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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 March 31, 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-20210331_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 April 22, 2021 was 86,135,281.


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 March 31, 2021 (unaudited) and December 31, 2020
3
Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2021 and 2020
4
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the Three Months Ended March 31, 2021 and 2020
5
Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2021 and 2020
6
7
7
8
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)
March 31, 2021 December 31, 2020
  (unaudited)  
Assets
Cash and cash equivalents $ 674  $ 695 
Restricted cash 261  218 
Mortgage servicing rights, $3,354 and $2,703 at fair value, respectively
3,359  2,708 
Advances and other receivables, net of reserves of $206 and $208, respectively
838  940 
Reverse mortgage interests, net of purchase discount of $93 and $127, respectively
5,091  5,253 
Mortgage loans held for sale at fair value 6,351  5,720 
Property and equipment, net of accumulated depreciation of $107 and $96, respectively
118  116 
Deferred tax assets, net 1,228  1,340 
Other assets 6,793  7,175 
Total assets $ 24,713  $ 24,165 
Liabilities and Stockholders’ Equity
Unsecured senior notes, net $ 2,074  $ 2,074 
Advance and warehouse facilities, net 7,379  6,763 
Payables and other liabilities 7,140  7,392 
MSR related liabilities - nonrecourse at fair value 957  967 
Mortgage servicing liabilities 38  41 
Other nonrecourse debt, net 4,221  4,424 
Total liabilities 21,809  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 1,113  1,126 
Retained earnings 1,995  1,434 
Treasury shares at cost - 7.1 million and 2.6 million shares, respectively
(206) (58)
Total Mr. Cooper stockholders’ equity 2,903  2,503 
Non-controlling interests 1 
Total stockholders’ equity 2,904  2,504 
Total liabilities and stockholders’ equity $ 24,713  $ 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 March 31,
2021 2020
Revenues:
Service related, net $ 588  $ (53)
Net gain on mortgage loans held for sale 679  331 
Total revenues 1,267  278 
Expenses:
Salaries, wages and benefits 285  246 
General and administrative 184  198 
Total expenses 469  444 
Interest income 89  118 
Interest expense (159) (192)
Other income, net  
Total other expenses, net (70) (73)
Income (loss) before income tax expense (benefit) 728  (239)
Less: Income tax expense (benefit) 167  (68)
Net income (loss) 561  (171)
Less: Net loss attributable to non-controlling interests   (3)
Net income (loss) attributable to Mr. Cooper 561  (168)
Less: Undistributed earnings attributable to participating stockholders 5  — 
Net income (loss) attributable to common stockholders $ 556  $ (168)
Net income (loss) per common share attributable to Mr. Cooper:
Basic $ 6.22  $ (1.84)
Diluted $ 5.92  $ (1.84)

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 January 1, 2020 1,000  $ —  91,118  $ $ 1,109  $ 1,122  $ —  $ 2,232  $ (1) $ 2,231 
Shares issued / (surrendered) under incentive compensation plan —  —  852  —  (5) —  —  (5) —  (5)
Share-based compensation —  —  —  —  —  —  — 
Cumulative effect adjustments pursuant to the
adoption of CECL-related accounting guidance
—  —  —  —  —  —  — 
Net loss —  —  —  —  —  (168) —  (168) (3) (171)
Balance at March 31, 2020 1,000  $ —  91,970  $ $ 1,108  $ 961  $ —  $ 2,070  $ (4) $ 2,066 
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     1,183    (19)     (19)   (19)
Share-based compensation         6      6    6 
Repurchase of common stock     (4,505)       (148) (148)   (148)
Net income           561    561    561 
Balance at March 31, 2021 1,000  $   86,135  $ 1  $ 1,113  $ 1,995  $ (206) $ 2,903  $ 1  $ 2,904 

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

5

MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions of dollars)
Three Months Ended March 31,
  2021 2020
Operating Activities
Net income (loss) $ 561  $ (171)
Adjustments to reconcile net income (loss) to net cash attributable to operating activities:
Deferred tax expense (benefit) 112  (68)
Net gain on mortgage loans held for sale (679) (331)
Interest income on participating interests in reverse mortgages (40) (62)
Provision for servicing and non-servicing reserves 13 
Fair value changes and amortization/accretion of mortgage servicing rights/liabilities (301) 526 
Fair value changes in MSR related liabilities 31  (29)
Depreciation and amortization for property and equipment and intangible assets 16  19 
Other operating activities 13  34 
Repurchases of forward loan assets out of Ginnie Mae securitizations (2,255) (919)
Mortgage loans originated and purchased for sale, net of fees (25,214) (12,375)
Sales proceeds and loan payment proceeds for mortgage loans held for sale 27,152  13,724 
Changes in assets and liabilities:
Advances and other receivables 91  300 
Reverse mortgage interests 220  400 
Other assets 70  111 
Payables and other liabilities 134  (457)
Net cash attributable to operating activities (76) 710 
Investing Activities
Property and equipment additions, net of disposals (14) (12)
Purchase of forward mortgage servicing rights (69) (27)
Proceeds on sale of forward mortgage servicing rights 1  43 
Net cash attributable to investing activities (82)
Financing Activities
Increase in advance and warehouse facilities 613  43 
Repayment of HECM securitizations (37) (99)
Proceeds from issuance of participating interest financing in reverse mortgage interests 34  55 
Repayment of participating interest financing in reverse mortgage interests (219) (330)
Proceeds from the issuance of excess spread financing   24 
Settlements and repayments of excess spread financing (41) (58)
Issuance of unsecured senior notes   600 
Redemption and repayment of unsecured senior notes   (698)
Repurchase of common stock (148) — 
Other financing activities (22) (18)
Net cash attributable to financing activities 180  (481)
Net increase in cash, cash equivalents, and restricted cash 22  233 
Cash, cash equivalents, and restricted cash - beginning of period 913  612 
Cash, cash equivalents, and restricted cash - end of period(1)
$ 935  $ 845 

(1)The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the condensed consolidated balance sheets.
March 31, 2021 March 31, 2020
Cash and cash equivalents $ 674  $ 579 
Restricted cash 261  266 
Total cash, cash equivalents, and restricted cash $ 935  $ 845 
See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited). 
6

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 $500, consisting of $450 in cash, subject to certain adjustments specified therein, and a retained interest of 9.9% for the Company (the “Title Transaction”). Pursuant the Stock Purchase Agreement, all cash generated, subject to certain adjustments, between March 13, 2021 and the closing date of the Title Transaction will be held for the benefit of Blend Labs. No gain or loss on the Title Transaction has been or will be recorded until the closing date, which is anticipated to be in the second quarter of 2021. The carrying amounts of assets and liabilities associated with the title business are not material to the condensed consolidated balance sheets and are reported under the Xome segment.

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 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.

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.

7

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. 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 COVID-19 pandemic was considered in the determination of key assumptions.
MSRs and Related Liabilities March 31, 2021 December 31, 2020
Forward MSRs - fair value $ 3,354  $ 2,703 
Reverse MSRs - amortized cost 5 
Mortgage servicing rights $ 3,359  $ 2,708 
Mortgage servicing liabilities - amortized cost $ 38  $ 41 
Excess spread financing - fair value $ 934  $ 934 
Mortgage servicing rights financing - fair value 23  33 
MSR related liabilities - nonrecourse at fair value $ 957  $ 967 

Forward Mortgage Servicing Rights
The following table sets forth the activities of forward MSRs:
Three Months Ended March 31,
Forward MSRs - Fair Value 2021 2020
Fair value - beginning of period $ 2,703  $ 3,496 
Additions:
Servicing retained from mortgage loans sold 288  123 
Purchases of servicing rights 67  24 
Dispositions:
Sales of servicing assets (2) — 
Changes in fair value:
Changes in valuation inputs or assumptions used in the valuation model 510  (401)
Other changes in fair value (212) (133)
Fair value - end of period $ 3,354  $ 3,109 

During the three months ended March 31, 2021 and 2020, the Company sold $50 and $40 in unpaid principal balance (“UPB”) of forward MSRs, of which 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.

8

The following table provides a breakdown of UPB and fair value for the Company’s forward MSRs:
March 31, 2021 December 31, 2020
Forward MSRs - UPB and Fair Value Breakdown UPB Fair Value UPB Fair Value
Investor Pools
Agency $ 234,589  $ 2,965  $ 227,136  $ 2,305 
Non-agency 41,439  389  44,053  398 
Total $ 276,028  $ 3,354  $ 271,189  $ 2,703 

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.

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
March 31, 2021
Mortgage servicing rights $ (142) $ (273) $ (187) $ (360) $ (49) $ (99)
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.

Reverse Mortgage Servicing Rights and Liabilities - Amortized Cost
The Company services certain Home Equity Conversion Mortgage (“HECM”) reverse mortgage loans with an unpaid principal balance of $17,269 and $18,091 as of March 31, 2021 and December 31, 2020, respectively. The following table sets forth the activities of reverse MSRs and mortgage servicing liabilities (“MSL”):
Three Months Ended March 31,
2021 2020
Reverse MSRs and MSLs - Amortized Cost Reverse MSRs Reverse MSLs Reverse MSRs Reverse MSLs
Balance - beginning of period $ 5  $ 41  $ $ 61 
Amortization/accretion   (3) —  (8)
Balance - end of the period $ 5  $ 38  $ $ 53 
Fair value - end of period $ 5  $ 38  $ $ 27 

Management evaluates reverse MSRs and MSLs each reporting period for impairment. Based on management’s assessment at March 31, 2021, no impairment or increased obligation was recorded.

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

9

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
March 31, 2021
Excess spread financing $ 33  $ 68  $ 36  $ 75 
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 $23 and $33 as of March 31, 2021 and December 31, 2020, respectively. Refer to Note 13, Fair Value Measurements, for further discussion on key weighted-average inputs and assumptions used in the valuation of the MSR financing liability.

Servicing Segment Revenues
The following table sets forth the items comprising total revenues for the Servicing segment:
Three Months Ended March 31,
Total Revenues - Servicing 2021 2020
Contractually specified servicing fees(1)
$ 276  $ 297 
Other service-related income(1)
145  49 
Incentive and modification income(1)
14  10 
Late fees(1)
18  27 
Reverse servicing fees 5 
Mark-to-market adjustments(2)
354  (383)
Counterparty revenue share(3)
(83) (76)
Amortization, net of accretion(4)
(153) (76)
Total revenues - Servicing $ 576  $ (146)

(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 $12 and $10 during the three months ended March 31, 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 $76 and $68 and MSL accretion of $3 and $8 during the three months ended March 31, 2021 and 2020, respectively.


10

3. Advances and Other Receivables

Advances and other receivables, net, consists of the following:
Advances and Other Receivables, Net March 31, 2021 December 31, 2020
Servicing advances, net of $63 and $72 purchase discount, respectively
$ 882  $ 975 
Receivables from agencies, investors and prior servicers, net of $20 and $21 purchase discount, respectively
162  173 
Reserves (206) (208)
Total advances and other receivables, net $ 838  $ 940 

The following table sets forth the activities of the servicing reserves for advances and other receivables:
Three Months Ended March 31,
Reserves for Advances and Other Receivables 2021 2020
Balance - beginning of period $ 208  $ 168 
Provision and other additions(1)
15  30 
Write-offs (17) (5)
Balance - end of period $ 206  $ 193 

(1)The Company recorded a provision of $12 and $10 through the MTM adjustments in revenues - service related, net, in the unaudited condensed consolidated statements of operations during the three months ended March 31, 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.

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 March 31,
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 (9) (1) (6) — 
Balance - end of period $ 63  $ 20  $ 125  $ 21 

Credit Loss for Advances and Other Receivables
During the three months ended March 31, 2021 and 2020, the Company increased the current expected credit loss (“CECL”) reserve by $1 and $6, respectively. As of March 31, 2021, the total CECL reserve was $39, of which $22 and $17 were recorded in reserves and purchase discount for advances and other receivables, respectively. As of March 31, 2020, the total CECL reserve was $23, of which $6 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.

11

4. Reverse Mortgage Interests

Reverse mortgage interests, net, consists of the following:
Reverse Mortgage Interests, Net March 31, 2021 December 31, 2020
Participating interests in HECM mortgage-backed securities (“HMBS”) $ 3,304  $ 3,471 
Unsecuritized interests 972  964 
Other interests securitized 908  945 
Purchase discount, net (93) (127)
Total reverse mortgage interests, net $ 5,091  $ 5,253 

Participating Interests in HMBS
The Company does not originate reverse mortgages, but during the three months ended March 31, 2021 and 2020, a total of $33 and $52 in UPB associated with new draws on existing loans was transferred to GNMA and securitized by the Company, respectively.

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. No such securitization occurred during the three months ended March 31, 2021 and 2020.

Unsecuritized Interests
Unsecuritized interests in reverse mortgages consist of the following:
Unsecuritized Interests March 31, 2021 December 31, 2020
Repurchased HECM loans (exceeds 98% of their Max Claim Amount (“MCA”)) $ 699  $ 665 
HECM related receivables(1)
180  208 
Funded borrower draws not yet securitized 77  72 
Real estate owned (“REO”) related receivables 16  19 
Total unsecuritized interests
$ 972  $ 964 

(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 $216 and $383 of HECM loans out of GNMA HMBS securitizations during the three months ended March 31, 2021 and 2020, respectively, of which $66 and $103 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 $137 and $266 of HECM loans to HUD during the three months ended March 31, 2021 and 2020, 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 March 31,
Purchase Discount, Net, for Reverse Mortgage Interests(1)
2021 2020
Balance - beginning of period $ (127) $ (114)
Utilization of purchase discounts(2)
35  10 
Amortization, net of accretion (1) (25)
Balance - end of period $ (93) $ (129)

(1)Net position as certain items are in a premium/(discount) position, based on the characteristics of underlying tranches of loans.
(2)Utilization of purchase discounts on liquidated loans, for which the remaining receivable was written off.

12

Credit Loss for Reverse Mortgage Interests
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 CECL related accounting guidance on January 1, 2020 and no additional CECL reserve was recorded as of March 31, 2021 and 2020.

The credit-risk characteristics of reverse mortgage interests do not vary with time as the financial instruments have no contractual life or financial profile as the primary counterparty is the government agency insuring the loans.

Reverse Mortgage Interest Income
Total interest earned on the Company’s participating interest in reverse mortgages was $40 and $62 during the three months ended March 31, 2021 and 2020, 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 March 31, 2021 December 31, 2020
Mortgage loans held for sale – UPB $ 6,204  $ 5,438 
Mark-to-market adjustment(1)
147  282 
Total mortgage loans held for sale $ 6,351  $ 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.

The following table sets forth the activities of mortgage loans held for sale:
Three Months Ended March 31,
Mortgage Loans Held for Sale 2021 2020
Balance - beginning of period $ 5,720  $ 4,077 
Loans sold (26,734) (13,510)
Mortgage loans originated and purchased, net of fees 25,214  12,375 
Repurchase of loans out of Ginnie Mae securitizations 2,255  919 
Net change in unrealized (loss) gain on loans held for sale (105) 61 
Net transfers of mortgage loans held for sale(1)
1  — 
Balance - end of period $ 6,351  $ 3,922 

(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 three months ended March 31, 2021 and 2020, the Company received proceeds of $27,152 and $13,724, respectively, on the sale of mortgage loans held for sale, resulting in gains of $418 and $214, respectively.

The total UPB and fair value of mortgage loans held for sale on non-accrual status was as follows:
March 31, 2021 December 31, 2020
Mortgage Loans Held for Sale UPB Fair Value UPB Fair Value
Non-accrual(1)
$ 67  $ 54  $ 64  $ 54 

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

The total UPB of mortgage loans held for sale for which the Company has begun formal foreclosure proceedings was $18 and $20 as of March 31, 2021 and December 31, 2020, respectively.
13


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 $5,816 and $6,159 as of March 31, 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 March 31, 2021 and December 31, 2020 include $5,557 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 March 31, 2021 and December 31, 2020. The Company had intangible assets of $30 and $34 as of March 31, 2021 and December 31, 2020, respectively. Goodwill and intangible assets are included in other assets within the condensed 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:
March 31, 2021 Three Months Ended March 31, 2021
Derivative Financial Instruments Expiration
Dates
Outstanding
Notional
Fair
Value
Gains/(Losses)
Assets
Mortgage loans held for sale
Loan sale commitments 2021 $ 2,341  $ 42  $ (60)
Derivative financial instruments
IRLCs 2021 8,950  232  (182)
LPCs 2021 1,165  8  (30)
Forward MBS trades 2021 22,566  286  249 
Total derivative financial instruments - assets $ 32,681  $ 526  $ 37 
Liabilities
Derivative financial instruments
IRLCs 2021 $ 240  $ 1  $ 1 
LPCs 2021 3,974  38  37 
Forward MBS trades 2021 6,341  76  (80)
Swap futures 2021 60  1  1 
Total derivative financial instruments - liabilities $ 10,615  $ 116  $ (41)
14

March 31, 2020 Three Months Ended March 31, 2020
Derivative Financial Instruments Expiration
Dates
Outstanding
Notional
Fair
Value
Gains/(Losses)
Assets
Mortgage loans held for sale
Loan sale commitments 2020 $ 2,598  $ 111  $ 79 
Derivative financial instruments
IRLCs 2020 6,923  263  128 
LPCs 2020 834  25  13 
Forward MBS trades 2020 886  — 
Eurodollar futures 2020-2021 —  — 
Total derivative financial instruments - assets $ 8,649  $ 294  $ 141 
Liabilities
Derivative financial instruments
IRLCs 2020 $ 22  $ —  $ — 
LPCs 2020 10  —  (3)
Forward MBS trades 2020 10,229  223  211 
Eurodollar futures 2020-2021 —  — 
Total derivative financial instruments - liabilities $ 10,267  $ 223  $ 208 

As of March 31, 2021, the Company held $2 and $113 in collateral deposits and collateral obligations on derivative instruments, respectively. As of December 31, 2020 the Company held $61 in collateral deposits on derivative instruments. Collateral deposits and collateral obligations are recorded in other assets and payable and other liabilities, respectively, 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.


9. Indebtedness

Advance and Warehouse Facilities
March 31, 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  $ 140  $ 165  $ 168  $ 195 
$640 advance facility(1)
LIBOR+3.9%
August 2022 Servicing advance receivables 640  231  299  235  305 
$425 advance facility
LIBOR+1.6% to 6.5%
October 2021 Servicing advance receivables 425  197  250  192  246 
$100 advance facility
LIBOR+2.5%
January 2022 Servicing advance receivables 100  70  92  74  98 
Advance facilities principal amount 638  806  669  844 
Warehouse Facilities
$2,500 warehouse facility(2)
LIBOR+1.6% to 1.9%
October 2021 Mortgage loans or MBS 2,500  1,442  1,495  1,003  1,037 
$2,000 warehouse facility
LIBOR+1.6% to 2.0%
February 2023 Mortgage loans or MBS 2,000  940  1,055  339  392 
$1,500 warehouse facility
LIBOR+1.5%
June 2021 Mortgage loans or MBS 1,500  867  838  1,081  1,028 
$1,350 warehouse facility(3)
LIBOR+1.7% to 3.9%
September 2022 Mortgage loans or MBS 1,350  918  990  1,067  1,128 
15

March 31, 2021 December 31, 2020
Interest Rate Maturity Date Collateral Capacity Amount Outstanding Collateral Pledged Outstanding Collateral Pledged
$1,200 warehouse facility
LIBOR+1.8% to 3.0%
November 2021 Mortgage loans or MBS 1,200  497  543  787  839 
$750 warehouse facility
LIBOR+1.8% to 2.3%
August 2021 Mortgage loans or MBS 750  612  631  477  492 
$750 warehouse facility
LIBOR+1.7% to 2.8%
October 2021 Mortgage loans or MBS 750  535  549  562  574 
$600 warehouse facility
LIBOR+2.5%
February 2022 Mortgage loans or MBS 600  332  374  187  222 
$500 warehouse facility
LIBOR+2.5% to 4.0%
May 2021 Mortgage loans or MBS 500      —  — 
$300 warehouse facility
LIBOR+1.4%
January 2022 Mortgage loans or MBS 300  129  130  163  164 
$250 warehouse facility
LIBOR+1.4% to 2.3%
May 2021 Mortgage loans or MBS 250  1  1  —  — 
$200 warehouse facility
LIBOR+1.8%
July 2021 Mortgage loans or MBS 200  169  173  131  134 
$50 warehouse facility
LIBOR+1.8% to 4.8%
June 2021 Mortgage loans or MBS 50  36  43  37  42 
$30 warehouse facility(4)
LIBOR+3.3%
January 2022 Mortgage loans or MBS 30  2  2 
Warehouse facilities principal amount 6,480  6,824  5,835  6,053 
MSR Facilities
$260 warehouse facility(1)
LIBOR+3.9%
August 2022 MSR 260 260 838 260 668
$200 warehouse facility
LIBOR+3.5%
August 2021 MSR 200 471 247
$150 warehouse facility(3)
LIBOR+3.8%
September 2022 MSR 150 438 228
$50 warehouse facility
LIBOR+3.3%
November 2022 MSR 50 10 80 10 74
MSR facilities principal amount 270 1,827 270 1,217
Advance, warehouse and MSR facilities principal amount 7,388  $ 9,457 6,774  $ 8,114 
Unamortized debt issuance costs (9) (11)
Advance and warehouse facilities, net $ 7,379 $ 6,763
Pledged Collateral for warehouse and MSR facilities:
Mortgage loans held for sale $ 5,970  $ 6,210  $ 5,330  $ 5,447 
Reverse mortgage interests 510  614  505  606 
MSR 270  1,827  270  1,217 

(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)Total capacity amount for this facility is $1,500, of which $150 is a sublimit for MSR financing.
(4)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 March 31, 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 (26) (26)
Unsecured senior notes, net $ 2,074  $ 2,074 

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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 three months ended March 31, 2021. During the three months ended March 31, 2020, the Company repaid $100 in principal of outstanding notes. Additionally, the Company redeemed $598 in principal of outstanding notes during the three months ended March 31, 2020, resulting in a gain of $1.

As of March 31, 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 

Other Nonrecourse Debt
Other nonrecourse debt consists of the following:
March 31, 2021 December 31, 2020
Other Nonrecourse Debt Issue Date Maturity Date Interest Rate Class of Note Collateral Amount Outstanding Outstanding
Participating interest financing(1)
0.3%-5.6%
$   $ 3,306  $ 3,473 
Securitization of nonperforming HECM loans
Trust 2020-1 September 2020 September 2030
1.3%-7.5%
A, M1, M2, M3, M4, M5 489  471  490 
Trust 2019-2 November 2019 November 2029
2.3%-6.0%
A, M1, M2, M3, M4, M5 254  232  241 
Trust 2019-1 June 2019 June 2029
2.7%-6.0%
A, M1, M2, M3, M4, M5 231  203  212 
Other nonrecourse debt principal amount 4,212  4,416 
Unamortized premium, net of debt issuance costs and discount 9 
Other nonrecourse debt, net $ 4,221  $ 4,424 

(1)Amounts represent the Company’s participating interest in GNMA HMBS securitized portfolios.

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 March 31, 2021.


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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. Also, the Company consolidated certain reverse mortgage SPEs as it is the primary beneficiary of each of these entities. These SPEs include the Nationstar HECM Loan Trusts.

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:
March 31, 2021 December 31, 2020
Consolidated Transactions with VIEs Transfers
Accounted for as
Secured
Borrowings
Reverse Secured Borrowings Transfers
Accounted for as
Secured
Borrowings
Reverse Secured Borrowings
Assets
Restricted cash $ 80  $ 27  $ 47  $ 23 
Advances and other receivables, net 415    441  — 
Reverse mortgage interests, net(1)
  4,159  —  4,356 
Total assets $ 495  $ 4,186  $ 488  $ 4,379 
Liabilities
Advance facilities(2)
$ 337  $   $ 358  $ — 
Payables and other liabilities     — 
Participating interest financing   3,306  —  3,473 
HECM Securitizations (HMBS)
Trust 2020-1   471  —  490 
Trust 2019-2   232  —  241 
Trust 2019-1   203  —  212 
Total liabilities $ 337  $ 4,212  $ 359  $ 4,416 

(1)Amounts include net purchase discount of $53 and $61 as of March 31, 2021 and December 31, 2020, respectively.
(2)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 March 31, 2021 December 31, 2020
Total collateral balances - UPB $ 1,283  $ 1,326 
Total certificate balances $ 1,281  $ 1,329 

The Company has not retained any variable interests in the unconsolidated securitization trusts that were outstanding as of March 31, 2021 and December 31, 2020 and therefore 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 March 31, 2021 December 31, 2020
Unconsolidated securitization trusts $ 147  $ 154 


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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.

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 March 31,
Computation of Earnings Per Share 2021 2020
Net income (loss) attributable to Mr. Cooper $ 561  $ (168)
Less: Undistributed earnings attributable to participating stockholders 5  — 
Net income (loss) attributable to common stockholders $ 556  $ (168)
Net income (loss) per common share attributable to Mr. Cooper:
Basic $ 6.22  $ (1.84)
Diluted $ 5.92  $ (1.84)
Weighted average shares of common stock outstanding (in thousands):
Basic 89,458  91,385 
Dilutive effect of stock awards(1)
3,590  — 
Dilutive effect of participating securities(1)
839  — 
Diluted 93,887  91,385 

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


12. Income Taxes

For the three months ended March 31, 2021, the effective tax rate, based on whole numbers, was 22.9% which differed from the statutory federal rate of 21% primarily due to state income taxes, as well as unfavorable permanent differences including executive compensation disallowed under Internal Revenue Code Section 162(m). The effective tax rate decreased during the three months ended March 31, 2021 compared to the same period in 2020, primarily due to quarterly discrete tax items related to the excess tax benefit from stock-based compensation and the recognition of a deferred tax asset for the investment in subsidiaries as it relates to the Title Transaction.

For the three months ended March 31, 2020, the effective tax rate, based on whole numbers, was 28.4% which differed from the statutory federal rate of 21% primarily due to permanent differences including executive compensation disallowed under Internal Revenue Code Section 162(m) and nondeductible meals and entertainment expenses, as well as other recurring items such as the state tax benefit.


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).

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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.

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:
  March 31, 2021
    Recurring Fair Value Measurements
Fair Value - Recurring Basis Total Fair Value Level 1 Level 2 Level 3
Assets
Mortgage loans held for sale $ 6,351  $   $ 6,351  $  
Forward mortgage servicing rights 3,354      3,354 
Derivative financial instruments
IRLCs
232      232 
Forward MBS trades
286    286   
LPCs
8      8 
Liabilities
Derivative financial instruments
IRLCs
1      1 
Forward MBS trades 76    76   
LPCs
38      38 
Swap futures 1    1   
Mortgage servicing rights financing 23      23 
Excess spread financing 934      934 

  December 31, 2020
    Recurring Fair Value Measurements
Fair Value - Recurring Basis Total Fair Value Level 1 Level 2 Level 3
Assets
Mortgage loans held for sale $ 5,720  $ —  $ 5,720  $ — 
Forward mortgage servicing rights 2,703  —  —  2,703 
Derivative financial instruments
IRLCs 414  —  —  414 
Forward MBS trades 37  —  37  — 
LPCs 38  —  —  38 
Liabilities
Derivative financial instruments
Forward MBS trades 156  —  156  — 
LPCs —  — 
Mortgage servicing rights financing 33  —  —  33 
Excess spread financing 934  —  —  934 

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The tables below present a reconciliation for all of the Company’s Level 3 assets and liabilities measured at fair value on a recurring basis:
Three Months Ended March 31, 2021
  Assets Liabilities
Fair Value - Level 3 Assets and Liabilities Forward mortgage servicing rights IRLCs LPCs Excess spread financing Mortgage servicing rights financing LPCs
Balance - beginning of period $ 2,703  $ 414  $ 38  $ 934  $ 33  $ 1 
Total gains or losses included in earnings 298  (182) (30) 41  (10) 37 
Purchases, issuances, sales, repayments and settlements
Purchases 67           
Issuances 288           
Sales (2)   —       
Settlements and repayments   —  —  (41)    
Balance - end of period $ 3,354  $ 232  $ 8  $ 934  $ 23  $ 38 

Three Months Ended March 31, 2020
  Assets Liabilities
Fair Value - Level 3 Assets and Liabilities Forward mortgage servicing rights Excess spread financing Mortgage servicing rights financing
Balance - beginning of period $ 3,496  $ 1,311  $ 37 
Total gains or losses included in earnings (534) (35)
Purchases, issuances, sales, repayments and settlements
Purchases 24  —  — 
Issuances 123  24  — 
Settlements and repayments —  (58) — 
Balance - end of period $ 3,109  $ 1,242  $ 43 

No transfers were made in or out of Level 3 fair value assets and liabilities for the Company during the three months ended March 31, 2021 and 2020.

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The tables below present the quantitative information for significant unobservable inputs used in the fair value measurement of Level 3 assets and liabilities:

March 31, 2021 December 31, 2020
Range Weighted Average Range Weighted Average
Level 3 Inputs Min Max Min Max
Forward MSR
Discount rate 8.2  % 12.0  % 9.3  % 8.2  % 12.0  % 9.4  %
Prepayment speed 10.5  % 17.7  % 12.4  % 14.2  % 21.3  % 15.4  %
Cost to service per loan(1)
$ 64  $ 226  $ 92  $ 66  $ 257  $ 98 
Average life(2)
5.9 years 5.0 years
IRLCs
Value of servicing (basis points per loan) (1.3) 2.2  1.2  (1.0) 2.2  1.2 
Excess spread financing
Discount rate 9.6  % 15.7  % 11.9  % 9.9  % 15.7  % 12.2  %
Prepayment speed 11.3  % 14.6  % 12.5  % 13.9  % 15.0  % 14.4  %
Recapture rate 17.1