Mr Cooper’s Q1 revenue soars 325%, but company also cut 250 jobs – NMP

No one in the mortgage industry, it seems, is safe from layoffs these days – not even the nation’s fourth-largest mortgage service, Mr. Cooper Group, which is coming off a spectacular quarter.

The Dallas-based non-bank mortgage lender and manager reported net income of $658 million, or $8.59 per diluted share, in the first quarter of 2022, a 325% increase from net income of 155 million, or $2.01 per diluted share, in the fourth quarter of 2021.

In his reportthe company cited “positive pre-tax operating income of $96 million, $552 million of other mark-to-market valuations thanks to higher interest rates and a pre-tax gain of $223 million thanks to its investment in a 20% stake in mortgage services technology company Sagent.

The report, however, included a sentence noting a company expense in the quarter of “$3 million in severance charges.” That expense was not discussed on an otherwise positive earnings conference call late Thursday afternoon, and none of the analysts on the call questioned it.

In response to a request for comment from National Mortgage Professional, a spokesperson responded by email with a statement from the company confirming that Mr. Cooper had cut approximately 250 positions during the quarter.

“While the mortgage industry has seen record origination volumes in recent years and resources have been increased to meet consumer demand, the industry is now facing higher interest rates driving down the origination volume,” the company’s statement read. “It is with deep regret that we needed to cut approximately 250 positions in the first quarter.

Mortgages fell significantly in the quarter for Mr. Cooper, who recorded pre-tax income from loans of $155 million, down 14.4% from $181 million in the previous quarter. . The company said it funded 46,933 loans in the first quarter, totaling about $11.6 billion in outstanding principal balance (UPB), including $7.8 billion in direct-to-consumer loans and $3.8 billion in loans. correspondents.

The report noted that $2 million related to severance pay was spent in the fixtures, suggesting that the bulk of the job cuts came from this unit.

The corporate statement continued: “Our team members play the most important role in the ongoing transformation of our business and any decision made that impacts our team and our culture is taken very seriously. As always, we are committed to being transparent and respectful, especially during these times, and have offered resources to support affected team members as they transition to the next phase of their careers.”

Details of resources available to employees affected by the job cuts were not provided.

During the conference call, Chairman and CEO Jay Bray noted that despite the positive results, the first quarter was difficult for both Mr. Cooper and the mortgage industry.

“The first quarter was extremely volatile as the conflict and humanitarian crisis in Ukraine shocked markets; further supply chain disruptions causing headaches for many industries; the acceleration of inflation forcing the Federal Reserve to act; and the biggest increase in mortgage rates in many years, if not decades,” he said.

In the first quarter, the company reported pretax management income of $558 million, including a $552 million gain in mortgage servicing fees (MSR). The company’s services portfolio ended the quarter with an outstanding principal balance of $796 billion, as the portfolio grew 27% year-over-year. Excluding the MSR gain, pretax management income was $7 million, down nearly 83% from $41 million in the prior quarter.

Mr. Cooper announced he was acquiring a stake in Sagent in February and the deal closed in March. In exchange, Sagent acquired certain intellectual property rights related to Mr. Cooper’s proprietary cloud-based technology platform for mortgage services. Mr. Cooper also became a multi-year client of Sagent.

Sagent is a Warburg Pincus-backed fintech software company that seeks to modernize services for banks and lenders. The company agreed to integrate Mr. Cooper’s platform “into a cloud-native core and license the cloud-based service platform” not only to Mr. Cooper, but also to other companies. other providers. Sagent said it will begin marketing the cloud-based service platform to other mortgage companies in 2023.

In the earnings report, Vice Chairman and President Chris Marshall said that while sharp increases in interest rates “will put pressure on the assembly industry, we are in a much better position than most, as we will benefit from significant improvements in service profitability during 2022.”

In the presentation to analysts on Thursday afternoon, Marshall noted that higher rates are expected to boost Mr. Cooper’s pretax operating profit to more than $100 million by the fourth quarter of this year.

News of Mr. Cooper’s job cuts comes amid a wave of job cuts announced in the quarter by companies in the mortgage industry, including Rocket Mortgage and Amrock, Better.com, Blend Labs and Union Mortgage .

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