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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________________________________________________________
 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
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
coop-20220630_g1.jpg
________________________________________________________________________________________________________
Mr. Cooper Group Inc.
(Exact name of registrant as specified in its charter)
Delaware   91-1653725
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
8950 Cypress Waters Blvd, Coppell, TX
  75019
(Address of principal executive offices)   (Zip Code)
(469) 549-2000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, $0.01 par value per share COOP The Nasdaq Stock Market
____________________________________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.
Large Accelerated Filer x Accelerated Filer
Non-Accelerated Filer ¨ Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x
Number of shares of common stock, $0.01 par value, outstanding as of July 22, 2022 was 71,650,299.


MR. COOPER GROUP INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
 
    Page
PART I
Item 1.
3
Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021
3
Condensed Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2022 and 2021
4
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Six Months Ended June 30, 2022 and 2021
5
Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2022 and 2021
7
9
9
16. Segment Information
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2

PART I. Financial Information

Item 1. Financial Statements
MR. COOPER GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions of dollars, except share data)
June 30, 2022 December 31, 2021
  (unaudited)  
Assets
Cash and cash equivalents $ 514  $ 895 
Restricted cash 115  146 
Mortgage servicing rights at fair value 6,151  4,223 
Advances and other receivables, net of reserves of $150 and $167, respectively
892  1,228 
Mortgage loans held for sale at fair value 2,072  4,381 
Property and equipment, net of accumulated depreciation of $112 and $122, respectively
72  98 
Deferred tax assets, net 750  991 
Other assets 2,329  2,242 
Total assets $ 12,895  $ 14,204 
Liabilities and Stockholders’ Equity
Unsecured senior notes, net $ 2,672  $ 2,670 
Advance and warehouse facilities, net 3,407  4,997 
Payables and other liabilities 2,223  2,392 
MSR related liabilities - nonrecourse at fair value 556  778 
Total liabilities 8,858  10,837 
Commitments and contingencies (Note 15)
Preferred stock at $0.00001 - 10 million shares authorized, zero shares issued, zero shares outstanding; aggregate liquidation preference of zero
  — 
Common stock at $0.01 par value - 300 million shares authorized, 93.2 million shares issued
1 
Additional paid-in-capital 1,094  1,116 
Retained earnings 3,688  2,879 
Treasury shares at cost - 21.6 million and 19.4 million shares, respectively
(747) (630)
Total Mr. Cooper stockholders’ equity 4,036  3,366 
Non-controlling interests 1 
Total stockholders’ equity 4,037  3,367 
Total liabilities and stockholders’ equity $ 12,895  $ 14,204 

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

MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(millions of dollars, except for earnings per share data)
  Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenues:
Service related, net $ 460  $ (8) $ 1,215  $ 572 
Net gain on mortgage loans held for sale 139  582  436  1,261 
Total revenues 599  574  1,651  1,833 
Expenses:
Salaries, wages and benefits 203  277  431  554 
General and administrative 125  148  235  325 
Total expenses 328  425  666  879 
Interest income 50  51  86  97 
Interest expense (111) (119) (217) (245)
Other (expense) income, net (5) 486  217  486 
Total other (expense) income, net (66) 418  86  338 
Income from continuing operations before income tax expense 205  567  1,071  1,292 
Less: Income tax expense 54  140  262  306 
Net income from continuing operations 151  427  809  986 
Net income from discontinued operations   12    14 
Net income 151  439  809  1,000 
Less: Undistributed earnings attributable to participating stockholders    
Net income attributable to common stockholders $ 151  $ 435  $ 809  $ 991 
Earnings from continuing operations per common share attributable to Mr. Cooper:
Basic $ 2.08  $ 4.91  $ 11.04  $ 11.13 
Diluted $ 2.03  $ 4.72  $ 10.74  $ 10.65 
Earnings from discontinued operations per common share attributable to Mr. Cooper:
Basic $   $ 0.14  $   $ 0.16 
Diluted $   $ 0.13  $   $ 0.15 
Earnings per common share attributable to Mr. Cooper:
Basic $ 2.08  $ 5.05  $ 11.04  $ 11.29 
Diluted $ 2.03  $ 4.85  $ 10.74  $ 10.80 
    
See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited).
4

MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(millions of dollars, except share data)
Preferred Stock Common Stock
Shares
(in thousands)
Amount Shares
(in thousands)
Amount Additional Paid-in Capital Retained Earnings Treasury Share Amount Total Mr. Cooper Stockholders’ Equity Non-controlling Interests Total Stockholders’
Equity
Balance at March 31, 2021 1,000  $ —  86,135  $ $ 1,113  $ 1,995  $ (206) $ 2,903  $ $ 2,904 
Shares issued / (surrendered) under incentive compensation plan —  —  14  —  (1) —  —  (1) —  (1)
Share-based compensation —  —  —  —  —  —  — 
Net income —  —  —  —  —  439  —  439  —  439 
Balance at June 30, 2021 1,000  $ —  86,149  $ $ 1,120  $ 2,434  $ (206) $ 3,349  $ $ 3,350 
Balance at March 31, 2022   $   73,906  $ 1  $ 1,085  $ 3,537  $ (647) $ 3,976  $ 1  $ 3,977 
Shares issued / (surrendered) under incentive compensation plan     6               
Share-based compensation         9      9    9 
Repurchase of common stock     (2,261)       (100) (100)   (100)
Net income           151    151    151 
Balance at June 30, 2022   $   71,651  $ 1  $ 1,094  $ 3,688  $ (747) $ 4,036  $ 1  $ 4,037 

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

5

MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(millions of dollars, except share data)
Preferred Stock Common Stock
Shares
(in thousands)
Amount Shares
(in thousands)
Amount Additional Paid-in Capital Retained Earnings Treasury Share Amount Total Mr. Cooper Stockholders’ Equity Non-controlling Interests Total Stockholders’
Equity
Balance at January 1, 2021 1,000  $ —  89,457  $ $ 1,126  $ 1,434  $ (58) $ 2,503  $ $ 2,504 
Shares issued / (surrendered) under incentive compensation plan —  —  1,197  —  (20) —  —  (20) —  (20)
Share-based compensation —  —  —  —  14  —  —  14  —  14 
Repurchase of common stock —  —  (4,505) —  —  —  (148) (148) —  (148)
Net income —  —  —  —  —  1,000  —  1,000  —  1,000 
Balance at June 30, 2021 1,000  $ —  86,149  $ $ 1,120  $ 2,434  $ (206) $ 3,349  $ $ 3,350 
Balance at January 1, 2022   $   73,777  $ 1  $ 1,116  $ 2,879  $ (630) $ 3,366  $ 1  $ 3,367 
Shares issued / (surrendered) under incentive compensation plan     856    (39)   18  (21)   (21)
Share-based compensation         17      17    17 
Repurchase of common stock     (2,982)       (135) (135)   (135)
Net income           809    809    809 
Balance at June 30, 2022   $   71,651  $ 1  $ 1,094  $ 3,688  $ (747) $ 4,036  $ 1  $ 4,037 

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

6

MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions of dollars)
Six Months Ended June 30,
  2022 2021
Operating Activities
Net income $ 809  $ 1,000 
Less: Net income from discontinued operations   14 
Net income from continuing operations 809  986 
Adjustments to reconcile net income from continuing operations to net cash attributable to operating activities:
Deferred tax expense 241  215 
Net gain on mortgage loans held for sale (436) (1,261)
Provision for servicing and non-servicing reserves 11  21 
Fair value changes in mortgage servicing rights (663) 190 
Fair value changes in MSR related liabilities 131 
Depreciation and amortization for property and equipment and intangible assets 20  31 
Gain on sale of business   (487)
Gain on disposition of assets (223) — 
Other operating activities 39  32 
Repurchases of forward loan assets out of Ginnie Mae securitizations (2,686) (5,812)
Mortgage loans originated and purchased for sale, net of fees (19,370) (47,560)
Sales proceeds and loan payment proceeds for mortgage loans held for sale 24,510  52,923 
Changes in assets and liabilities:
Advances and other receivables 311  48 
Other assets 4  101 
Payables and other liabilities (116)
Net cash attributable to operating activities - continuing operations 2,582  (567)
Net cash attributable to operating activities - discontinued operations   453 
Net cash attributable to operating activities 2,582  (114)
Investing Activities
Property and equipment additions, net of disposals (9) (26)
Purchase of mortgage servicing rights (1,151) (217)
Proceeds on sale of mortgage servicing rights 275  13 
Other investing activities   (17)
Net cash attributable to investing activities - continuing operations (885) (247)
Net cash attributable to investing activities - discontinued operations   — 
Net cash attributable to investing activities (885) (247)
Financing Activities
(Decrease) increase in advance and warehouse facilities (1,597) 1,047 
Repayments of excess spread financing (292) — 
Settlements of excess spread financing (61) (81)
Repurchase of common stock (135) (148)
Other financing activities (24) (23)
Net cash attributable to financing activities - continuing operations (2,109) 795 
Net cash attributable to financing activities - discontinued operations   (441)
Net cash attributable to financing activities (2,109) 354 
Net decrease in cash, cash equivalents, and restricted cash (412) (7)
Cash, cash equivalents, and restricted cash - beginning of period 1,041  913 
Cash, cash equivalents, and restricted cash - end of period(1)
$ 629  $ 906 
Supplemental Disclosures of Non-cash Investing Activities
Equity consideration received from disposition of assets $ 250  $ — 
Purchase of mortgage servicing rights $ 45  $
Forward mortgage servicing rights sales price holdback $ 15  $ — 
Consideration from sale of business $   $ 499 

7

(1)The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the condensed consolidated balance sheets.
June 30, 2022 June 30, 2021
Cash and cash equivalents $ 514  $ 716 
Restricted cash 115  113 
Restricted cash within assets of discontinued operations   77 
Total cash, cash equivalents, and restricted cash $ 629  $ 906 
See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited). 
8

MR COOPER GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(millions of dollars, unless otherwise stated)

1. Nature of Business and Basis of Presentation

Nature of Business
Mr. Cooper Group Inc., collectively with its consolidated subsidiaries, (“Mr. Cooper,” the “Company,” “we,” “us” or “our”) provides servicing, origination and transaction-based services related to single family residences throughout the United States with operations under its primary brands: Mr. Cooper® and Xome®. Mr. Cooper is one of the largest home loan originators and servicers in the country focused on delivering a variety of servicing and lending products, services and technologies. 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.

Basis of Presentation
The interim condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Reports on Form 10-K for the year ended December 31, 2021.

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.

Share-based compensation for restricted stock units granted to employees of the Company, consultants, and non-employee directors is based on the fair market value of the Company’s common stock on the grant date and recognized as an expense over the requisite employee service period on a straight-line basis using an accelerated attribution model. Shares for these awards are issued to employees from treasury stock.

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. These investments are initially measured at cost and subsequently adjusted for Company’s proportionate share of earnings and losses in the investee. Investments in certain companies over which the Company does not exert significant influence are recorded at fair value, or at cost upon election of measurement alternative, at the end of each reporting period. 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, macro-economic uncertainty, 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 and such differences could be material.

Reclassifications
Certain reclassifications have been made in the 2021 condensed consolidated statement of cash flows to conform to 2022 presentation. Such reclassifications were not material and did not affect total revenues or net income.

9

Recent Accounting Guidance Adopted
The Company did not adopt any accounting guidance during the six months ended June 30, 2022 that had a material impact on its condensed consolidated financial statements or disclosures.


2. Dispositions

Sale of Mortgage Servicing Platform
On March 31, 2022, the Company completed the sale of certain assets and liabilities of its servicing and subservicing technology platform for performing and non-performing mortgage loans (the “Mortgage Servicing Platform”) to Sagent M&C, LLC (“Sagent”), in exchange for Class A-1 Common Units equal to 19.9% ownership of Sagent, and the sale of certain tangible personal property of the Company used in the conduct of the Mortgage Servicing Platform in exchange for $9.9 in cash, for total consideration of $260 (the “Sagent Transaction”). In connection with the Sagent Transaction, the Company recorded a gain of $223, which was included in other income, net within the condensed consolidated statements of operations, and recorded $4 transaction costs during the six months ended June 30, 2022. No transaction costs were recorded in the three months ended June 30, 2022. The net carrying amount of assets and liabilities transferred in connection with the Sagent Transaction was $31 and reported under Corporate/Other.

The Company accounted for the equity interest under the equity method of accounting, as the Company has the ability to exercise significant influence over Sagent’s operating and financial decisions but does not own a majority equity interest or otherwise control the respective entity. Under the equity method of accounting, the investment is initially stated at cost and subsequently adjusted for additional investments and the Company’s proportionate share of Sagent’s earnings or losses and distributions. The initial cost of the equity interest recorded was $250, which represented the fair value as of March 31, 2022.

Sale of Reverse Servicing Portfolio
In 2021, the Company completed the sale of its reverse servicing portfolio, operating under Champion Mortgage brand (“Champion”), to Mortgage Assets Management, LLC and its affiliates (“MAM”) for total consideration of $1,640. Upon close of the transaction, MAM assumed Champion’s reverse portfolio and related operations. The Company recorded transaction costs of $5 during the three and six months ended June 30, 2021. The carrying amounts of assets and liabilities associated with the reverse servicing operation were reported under the Servicing segment. The sale of business represents a strategic shift in the Company’s operations. Therefore, the sale of the reverse servicing portfolio qualifies for reporting as discontinued operations, and the related results of operations are reported as discontinued operations in the condensed consolidated statements of operations for prior periods presented.

As part of the transaction, the Company entered into a transitional servicing agreement with MAM, under which the Company was compensated for continuing to subservice the reverse loans through the date that the loans were transferred out of Company’s servicing system. The transfer of the loans out of the Company’s servicing system was completed on April 1, 2022. In addition, the Company retained certain loans, primarily related to previously liquidated loans. As of June 30, 2022, the retained total assets and total liabilities were $34 and $26, respectively. As of December 31, 2021, the retained total assets and total liabilities were $55 and $39, respectively. The retained assets and liabilities are included in other assets, and payables and other liabilities, respectively, on the condensed consolidated balance sheets.

The following table sets forth the condensed consolidated statements of operations data for discontinued operations for the three and six months ended June 30, 2021:
Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
Revenue - service related, net $ $
Salaries, wages and benefits expense (8) (16)
General and administrative expense 71  64 
Interest income 43  87 
Interest expense (30) (64)
Loss on classification as discontinued operations (61) (61)
Income from discontinued operations before income tax expense 16  19 
Less: Income tax expense
Net income from discontinued operations $ 12  $ 14 

10


3. Mortgage Servicing Rights and Related Liabilities

The following table sets forth the carrying value of the Company’s mortgage servicing rights (“MSRs”) and the related liabilities. In estimating the fair value of all mortgage servicing rights and related liabilities, the impact of the current environment was considered in the determination of key assumptions.
MSRs and Related Liabilities June 30, 2022 December 31, 2021
MSRs - fair value $ 6,151  $ 4,223 
Excess spread financing - fair value $ 532  $ 768 
Mortgage servicing rights financing - fair value 24  10 
MSR related liabilities - nonrecourse at fair value $ 556  $ 778 

Mortgage Servicing Rights
The following table sets forth the activities of MSRs:
Six Months Ended June 30,
MSRs - Fair Value 2022 2021
Fair value - beginning of period $ 4,223  $ 2,703 
Additions:
Servicing retained from mortgage loans sold 360  554 
Purchases of servicing rights 1,178  218 
Dispositions:
Sales of servicing assets (289) (12)
Changes in fair value:
Changes in valuation inputs or assumptions used in the valuation model (MSR MTM) 1,124  321 
Changes in valuation due to amortization (461) (511)
Other changes 16  34 
Fair value - end of period $ 6,151  $ 3,307 

During the six months ended June 30, 2022 and 2021, the Company sold $20,052 and $1,076 in unpaid principal balance (“UPB”) of MSRs, of which $19,367 and $1,008 were retained by the Company as subservicer, respectively.

MSRs are segregated between investor type into agency and non-agency pools (referred to herein as “investor pools”) based upon contractual servicing agreements with investors at the respective balance sheet date to evaluate the MSR portfolio and fair value of the portfolio. Agency investors primarily consist of government sponsored enterprises (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae” or “FNMA”) and the Federal Home Loan Mortgage Corp (“Freddie Mac” or “FHLMC”), and the Government National Mortgage Association (“Ginnie Mae” or “GNMA”). Non-agency investors consist of investors in private-label securitizations.

The following table provides a breakdown of UPB and fair value for the Company’s MSRs:
June 30, 2022 December 31, 2021
MSRs - UPB and Fair Value Breakdown UPB Fair Value UPB Fair Value
Investor Pools
Agency $ 364,436  $ 5,806  $ 302,851  $ 3,859 
Non-agency 32,951  345  36,357  364 
Total $ 397,387  $ 6,151  $ 339,208  $ 4,223 

Refer to Note 13, Fair Value Measurements, for further discussion on key weighted-average inputs and assumptions used in estimating the fair value of MSRs.

11

The following table shows the hypothetical effect on the fair value of the Company’s 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
MSRs - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
June 30, 2022
Mortgage servicing rights $ (258) $ (495) $ (150) $ (293) $ (66) $ (132)
December 31, 2021
Mortgage servicing rights $ (141) $ (272) $ (148) $ (286) $ (46) $ (93)

These hypothetical sensitivities should be evaluated with care. The effect on fair value of an adverse change in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.

Excess Spread Financing - Fair Value
The Company had excess spread financing liability of $532 and $768 as of June 30, 2022 and December 31, 2021, respectively. Refer to Note 13, Fair Value Measurements, for key weighted-average inputs and assumptions used in the valuation of excess spread financing liability. In June 2022, the Company entered into an assignment agreement with an investor to repurchase excess spread liabilities for a total purchase price of $277.

The following table shows the hypothetical effect on the Company’s excess spread financing fair value when applying certain unfavorable variations of key assumptions to these liabilities for the dates indicated:
Discount Rate
Prepayment Speeds
Excess Spread Financing - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
June 30, 2022
Excess spread financing $ 20  $ 42  $ 13  $ 26 
December 31, 2021
Excess spread financing $ 26  $ 54  $ 28  $ 58 

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 $24 and $10 as of June 30, 2022 and December 31, 2021, respectively. Refer to Note 13, Fair Value Measurements, for key weighted-average inputs and assumptions used in the valuation of the MSR financing liability.
12


Servicing Segment Revenues
The following table sets forth the items comprising total revenues for the Servicing segment:
Three Months Ended June 30, Six Months Ended June 30,
Total Revenues - Servicing 2022 2021 2022 2021
Contractually specified servicing fees(1)
$ 378  $ 275  $ 705  $ 551 
Other service-related income(1)
20  214  68  359 
Incentive and modification income(1)
9  14  18  28 
Late fees(1)
19  16  38  34 
Mark-to-market adjustments(2)
200  (140) 753  225 
Amortization, net of accretion(3)
(199) (198) (401) (365)
Other(4)
(32) (76) (70) (159)
Total revenues - Servicing $ 395  $ 105  $ 1,111  $ 673 

(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 $6 and $8 for the three months ended June 30, 2022 and 2021 and $12 and $20 for the six months ended June 30, 2022 and 2021, respectively.
(3)Amortization is net of excess spread accretion of $27 and $70 during the three months ended June 30, 2022 and 2021, respectively. For the six months ended June 30, 2022 and 2021, amortization is net of excess spread accretion of $60 and $146, respectively.
(4)Other represents the excess servicing fee that the Company pays to the counterparties under the excess spread financing arrangements, portfolio runoff and the payments made associated with MSR financing arrangements.


4. Advances and Other Receivables

Advances and other receivables, net, consists of the following:
Advances and Other Receivables, Net June 30, 2022 December 31, 2021
Servicing advances, net of $14 and $19 purchase discount, respectively
$ 915  $ 1,263 
Receivables from agencies, investors and prior servicers, net of $8 and $12 purchase discount, respectively
127  132 
Reserves (150) (167)
Total advances and other receivables, net $ 892  $ 1,228 

The following table sets forth the activities of the servicing reserves for advances and other receivables:
Three Months Ended June 30, Six Months Ended June 30,
Reserves for Advances and Other Receivables 2022 2021 2022 2021
Balance - beginning of period $ 152  $ 206  $ 167  $ 208 
Provision and other additions(1)
18  26  34  41 
Write-offs (20) (41) (51) (58)
Balance - end of period $ 150  $ 191  $ 150  $ 191 

(1)The Company recorded a provision of $6 and $8 through the MTM adjustments in revenues - service related, net, in the condensed consolidated statements of operations during the three months ended June 30, 2022 and 2021, respectively, and $12 and $20 during the six months ended June 30, 2022 and 2021, 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.

13

Purchase Discount for Advances and Other Receivables
The following tables set forth the activities of the purchase discounts for advances and other receivables:
Three Months Ended June 30,
2022 2021
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 $ 16  $ 8  $ 63  $ 20 
Utilization of purchase discounts (2)   (37) — 
Balance - end of period $ 14  $ 8  $ 26  $ 20 
Six Months Ended June 30,
2022 2021
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 $ 19  $ 12  $ 72  $ 21 
Utilization of purchase discounts (5) (4) (46) (1)
Balance - end of period $ 14  $ 8  $ 26  $ 20 

Credit Loss for Advances and Other Receivables
During the three and six months ended June 30, 2022, the Company increased the current expected credit loss (“CECL”) reserve by $3 and $7, respectively. During the three and six months ended June 30, 2021, the Company increased the CECL reserve by $3 and $4, respectively. In addition, the Company had no write-offs during the three months ended June 30, 2022 and wrote off $5 of the CECL reserve during the six months ended June 30, 2022. As of June 30, 2022, the total CECL reserve was $33, of which $25 and $8 were recorded in reserves and purchase discount for advances and other receivables, respectively. As of June 30, 2021, the total CECL reserve was $42, of which $25 and $17 were recorded in reserves and purchase discount for advances and other receivables, respectively.

The Company determined that the credit-related risk associated with applicable financial instruments typically increase with the passage of time. The CECL reserve methodology considers these financial instruments collectible to a point in time of 39 months. Any projected remaining balance at the end of the collection period is considered a loss and factors into the overall CECL loss rate required.

5. Mortgage Loans Held for Sale

Mortgage loans held for sale are recorded at fair value as set forth below:
Mortgage Loans Held for Sale June 30, 2022 December 31, 2021
Mortgage loans held for sale – UPB $ 2,098  $ 4,257 
Mark-to-market adjustment(1)
(26) 124 
Total mortgage loans held for sale $ 2,072  $ 4,381 

(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 condensed consolidated statements of operations.

14

The following table sets forth the activities of mortgage loans held for sale:
Six Months Ended June 30,
Mortgage Loans Held for Sale 2022 2021
Balance - beginning of period $ 4,381  $ 5,720 
Loans sold (24,251) (52,128)
Mortgage loans originated and purchased, net of fees 19,370  47,560 
Repurchase of loans out of Ginnie Mae securitizations 2,686  5,812 
Net change in unrealized loss on retained loans held for sale (115) (5)
Net transfers of mortgage loans held for sale(1)
1 
Balance - end of period $ 2,072  $ 6,961 

(1)Amount reflects transfers to other assets for loans transitioning into REO status and transfers to advances and other receivables, net, for claims made on certain government insurance mortgage loans. Transfers out are net of transfers in upon receipt of proceeds from an REO sale or claim filing.

During the six months ended June 30, 2022 and 2021, the Company received proceeds of $24,510 and $52,923, respectively, on the sale of mortgage loans held for sale, resulting in gains of $259 and $795, respectively.

The total UPB and fair value of mortgage loans held for sale on non-accrual status was as follows:
June 30, 2022 December 31, 2021
Mortgage Loans Held for Sale UPB Fair Value UPB Fair Value
Non-accrual(1)
$ 113  $ 103  $ 104  $ 94 

(1)Non-accrual UPB includes $103 and $94 of UPB related to Ginnie Mae repurchased loans as of June 30, 2022 and December 31, 2021, respectively.

The total UPB of mortgage loans held for sale for which the Company has begun formal foreclosure proceedings was $46 and $16 as of June 30, 2022 and December 31, 2021, respectively.

6. Loans Subject to Repurchase from Ginnie Mae

Forward loans are sold to Ginnie Mae in conjunction with the issuance of mortgage backed securities. The Company, as the issuer of the mortgage backed securities, has the unilateral right to repurchase any individual loan in a Ginnie Mae securitization pool if that loan meets certain criteria, including payments not being received from borrowers for greater than 90 days. Once the Company has the unilateral right to repurchase a delinquent loan, it has effectively regained control over the loan and recognizes these rights to the loan on its condensed consolidated balance sheets and establishes a corresponding repurchase liability regardless of the Company’s intention to repurchase the loan. The Company had loans subject to repurchase from Ginnie Mae of $1,400 and $1,496 as of June 30, 2022 and December 31, 2021, respectively, which are included in both other assets and payables and other liabilities in the condensed consolidated balance sheets. Loans subject to repurchase from Ginnie Mae as of June 30, 2022 and December 31, 2021 include $1,241 and $1,301 loans in forbearance related to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), respectively, whereby no payments have been received from borrowers for greater than 90 days.


7. Goodwill and Intangible Assets

The Company had goodwill of $120 as of June 30, 2022 and December 31, 2021, and intangible assets of $11 and $14 as of June 30, 2022 and December 31, 2021, respectively. Goodwill and intangible assets are included in other assets within the condensed consolidated balance sheets.


15

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 the Originations and Servicing segments. 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 futures. The changes in value on the derivative instruments associated with hedging loans held for sale fair value are recorded in earnings as a component of net gain on mortgage loans held for sale on the condensed consolidated statements of operations and condensed consolidated statement of cash flows, while changes in the value of derivative instruments associated with the MSR portfolio fair value are recorded in service related, net on the condensed consolidated statements of operations and in changes in other assets or other liabilities on the condensed consolidated statements of cash flows.

The following tables provide the outstanding notional balances, fair values of outstanding positions and recorded gains/(losses) for the derivative financial instruments. Gains(losses) include both realized and unrealized gains (losses) of each derivative financial instrument.
June 30, 2022 Six Months Ended June 30, 2022
Derivative Financial Instruments Expiration
Dates
Outstanding
Notional
Fair
Value
Gains/(Losses)
Assets
Mortgage loans held for sale
Loan sale commitments 2022 $ 246  $ 8  $ (17)
Derivative financial instruments
IRLCs 2022 2,103  62  (72)
LPCs 2022 325  3   
Treasury futures 2022 30    3 
Forward MBS trades 2022 1,798  12  429 
Total derivative financial instruments - assets $ 4,256  $ 77  $ 360 
Liabilities
Derivative financial instruments
IRLCs 2022 $ 56  $ 1  $ (1)
LPCs 2022 186  1  1 
Treasury futures 2022 902  18  (185)
Forward MBS trades 2022 1,716  13  (31)
Total derivative financial instruments - liabilities $ 2,860  $ 33  $ (216)

16

June 30, 2021 Six Months Ended June 30, 2021
Derivative Financial Instruments Expiration
Dates
Outstanding
Notional
Fair
Value
Gains/(Losses)
Assets
Mortgage loans held for sale
Loan sale commitments 2021 $ 1,514  $ 39  $ (63)
Derivative financial instruments
IRLCs 2021 6,730  204  (210)
LPCs 2021 1,984  10  (29)
Forward MBS trades 2021 9,749  27  271 
Swap futures 2021 60  — 
Total derivative financial instruments - assets $ 18,523  $ 241  $ 33 
Liabilities
Derivative financial instruments
IRLCs 2021 $ $ —  $ — 
LPCs 2021 708  (1)
Forward MBS trades 2021 11,747  25  (126)
Swap futures 2021 —  —  (4)
Total derivative financial instruments - liabilities $ 12,464  $ 26  $ (131)

The Company held $37 and $27 in collateral deposits as of June 30, 2022 and December 31, 2021, respectively. Collateral deposits are recorded in other assets in the Company’s condensed consolidated balance sheets. The Company does not offset fair value amounts recognized for derivative instruments with amounts collected or deposited on derivative instruments in the condensed consolidated balance sheets.


17


9. Indebtedness

Advance and Warehouse Facilities
June 30, 2022 December 31, 2021
Maturity Date Collateral Capacity Amount Outstanding Collateral Pledged Outstanding Collateral Pledged
Advance Facilities
$400 advance facility(1)
August 2023 Servicing advance receivables $ 400  $ 173  $ 243  $ 234  $ 318 
$350 advance facility October 2022 Servicing advance receivables 350  156  186  160  197 
$350 advance facility January 2023 Servicing advance receivables 350  145  172  162  190 
$75 advance facility December 2022 Servicing advance receivables 75  49  70  58  89 
Advance facilities principal amount 523  671  614  794 
Warehouse Facilities
$4,000 warehouse facility February 2023 Mortgage loans or MBS 4,000  661  771  1,224  1,341 
$2,500 warehouse facility October 2022 Mortgage loans or MBS 2,500  532  550  991  1,024 
$1,500 warehouse facility June 2023 Mortgage loans or MBS 1,500  180  180  356  345 
$750 warehouse facility October 2022 Mortgage loans or MBS 750  241  253  256  270 
$600 warehouse facility(2)
September 2023 Mortgage loans or MBS 600  91  101  409  425 
$500 warehouse facility June 2023 Mortgage loans or MBS 500  9  10  188  194 
$500 warehouse facility September 2022 Mortgage loans or MBS 500  117  120  419  430 
$500 warehouse facility June 2023 Mortgage loans or MBS 500  57  68  39  39 
$500 warehouse facility August 2023 Mortgage loans or MBS 500  31  32  38  39 
$450 warehouse facility April 2023 Mortgage loans or MBS 450      87  89 
$325 warehouse facility December 2022 Mortgage loans or MBS 325  1  1  67  67 
$250 warehouse facility(3)
April 2023 Mortgage loans or MBS 250     
$200 warehouse facility April 2023 Mortgage loans or MBS 200  19  25  46  58 
$30 warehouse facility(4)
January 2022 Mortgage loans or MBS       —  — 
Warehouse facilities principal amount 1,939  2,111  4,125  4,327 
MSR Facilities
$800 warehouse facility(1)(5)
August 2023 MSR 800 260  2,008  260 1,107 
$600 warehouse facility(6)
April 2023 MSR 600 400 883  —  838 
$400 warehouse facility(2)
September 2023 MSR 400 65 1,376 745
$400 warehouse facility June 2024 MSR 400 200 710
$50 warehouse facility November 2023 MSR 50 25 77 10 124
MSR facilities principal amount 950 5,054 270 2,814
Advance, warehouse and MSR facilities principal amount 3,412  $ 7,836 5,009  $ 7,935 
Unamortized debt issuance costs (5) (12)
Advance and warehouse facilities, net $ 3,407 $ 4,997

(1)Total capacity for this facility is $1,200, of which $400 is internally allocated for advance financing and $800 is internally allocated for MSR financing; capacity is fully fungible and is not restricted by these allocations, in comparison to $1,200, $940, and $260 respectively in 2021.
(2)The capacity amount for this facility is $1,000, of which $400 is a sublimit for MSR financing.
(3)The capacity amount for this warehouse facility decreased from $600 to $250 in 2022.
(4)This facility was terminated in January 2022.
(5)The capacity amount for this warehouse facility increased from $260 to $800 in 2022.
(6)The capacity amount for this warehouse facility increased from $400 to $600 in 2022.

The weighted average interest rate for advance facilities was 3.1% and 3.4% for the three months ended June 30, 2022 and 2021, respectively, and 2.8% and 3.2% for the six months ended June 30, 2022 and 2021, respectively. The weighted average interest rate for warehouse and MSR facilities was 3.1% and 2.1% for three months ended June 30, 2022 and 2021, respectively, and 2.6% and 2.2% for the six months ended June 30, 2022 and 2021, respectively.

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Unsecured Senior Notes
Unsecured senior notes consist of the following:
Unsecured Senior Notes June 30, 2022 December 31, 2021
$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 
$600 face value, 5.750% interest rate payable semi-annually, due November 2031
600  600 
Unsecured senior notes principal amount 2,700  2,700 
Unamortized debt issuance costs (28) (30)
Unsecured senior notes, net $ 2,672  $ 2,670 

The indentures provide that on or before certain fixed dates, the Company may redeem up to 40% of the aggregate principal amount of the unsecured senior notes with the net proceeds of certain equity offerings at fixed redemption prices, plus accrued and unpaid interest, to the redemption dates, subject to compliance with certain conditions. In addition, the Company may redeem all or a portion of the unsecured senior notes at any time on or after certain fixed dates at the applicable redemption prices set forth in the indentures plus accrued and unpaid interest, to the redemption dates. No notes were repurchased or redeemed during the six months ended June 30, 2022 and 2021.

As of June 30, 2022, the expected maturities of the Company’s unsecured senior notes based on contractual maturities are as follows:
Year Ending December 31, Amount
2022 through 2026 $  
Thereafter 2,700 
Total unsecured senior notes principal amount $ 2,700 

Interest Expense
Interest expense primarily includes interest incurred on advance and warehouse facilities, unsecured senior notes, excess spread financing and compensating bank balances, as well as bank fees. The Company incurred interest expense related to advance and warehouse facilities, unsecured senior notes and excess spread financing of $90 and $176 for the three and six months ended June 30, 2022, respectively, and $90 and $183 for the three and six months ended June 30, 2021, respectively.

Financial Covenants
The Company’s credit facilities contain various financial covenants which primarily relate to required tangible net worth amounts, liquidity reserves, leverage requirements, and profitability requirements, which are measured at the Company’s operating subsidiary, Nationstar Mortgage LLC. The Company was in compliance with its required financial covenants as of June 30, 2022.


10. Securitizations and Financings

Variable Interest Entities
In the normal course of business, the Company enters into various types of on- and off-balance sheet transactions with special purpose entities (“SPEs”) determined to be VIEs, which primarily consist of securitization trusts established for a limited purpose. Generally, these SPEs are formed for the purpose of securitization transactions in which the Company transfers assets to an SPE, which then issues to investors various forms of debt obligations supported by those assets.

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

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A summary of the assets and liabilities of the Company’s transactions with VIEs included in the Company’s condensed consolidated balance sheets is presented below:
June 30, 2022 December 31, 2021
Consolidated Transactions with VIEs Transfers
Accounted for as
Secured
Borrowings
Transfers
Accounted for as
Secured
Borrowings
Assets
Restricted cash $ 45  $ 50 
Advances and other receivables, net 358  387 
Total assets $ 403  $ 437 
Liabilities
Advance facilities, net(1)
$ 301  $ 322 
Payables and other liabilities  
Total liabilities $ 301  $ 323 

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

The following table shows a summary of the outstanding collateral and certificate balances for securitization trusts for which the Company was the transferor, including any retained beneficial interests and MSRs, that were not consolidated by the Company:
Unconsolidated Securitization Trusts June 30, 2022 December 31, 2021
Total collateral balances - UPB $ 1,034  $ 1,122 
Total certificate balances $ 1,012  $ 1,112 

The Company has not retained any variable interests in the unconsolidated securitization trusts that were outstanding as of June 30, 2022 and December 31, 2021. Therefore, it does not have a significant maximum exposure to loss related to these unconsolidated VIEs.

A summary of mortgage loans transferred by the Company to unconsolidated securitization trusts that are 60 days or more past due are presented below:
Principal Amount of Transferred Loans 60 Days or More Past Due June 30, 2022 December 31, 2021
Unconsolidated securitization trusts $ 127  $ 138 


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. In 2021, the Company repurchased a total of 14.8 million shares of its common stock from affiliates of Kohlberg Kravis Roberts & Co. L.P. (“KKR”), a related party of the Company. In addition, in August 2021, the Company repurchased 1.0 million shares of its preferred stock from affiliates of KKR. After giving effect to these transactions, KKR no longer held any equity interests in the Company.

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The following table sets forth the computation of basic and diluted net income per common share (amounts in millions, except per share amounts):
Three Months Ended June 30, Six Months Ended June 30,
Computation of Earnings Per Share 2022 2021 2022 2021
Net income from continuing operations $ 151  $ 427  $ 809  $ 986 
Less: Undistributed earnings from continuing operations attributable to participating stockholders   — 
Net income from continuing operations attributable to Mr. Cooper common stockholders $ 151  $ 423  $ 809  $ 977 
Net income from discontinued operations $   $ 12  $   $ 14 
Less: Undistributed earnings from discontinued operations attributable to participating stockholders   —    — 
Net income from discontinued operations attributable to Mr. Cooper common stockholders $   $ 12  $   $ 14 
Net income $ 151  $ 439  $ 809  $ 1,000 
Less: Undistributed earnings attributable to participating stockholders    
Net income attributable to common stockholders $ 151  $ 435  $ 809  $ 991 
Earnings from continuing operations per common share attributable to Mr. Cooper:
Basic $ 2.08  $ 4.91  $ 11.04  $ 11.13 
Diluted $ 2.03  $ 4.72  $ 10.74  $ 10.65 
Earnings from discontinued operations per common share attributable to Mr. Cooper:
Basic $   $ 0.14  $   $ 0.16 
Diluted $   $ 0.13  $   $ 0.15 
Earnings per common share attributable to Mr. Cooper:
Basic $ 2.08  $ 5.05  $ 11.04  $ 11.29 
Diluted $ 2.03  $ 4.85  $ 10.74  $ 10.80 
Weighted average shares of common stock outstanding (in thousands):
Basic 72,709  86,142  73,278  87,791 
Dilutive effect of stock awards 1,618  2,664  2,052  3,123 
Dilutive effect of participating securities   839    839 
Diluted 74,327  89,645  75,330  91,753 


12. Income Taxes

For the three and six months ended June 30, 2022, the effective tax rate for continuing operations was 26.0% and 24.4%, respectively, which differed from the statutory federal rate of 21% primarily due to state income taxes and nondeductible executive compensation. The effective tax rate increased during the three and six months ended June 30, 2022 compared to the same period in 2021, primarily due to the impact of quarterly discrete tax items relative to the income before taxes for the respective periods, including the excess tax benefit from stock-based compensation and prior period tax credits.

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For the three and six months ended June 30, 2021, the effective tax rate for continuing operations was 24.8% and 23.7% which differed from the statutory federal rate of 21% primarily due to state income taxes, as well as unfavorable permanent differences including executive compensation.


13. Fair Value Measurements

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

There have been no significant changes to the valuation techniques and inputs used by the Company in estimating fair values of Level 2 and Level 3 assets and liabilities as disclosed in the Company’s Annual Reports on Form 10-K for the year ended December 31, 2021.

The following tables present the estimated carrying amount and fair value of the Company’s financial instruments and other assets and liabilities measured at fair value on a recurring basis:
  June 30, 2022
    Recurring Fair Value Measurements
Fair Value - Recurring Basis Total Fair Value Level 1 Level 2 Level 3
Assets
Mortgage loans held for sale $ 2,072  $   $ 2,072  $  
Mortgage servicing rights 6,151      6,151 
Equity securities 59  5  —  54 
Derivative financial instruments
IRLCs 62      62 
LPCs 3      3 
Forward MBS trades 12    12   
Liabilities
Derivative financial instruments
IRLCs 1      1 
LPCs 1      1 
Forward MBS trades 13    13   
Treasury futures 18    18   
Mortgage servicing rights financing 24      24 
Excess spread financing 532      532 

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  December 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 $ 4,381  $ —  $ 4,381  $ — 
Mortgage servicing rights 4,223  —  —  4,223 
Equity securities 63  —  54 
Derivative financial instruments
IRLCs 134  —  —  134 
Forward MBS trades —  — 
LPCs —  — 
Liabilities
Derivative financial instruments
Forward MBS trades —  — 
LPCs —  — 
Swap futures —  — 
Mortgage servicing rights financing 10  —  —  10 
Excess spread financing 768  —  —  768 

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:
Six Months Ended June 30, 2022
  Assets Liabilities