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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 September 30, 2020
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-20200930_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 ¨ Accelerated Filer x
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 October 23, 2020 was 90,853,569.



MR. COOPER GROUP INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
 
    Page
PART I
Item 1.
3
Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019
3
Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2020 and 2019
4
Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Nine Months Ended September 30, 2020 and 2019
5
Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2020 and 2019
7
9
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.
CONSOLIDATED BALANCE SHEETS
(millions of dollars, except share data)
September 30, 2020 December 31, 2019
  (unaudited)  
Assets
Cash and cash equivalents $ 946  $ 329 
Restricted cash 229  283 
Mortgage servicing rights, $2,663 and $3,496 at fair value, respectively
2,669  3,502 
Advances and other receivables, net of reserves of $191 and $175, respectively
745  988 
Reverse mortgage interests, net of purchase discount of $125 and $114, respectively
5,460  6,279 
Mortgage loans held for sale at fair value 3,817  4,077 
Property and equipment, net of accumulated depreciation of $84 and $55, respectively
114  112 
Deferred tax assets, net 1,344  1,345 
Other assets 6,431  1,390 
Total assets $ 21,755  $ 18,305 
Liabilities and Stockholders’ Equity
Unsecured senior notes, net $ 2,167  $ 2,366 
Advance and warehouse facilities, net 4,851  4,997 
Payables and other liabilities 6,590  2,016 
MSR related liabilities - nonrecourse at fair value 1,091  1,348 
Mortgage servicing liabilities 44  61 
Other nonrecourse debt, net 4,671  5,286 
Total liabilities 19,414  16,074 
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, 92.0 million and 91.1 million shares issued, respectively
1 
Additional paid-in-capital 1,120  1,109 
Retained earnings 1,243  1,122 
Treasury shares at cost - 1.2 million and zero shares, respectively
(24) — 
Total Mr. Cooper stockholders’ equity 2,340  2,232 
Non-controlling interests 1  (1)
Total stockholders’ equity 2,341  2,231 
Total liabilities and stockholders’ equity $ 21,755  $ 18,305 

See accompanying notes to the consolidated financial statements (unaudited).
3


MR. COOPER GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(millions of dollars, except for earnings per share data)
  Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Revenues:
Service related, net $ 227  $ 258  $ 186  $ 479 
Net gain on mortgage loans held for sale 645  360  1,594  788 
Total revenues 872  618  1,780  1,267 
Expenses:
Salaries, wages and benefits 275  250  769  703 
General and administrative 156  228  525  710 
Total expenses 431  478  1,294  1,413 
Interest income 56  163  250  459 
Interest expense (165) (196) (534) (572)
Other income (expense), net (51) —  (50) 16 
Total other expenses, net (160) (33) (334) (97)
Income (loss) before income tax expense (benefit) 281  107  152  (243)
Less: Income tax expense (benefit) 67  24  36  (52)
Net income (loss) 214  83  116  (191)
Less: Net income (loss) attributable to non-controlling interests 5  (1) 2  (2)
Net income (loss) attributable to Mr. Cooper 209  84  114  (189)
Less: Undistributed earnings attributable to participating stockholders 2  1  — 
Net income (loss) attributable to common stockholders $ 207  $ 83  $ 113  $ (189)
Net income (loss) per common share attributable to Mr. Cooper:
Basic $ 2.26  $ 0.91  $ 1.23  $ (2.08)
Diluted $ 2.18  $ 0.90  $ 1.20  $ (2.08)

See accompanying notes to the consolidated financial statements (unaudited).
4


MR. COOPER GROUP INC.
UNAUDITED 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 June 30, 2019 1,000  $ —  91,061  $ $ 1,100  $ 575  $ —  $ 1,676  $ $ 1,678 
Shares issued under incentive compensation plan —  —  26  —  —  —  — 
Share-based compensation —  —  —  —  —  —  — 
Net income (loss) —  —  —  —  —  84  —  84  (1) 83 
Balance at September 30, 2019 1,000  $ —  91,087  $ $ 1,106  $ 659  $ —  $ 1,766  $ $ 1,767 
Balance at June 30, 2020 1,000  $   92,022  $ 1  $ 1,114  $ 1,034  $   $ 2,149  $ (4) $ 2,145 
Shares issued under incentive compensation plan     19               
Share-based compensation         6      6    6 
Repurchase of common stock     (1,187)       (24) (24)   (24)
Net income           209    209  5  214 
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).

5


MR. COOPER GROUP INC.
UNAUDITED 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, 2019 1,000  $ —  90,821  $ $ 1,093  $ 848  $ —  $ 1,942  $ $ 1,945 
Shares issued / (surrendered) under incentive compensation plan —  —  266  —  (1) —  —  (1) —  (1)
Share-based compensation —  —  —  —  14  —  —  14  —  14 
Net loss —  —  —  —  —  (189) —  (189) (2) (191)
Balance at September 30, 2019 1,000  $ —  91,087  $ $ 1,106  $ 659  $ —  $ 1,766  $ $ 1,767 
Balance at January 1, 2020 1,000  $   91,118  $ 1  $ 1,109  $ 1,122  $   $ 2,232  $ (1) $ 2,231 
Shares issued / (surrendered) under incentive compensation plan     923    (5)     (5)   (5)
Share-based compensation         16      16    16 
Cumulative effect adjustments pursuant to the adoption of ASU 2016-13           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).
6


MR. COOPER GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions of dollars)
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 
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)
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). 
7


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). 
8


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.

9


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.
10




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 
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.

11


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

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
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) (39)
Adjustments(1)
    (6) 37 
Balance - end of the period $ 6  $ 44  $ $ 69 
Fair value - end of period $ 6  $ 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
13


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  %

14


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  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.

15


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.

16


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.

17


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 
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.

18


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 
19


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  $
Derivative financial instruments
IRLCs 2019 4,964  144  84 
LPCs 2019 1,397  18  17 
Forward MBS trades 2019 3,054 
Eurodollar futures 2019-2021 —  — 
Total derivative financial instruments - assets $ 9,421  $ 170  $ 107 
Liabilities
Derivative financial instruments
IRLCs 2019 $ 15  $ —  $ — 
LPCs 2019 547 
Forward MBS trades 2019 5,667  16  (8)
Eurodollar futures 2019-2021 —  — 
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 
20


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 
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.
21



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 

22


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.


23


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.