sold 554  249 
Purchases of servicing rights 218  24 
Dispositions:
Sales of servicing assets (12) — 
Changes in fair value:
Changes in valuation inputs or assumptions used in the valuation model 270  (717)
Changes in valuation due to amortization (460) (338)
Other changes 34  43 
Fair value - end of period $ 3,307  $ 2,757 

During the six months ended June 30, 2021 and 2020, the Company sold $1,076 and $71 in unpaid principal balance (“UPB”) of forward MSRs, of which $1,008 and none were retained by the Company as subservicer, respectively.

MSRs measured at fair value are 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. 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”). Non-agency investors consist of investors in private-label securitizations.

The following table provides a breakdown of UPB and fair value for the Company’s forward MSRs:
June 30, 2021 December 31, 2020
Forward MSRs - UPB and Fair Value Breakdown UPB Fair Value UPB Fair Value
Investor Pools
Agency $ 248,799  $ 2,955  $ 227,136  $ 2,305 
Non-agency 38,656  352  44,053  398 
Total $ 287,455  $ 3,307  $ 271,189  $ 2,703 

In the second quarter of 2021, the Company refined its estimate of the fair value of forward MSRs by incorporating an estimate of future cash flows from existing loans that are expected to be recaptured. The estimate of future cash flows related to recapture is consistent with recent pricing observed from various market participants, including the Company’s independent, third-party valuation firms. As a result of considering the recapture rate, the Company adjusted its discount rate assumption in order to ensure that the fair value of forward MSRs remains consistent with current market participant pricing and was also corroborated with valuations provided by independent, third parties. The net impact on the overall forward MSRs fair value was not significant during the three and six months ended June 30, 2021. Refer to Note 13, Fair Value Measurements, for further discussion on key weighted-average inputs and assumptions used in estimating the fair value of forward MSRs.

12

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
Cost to Service per Loan
Forward MSRs - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
June 30, 2021
Mortgage servicing rights $ (112) $ (216) $ (139) $ (268) $ (43) $ (87)
December 31, 2020
Mortgage servicing rights $ (100) $ (192) $ (181) $ (347) $ (45) $ (89)

These hypothetical sensitivities should be evaluated with care. The effect on fair value of an 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.

Excess Spread Financing - Fair Value
The Company had excess spread financing liability of $867 and $934 as of June 30, 2021 and December 31, 2020, respectively. Refer to Note 13, Fair Value Measurements, for key weighted-average inputs and assumptions used in the valuation of excess spread financing.

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
June 30, 2021
Excess spread financing $ 30  $ 61  $ 34  $ 70 
December 31, 2020
Excess spread financing $ 30  $ 62  $ 41  $ 84 

These hypothetical sensitivities should be evaluated with care. The effect on fair value of an 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. 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 $21 and $33 as of June 30, 2021 and December 31, 2020, respectively. Refer to Note 13, Fair Value Measurements, for key weighted-average inputs and assumptions used in the valuation of the MSR financing liability.
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Servicing Segment Revenues
The following table sets forth the items comprising total revenues for the Servicing segment:
Three Months Ended June 30, Six Months Ended June 30,
Total Revenues - Servicing 2021 2020 2021 2020
Contractually specified servicing fees(1)
$ 275  $ 285  $ 551  $ 582 
Other service-related income(1)
214  62  359  111 
Incentive and modification income(1)
14  28  18 
Late fees(1)
16  20  34  47 
Mark-to-market adjustments(2)
(180) (261) 174  (644)
Counterparty revenue share(3)
(76) (88) (159) (164)
Amortization, net of accretion(4)
(158) (107) (314) (191)
Total revenues - Servicing $ 105  $ (81) $ 673  $ (241)

(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 $8 and $3 for the three months ended June 30, 2021 and 2020 and $20 and $13 for the six months ended June 30, 2021 and 2020, 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 $70 and $79 during the three months ended June 30, 2021 and 2020, respectively. For the six months ended June 30, 2021 and 2020, amortization is net of excess spread accretion of $146 and $147, respectively.


4. Advances and Other Receivables

Advances and other receivables, net, consists of the following:
Advances and Other Receivables, Net June 30, 2021 December 31, 2020
Servicing advances, net of $26 and $72 purchase discount, respectively
$ 856  $ 975 
Receivables from agencies, investors and prior servicers, net of $20 and $21 purchase discount, respectively
172  173 
Reserves (191) (208)
Total advances and other receivables, net $ 837  $ 940 

The following table sets forth the activities of the servicing reserves for advances and other receivables:
Three Months Ended June 30, Six Months Ended June 30,
Reserves for Advances and Other Receivables 2021 2020 2021 2020
Balance - beginning of period $ 206  $ 193  $ 208  $ 168 
Provision and other additions(1)
26  29  41  59 
Write-offs (41) (6) (58) (11)
Balance - end of period $ 191  $ 216  $ 191  $ 216 

(1)The Company recorded a provision of $8 and $3 through the MTM adjustments in revenues - service related, net, in the unaudited condensed consolidated statements of operations during the three months ended June 30, 2021 and 2020, respectively, and $20 and $13 during the six months ended June 30, 2021 and 2020, 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.

14

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 June 30,
2021 2020
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 $ 63  $ 20  $ 125  $ 21 
Utilization of purchase discounts (37)   (8) — 
Balance - end of period $ 26  $ 20  $ 117  $ 21 

Six Months Ended June 30,
2021 2020
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 $ 72  $ 21  $ 131  $ 21 
Utilization of purchase discounts (46) (1) (14) — 
Balance - end of period $ 26  $ 20  $ 117  $ 21 

Credit Loss for Advances and Other Receivables
During the three and six months ended June 30, 2021, the Company increased the current expected credit loss (“CECL”) reserve by $3 and $4, respectively. During the three and six months ended June 30, 2020, the Company increased the CECL reserve by $8 and $14, respectively. As of June 30, 2021, the total CECL reserve was $42, of which $25 and $17 were recorded in reserves and purchase discount for advances and other receivables, respectively. As of June 30, 2020, the total CECL reserve was $31, of which $14 and $17 were recorded in reserves and purchase discount for advances and other receivables, respectively.

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.

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 June 30, 2021 December 31, 2020
Mortgage loans held for sale – UPB $ 6,706  $ 5,438 
Mark-to-market adjustment(1)
255  282 
Total mortgage loans held for sale $ 6,961  $ 5,720 

(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 unaudited condensed consolidated statements of operations.

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The following table sets forth the activities of mortgage loans held for sale:
Six Months Ended June 30,
Mortgage Loans Held for Sale 2021 2020
Balance - beginning of period $ 5,720  $ 4,077 
Loans sold (52,128) (26,149)
Mortgage loans originated and purchased, net of fees 47,560  23,110 
Repurchase of loans out of Ginnie Mae securitizations 5,812  2,092 
Net change in unrealized (loss) gain on retained loans held for sale (5) 42 
Net transfers of mortgage loans held for sale(1)
2 
Balance - end of period $ 6,961  $ 3,179 

(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 six months ended June 30, 2021 and 2020, the Company received proceeds of $52,923 and $26,606, respectively, on the sale of mortgage loans held for sale, resulting in gains of $795 and $457, respectively.

The total UPB and fair value of mortgage loans held for sale on non-accrual status was as follows:
June 30, 2021 December 31, 2020
Mortgage Loans Held for Sale UPB Fair Value UPB Fair Value
Non-accrual(1)
$ 1,178  $ 1,216  $ 64  $ 54 

(1)Non-accrual UPB includes $1,149 and $48 of UPB related to Ginnie Mae repurchased loans as of June 30, 2021 and December 31, 2020, respectively.

The total UPB of mortgage loans held for sale for which the Company has begun formal foreclosure proceedings was $19 and $20 as of June 30, 2021 and December 31, 2020, 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 condensed 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 $4,057 and $6,159 as of June 30, 2021 and December 31, 2020, respectively, which are included in both other assets and payables and other liabilities in the condensed consolidated balance sheets. Loans subject to repurchase from Ginnie Mae as of June 30, 2021 and December 31, 2020 include $3,825 and $5,879 loans in forbearance related to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), respectively, 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 June 30, 2021 and December 31, 2020. The Company had intangible assets of $22 and $31 as of June 30, 2021 and December 31, 2020, respectively. Goodwill and intangible assets are included in other assets within the condensed consolidated balance sheets.


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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 changes in value on the derivative instruments are recorded in earnings as a component of net gain on mortgage loans held for sale on the condensed consolidated statements of operations and condensed consolidated statement of cash flows, except for a portion of forward MBS trades to hedge MSR pipelines and related fair value changes, which is recorded in service related, net on the condensed consolidated statements of operations and in changes in other assets or other liabilities on the condensed consolidated statements of cash flows.

The following tables provide the outstanding notional balances, fair values of outstanding positions and recorded gains/(losses) for the derivative financial instruments:
June 30, 2021 Six Months Ended June 30, 2021
Derivative Financial Instruments Expiration
Dates
Outstanding
Notional
Fair
Value
Gains/(Losses)
Assets
Mortgage loans held for sale
Loan sale commitments 2021 $ 1,514  $ 39  $ (63)
Derivative financial instruments
IRLCs 2021 6,730  204  (210)
LPCs 2021 1,984  10  (28)
Forward MBS trades 2021 9,749  27  (10)
Swap futures 2021 60     
Total derivative financial instruments - assets $ 18,523  $ 241  $ (248)
Liabilities
Derivative financial instruments
IRLCs 2021 $ 9  $   $  
LPCs 2021 708  1   
Forward MBS trades 2021 11,747  25  (131)
Total derivative financial instruments - liabilities $ 12,464  $ 26  $ (131)

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June 30, 2020 Six Months Ended June 30, 2020
Derivative Financial Instruments Expiration
Dates
Outstanding
Notional
Fair
Value
Gains/(Losses)
Assets
Mortgage loans held for sale
Loan sale commitments 2020 $ 1,673  $ 81  $ 48 
Derivative financial instruments
IRLCs 2020 9,227  370  235 
LPCs 2020 1,823  18 
Forward MBS trades 2020 1,239  (3)
Eurodollar futures 2020-2021 —  — 
Total derivative financial instruments - assets $ 12,295  $ 391  $ 238 
Liabilities
Derivative financial instruments
LPCs 2020 $ 55  $ —  $ (2)
Forward MBS trades 2020 10,119  50  37 
Eurodollar futures 2020-2021 —  — 
Total derivative financial instruments - liabilities $ 10,179  $ 50  $ 35 

The Company held $2 and $61 in collateral deposits on derivative instruments as of June 30, 2021 and December 31, 2020, respectively, which are recorded in other assets in the Company’s condensed consolidated balance sheets. The Company does not offset fair value amounts recognized for derivative instruments with amounts collected or deposited on derivative instruments in the condensed consolidated balance sheets.


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9. Indebtedness

Advance and Warehouse Facilities
June 30, 2021 December 31, 2020
Interest Rate Maturity Date Collateral Capacity Amount Outstanding Collateral Pledged Outstanding Collateral Pledged
Advance Facilities
$875 advance facility
CP+2.0% to 6.5%
January 2022 Servicing advance receivables $ 875  $ 143  $ 168  $ 168  $ 195 
$640 advance facility(1)
LIBOR+3.9%
August 2022 Servicing advance receivables 640  201  264  235  305 
$425 advance facility
LIBOR+1.7% to 6.5%
October 2021 Servicing advance receivables 425  167  219  192  246 
$100 advance facility
LIBOR+2.5%
January 2022 Servicing advance receivables 100  66  69  74  98 
Advance facilities principal amount 577  720  669  844 
Warehouse Facilities
$2,500 warehouse facility(2)
LIBOR+1.6% to 1.9%
October 2021 Mortgage loans or MBS 2,500  1,374  1,424  1,003  1,037 
$2,000 warehouse facility(3)
LIBOR+1.5% to 1.8%
February 2023 Mortgage loans or MBS 2,000  1,968  2,124  339  392 
$1,500 warehouse facility
LIBOR+1.5%
June 2022 Mortgage loans or MBS 1,500  607  584  1,081  1,028 
$1,350 warehouse facility(4)(5)
LIBOR+1.8% to 3.9%
September 2022 Mortgage loans or MBS 1,350  1,018  1,065  951  977 
$1,200 warehouse facility(5)
LIBOR+1.8% to 3.0%
November 2021 Mortgage loans or MBS 1,200  293  303  586  607 
$750 warehouse facility
LIBOR+1.8% to 2.3%
August 2021 Mortgage loans or MBS 750  400  412  477  492 
$750 warehouse facility
LIBOR+1.7% to 2.8%
October 2021 Mortgage loans or MBS 750  303  313  562  574 
$600 warehouse facility(5)
LIBOR+2.5%
February 2022 Mortgage loans or MBS 600  77  78  —  — 
$500 warehouse facility
LIBOR+1.5% to 3.0%
June 2023 Mortgage loans or MBS 500      —  — 
$500 warehouse facility(5)
LIBOR+1.5% to 4.0%
June 2022 Mortgage loans or MBS 500  146  145  —  — 
$300 warehouse facility
LIBOR+1.4%
January 2022 Mortgage loans or MBS 300  93  94  163  164 
$200 warehouse facility
LIBOR+1.8%
August 2021 Mortgage loans or MBS 200  180  184  131  134 
$50 warehouse facility
LIBOR+1.8% to 4.8%
April 2022 Mortgage loans or MBS 50  11  15  37  42 
$30 warehouse facility(5)(6)
LIBOR+3.3%
January 2022 Mortgage loans or MBS 30      —  — 
Warehouse facilities principal amount 6,470  6,741  5,330  5,447 
MSR Facilities
$260 warehouse facility(1)
LIBOR+3.9%
August 2022 MSR 260 260 865 260 668
$200 warehouse facility
LIBOR+3.5%
August 2021 MSR 200 517 247
$150 warehouse facility(4)
LIBOR+3.8%
September 2022 MSR 150 453 228
$50 warehouse facility
LIBOR+3.3%
November 2022 MSR 50 10 72 10 74
MSR facilities principal amount 270 1,907 270 1,217
Advance, warehouse and MSR facilities principal amount 7,317  $ 9,368 6,269  $ 7,508 
Unamortized debt issuance costs (7) (11)
Advance and warehouse facilities, net $ 7,310 $ 6,258
Pledged Collateral for warehouse and MSR facilities:
Mortgage loans held for sale $ 6,470  $ 6,741  $ 5,330  $ 5,447 
MSR 270  1,907  270  1,217 

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(1)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.
(2)The capacity amount for this warehouse facility increased from $1,500 to $2,500 in 2021.
(3)The capacity amount for this warehouse facility subsequently increased from $2,000 to $4,000 in July 2021.
(4)Total capacity amount for this facility is $1,500, of which $150 is a sublimit for MSR financing.
(5)The outstanding and collateral pledged amounts excluded balances related to reverse mortgage interests, which are included in liabilities of discontinued operations. Refer to Note 2, Discontinued Operations for further details on liabilities of discontinued operations.
(6)The capacity amount for this warehouse facility decreased from $40 to $30 in 2021.

Unsecured Senior Notes
Unsecured senior notes consist of the following:
Unsecured Senior Notes June 30, 2021 December 31, 2020
$850 face value, 5.500% interest rate payable semi-annually, due August 2028
$ 850  $ 850 
$650 face value, 5.125% interest rate payable semi-annually, due December 2030
650  650 
$600 face value, 6.000% interest rate payable semi-annually, due January 2027
600  600 
Unsecured senior notes principal amount 2,100  2,100 
Unamortized debt issuance costs (25) (26)
Unsecured senior notes, net $ 2,075  $ 2,074 

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. No notes were repurchased or redeemed during the six months ended June 30, 2021 and three months ended June 30, 2020. During the six months ended June 30, 2020, the Company repaid $100 in principal of outstanding notes, and redeemed $598 in principal of outstanding notes, resulting in a gain of $1.

As of June 30, 2021, the expected maturities of the Company’s unsecured senior notes based on contractual maturities are as follows:
Year Ending December 31, Amount
2021 through 2025 $  
Thereafter 2,100 
Total unsecured senior notes principal amount $ 2,100 

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 June 30, 2021.


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.

The Company has determined that the SPEs created in connection with certain advance facilities trusts should be consolidated as the Company is the primary beneficiary of each of these entities.

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A summary of the assets and liabilities of the Company’s transactions with VIEs included in the Company’s condensed consolidated balance sheets is presented below:
June 30, 2021 December 31, 2020
Consolidated Transactions with VIEs Transfers
Accounted for as
Secured
Borrowings
Transfers
Accounted for as
Secured
Borrowings
Assets
Restricted cash $ 44  $ 47 
Advances and other receivables, net 387  441 
Total assets $ 431  $ 488 
Liabilities
Advance facilities(1)
$ 310  $ 358 
Payables and other liabilities  
Total liabilities $ 310  $ 359 

(1)Refer to advance facilities in Note 9, Indebtedness, for additional information.

The following table shows a summary of the outstanding collateral and certificate balances for securitization trusts for which the Company was the transferor, including any retained beneficial interests and MSRs, that were not consolidated by the Company:
Unconsolidated Securitization Trusts June 30, 2021 December 31, 2020
Total collateral balances - UPB $ 1,230  $ 1,326 
Total certificate balances $ 1,229  $ 1,329 

The Company has not retained any variable interests in the unconsolidated securitization trusts that were outstanding as of June 30, 2021 and December 31, 2020. Therefore, it does not have a significant maximum exposure to loss related to these unconsolidated VIEs.

A summary of mortgage loans transferred by the Company to unconsolidated securitization trusts that are 60 days or more past due are presented below:
Principal Amount of Transferred Loans 60 Days or More Past Due June 30, 2021 December 31, 2020
Unconsolidated securitization trusts $ 141  $ 154 


11. Earnings Per Share

The Company computes earnings per share using the two-class method, which is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. The Series A Preferred Stock is considered participating securities because it has dividend rights determined on an as-converted basis in the event of Company’s declaration of a dividend or distribution for common shares. On March 26, 2021, the Company repurchased 3,700 thousand shares of its common stock from affiliates of Kohlberg Kravis Roberts & Co. L.P., a related party of the Company, for a total cost of $119 or $32.25 per share.

21

The following table sets forth the computation of basic and diluted net income (loss) per common share (amounts in millions, except per share amounts):
Three Months Ended June 30, Six Months Ended June 30,
Computation of Earnings Per Share 2021 2020 2021 2020
Net income (loss) from continuing operations $ 427  $ 77  $ 986  $ (82)
Less: Net loss attributable to non-controlling interests   —    (3)
Less: Undistributed earnings from continuing operations attributable to participating stockholders 4  9  — 
Net income (loss) from continuing operations attributable to Mr. Cooper common stockholders $ 423  $ 76  $ 977  $ (79)
Net income (loss) from discontinued operations $ 12  $ (4) $ 14  $ (16)
Less: Undistributed earnings from discontinued operations attributable to participating stockholders   —    — 
Net income (loss) from discontinued operations attributable to Mr. Cooper common stockholders $ 12  $ (4) $ 14  $ (16)
Net income (loss) $ 439  $ 73  $ 1,000  $ (98)
Less: Net loss attributable to non-controlling interests   —    (3)
Net income (loss) attributable to Mr. Cooper 439  73  1,000  (95)
Less: Undistributed earnings attributable to participating stockholders 4  9  — 
Net income (loss) attributable to common stockholders $ 435  $ 72  $ 991  $ (95)
Earnings from continuing operations per common share attributable to Mr. Cooper:
Basic $ 4.91  $ 0.82  $ 11.13  $ (0.86)
Diluted $ 4.72  $ 0.81  $ 10.65  $ (0.86)
Earnings from discontinued operations per common share attributable to Mr. Cooper:
Basic $ 0.14  $ (0.04) $ 0.16  $ (0.18)
Diluted $ 0.13  $ (0.04) $ 0.15  $ (0.18)
Earnings per common share attributable to Mr. Cooper:
Basic $ 5.05  $ 0.78  $ 11.29  $ (1.04)
Diluted $ 4.85  $ 0.77  $ 10.80  $ (1.04)
Weighted average shares of common stock outstanding (in thousands):
Basic 86,142  91,997  87,791  91,691 
Dilutive effect of stock awards(1)
2,664  176  3,123  — 
Dilutive effect of participating securities(1)
839  839  839  — 
Diluted 89,645  93,012  91,753  91,691 

(1)For periods with net loss, the Company excluded potential common shares from the computation of diluted EPS because inclusion would be antidilutive.

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12. Income Taxes

For the three and six months ended June 30, 2021, the effective tax rate was 24.8% and 23.7%, respectively, which differed from the statutory federal rate of 21% primarily due to state income taxes and nondeductible executive compensation. The effective tax rate decreased during the six months ended June 30, 2021 compared to the same period in 2020, primarily due to quarterly discrete tax items related to the completion of the Title Transaction and excess tax benefit from stock-based compensation.

For the three and six months ended June 30, 2020, the effective tax rate was 33.0% and 24.2%, respectively, which differed from the statutory federal rate of 21% primarily due to state income taxes and nondeductible executive compensation.


13. Fair Value Measurements

Fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a three-tiered fair value hierarchy has been established based on the level of observable inputs used in the measurement of fair value (e.g., Level 1 representing quoted prices for identical assets or liabilities in an active market; Level 2 representing values using observable inputs other than quoted prices included within Level 1; and Level 3 representing estimated values based on significant unobservable inputs).

There have been no significant changes to the valuation techniques and inputs used by the Company in estimating fair values of Level 2 and Level 3 assets and liabilities as disclosed in the Company’s Annual Reports on Form 10-K for the year ended December 31, 2020, with the exception of the following:

Mortgage Servicing Rights – Fair Value (Level 3) – The Company estimates the fair value of its forward MSRs on a recurring basis using a process that combines the use of a discounted cash flow model and analysis of current market data to arrive at an estimate of fair value. The cash flow assumptions and prepayment assumptions used in the model are based on a discounted cash flow model which incorporates prepayment speeds, delinquencies, discount rate, ancillary revenues, float earnings and other assumptions (including costs to service, recapture rates and forbearance rates), with the key assumptions being mortgage prepayment speeds, discount rates, and cost to service. In the second quarter of 2021, the Company refined its estimate of the fair value of forward MSRs by incorporating an estimate of future cash flows from loans that are expected to be recaptured. The estimate of future cash flows related to recapture is consistent with recent pricing observed from various market participants, including the Company’s independent third-party valuation firms As a result of considering the recapture rate, the Company adjusted its discount rate assumption in order to ensure that the fair value of forward MSRs remains consistent with current market participant pricing and is reflective of an exit price. The estimated fair value was also corroborated with valuations provided by independent third parties. The net impact on the overall forward MSRs fair value was not significant during the three and six months ended June 30, 2021. These assumptions are generated and applied based on collateral stratifications including product type, remittance type, geography, delinquency and coupon dispersion. These assumptions require the use of judgment by the Company and can have a significant impact on the fair value of the MSRs. Quarterly, management obtains third-party valuations to assess the reasonableness of the fair value calculations provided by the internal cash flow model. Because of the nature of the valuation inputs, the Company classifies these valuations as Level 3 in the fair value disclosures. See Note 3, Mortgage Servicing Rights and Related Liabilities, for more information.

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The following tables present the estimated carrying amount and fair value of the Company’s financial instruments and other assets and liabilities measured at fair value on a recurring basis:
  June 30, 2021
    Recurring Fair Value Measurements
Fair Value - Recurring Basis Total Fair Value Level 1 Level 2 Level 3
Assets
Mortgage loans held for sale $ 6,961  $   $ 6,961  $  
Forward mortgage servicing rights 3,307      3,307 
Derivative financial instruments
IRLCs
204      204 
LPCs
10