Mr. Cooper Group Reports Second Quarter 2021 Net Income of $439 Million

• Reported total net income of $439 million and $4.85 per diluted share, equivalent to a ROCE of 56%
• Generated pretax operating income from continuing operations of $227 million, equivalent to ROTCE of 23.1%
• Book value per share increased to $38.89 and Tangible book value per share increased to $37.24
• Originations generated pretax income of $207 million on funded volume of $22.2 billion
• Servicing portfolio grew 4% quarter-over-quarter to $654 billion
• Completed sale of Title365 for $500 million
• Unrestricted cash was $1.2 billion as of July 1st, 2021
• Subsequent to quarter-end, announced $500 million stock repurchase authorization and agreement to sell Reverse servicing portfolio

Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), which principally operates under the Mr. Cooper® and Xome® brands, reported second quarter net income of $439 million or $4.85 per diluted share. Net income included a $135 million mark-to-market charge, which excludes fair value amortization of $45 million. Excluding mark-to-market and other items, the Company reported pretax operating income of $227 million. Other items were $7 million in severance charges related to corporate actions, $485 million in gain on the sale of Title365, net of transaction costs, $16 million in discontinued operations related to the reverse portfolio, and $3 million of intangible amortization.

Chairman and CEO Jay Bray commented, “Not only did we generate very solid operating returns this quarter, but also we took strategic actions, including the sale of Title365 and Reverse, which rationalize and simplify the business model, strengthen the balance sheet, and prepare us for faster growth.”

Chris Marshall, Vice Chairman, President, and CFO added, “The company’s balance sheet has never been stronger, with $1.2 billion in cash as of July 1, 2021 including the proceeds of the sale of Title365 and immediately accessible liquidity of $509 million. Additionally, pro forma for the sale of the Reverse portfolio, our capital ratio exceeded our previously disclosed target of 15%.”

Servicing

The Servicing segment is focused on providing a best-in-class home loan experience for our 3.5 million customers while simultaneously strengthening asset performance for investors. In the second quarter, Servicing recorded a pretax loss of $56 million, reflecting a total mark-to-market charge of $180 million, which included $135 million in other mark-to-market and $45 million in fair value amortization. The forward servicing portfolio ended the quarter at $654 billion UPB. Servicing generated pretax operating income, excluding the full mark-to-market and accounting items, of $125 million. At quarter end, the carrying value of the MSR was $3,307 million equivalent to 115 bps of MSR UPB and original cost basis of 86 bps.

Originations

The Originations segment focuses on creating servicing assets at attractive margins by acquiring loans through the correspondent channel and refinancing existing loans in the direct-to-consumer channel. Originations earned pretax income of $207 million and pretax operating income of $213 million, which excluded $6 million in severance charges related to corporate actions.

The Company funded 83,871 loans in the second quarter, totaling approximately $22.2 billion UPB, which was comprised of $10.5 billion in direct-to-consumer and $11.7 billion in correspondent. Funded volume decreased 12% quarter-over-quarter.

Xome

Xome provides real estate solutions including property disposition, asset management, title, close, valuation, and field services for Mr. Cooper and third-party clients. The Xome segment recorded pretax income of $480 million and pretax operating loss of $4 million in the second quarter, which excluded intangible amortization and a $485 million gain, net of transactions costs, related to the sale of Title365.

Conference Call Webcast and Investor Presentation

The Company will host a conference call on July 29, 2021 at 10:00 A.M. Eastern Time. Preregistration for the call is now available in the Investor section of www.mrcoopergroup.com. Participants will receive a toll-free dial-in number and a unique registrant ID to be used for immediate call access. A simultaneous audio webcast of the conference call will be available under the investors section on www.mrcoopergroup.com. A telephonic replay will also be available approximately two hours after the conclusion of the conference call by dialing 855-859-2056 (toll-free), or 404-537-3406 (international). Please use the passcode 6059502 to access the replay.

Non-GAAP Financial Measures

The Company utilizes non-GAAP financial measures as the measures provide additional information to assist investors in understanding and assessing the Company’s and our business segments’ ongoing performance and financial results, as well as assessing our prospects for future performance. The adjusted operating financial measures facilitate a meaningful analysis and allow more accurate comparisons of our ongoing business operations because they exclude items that may not be indicative of or are unrelated to the Company’s and our business segments’ core operating performance, and are better measures for assessing trends in our underlying businesses. These notable items are consistent with how management views our businesses. Management uses these non-GAAP financial measures in making financial, operational and planning decisions and evaluating the Company’s and our business segment’s ongoing performance. Pretax operating income (loss) in the servicing segment eliminates the effects of mark-to-market adjustments which primarily reflects unrealized gains or losses based on the changes in fair value measurements of MSRs and their related financing liabilities for which a fair value accounting election was made. These adjustments, which can be highly volatile and material due to changes in credit markets, are not necessarily reflective of the gains and losses that will ultimately be realized by the Company. Pretax operating income (loss) in each segment also eliminates, as applicable, transition and integration costs, gains (losses) on sales of fixed assets, certain settlement costs that are not considered normal operational matters, intangible amortization, and other adjustments based on the facts and circumstances that would provide investors a supplemental means for evaluating the Company’s core operating performance. Return on tangible common equity (ROTCE) is computed by dividing net income by average tangible common equity (also known as tangible book value). Tangible common equity equals total stockholders’ equity less goodwill and intangible assets. Management believes that ROTCE is a useful financial measure because it measures the performance of a business consistently and enables investors and others to assess the Company’s use of equity. Tangible book value is defined as stockholders’ equity less goodwill and intangible assets. Our management believes tangible book value is useful to investors because it provides a more accurate measure of the realizable value of shareholder returns, excluding the impact of goodwill and intangible assets.

Forward Looking Statements

Any statements in this release that are not historical or current facts are forward looking statements. Forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including the severity and duration of the COVID-19 pandemic; the pandemic’s impact on the U.S. and global economies; federal, state, and local governmental responses to the pandemic; borrower forbearance rates and availability of financing. Results for any specified quarter are not necessarily indicative of the results that may be expected for the full year or any future period. Certain of these risks and uncertainties are described in the “Risk Factors” section of Mr. Cooper Group’s most recent annual reports and other required documents as filed with the SEC which are available at the SEC’s website at http://www.sec.gov. Mr. Cooper undertakes no obligation to publicly update or revise any forward-looking statement or any other financial information contained herein, and the statements made in this press release are current as of the date of this release only.

Financial Tables

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