Mr. Cooper Group(US:COOP)2023-07-26 20:13Financial Performance - The company reported a 300 basis point gain in operating ROTCE, reaching 11.7%, and an increase in tangible book value per share to $58.81 [2][4] - Capital and liquidity remain at near-record levels, with a capital ratio of 30% as measured by tangible net worth to assets [30] Capital Management - The company repurchased 1.2 million shares for $57 million, totaling 31% of shares repurchased since inception, with an additional $200 million repurchase authorization approved by the board [3] Servicing Performance - The servicing segment achieved a record $182 million in pre-tax operating income, prompting a 17% increase in full-year guidance for operating income from $600 million to $700 million [6][19] - The portfolio reached $882 billion, with expectations to hit the $1 trillion target by year-end, accelerated by pending transactions [7][19] Strategic Initiatives - The company is focused on driving efficiencies through automation and enhancing the DTC platform, which is highly profitable and aims to contribute more significantly to overall results [12][17] - The company is also expanding its self-servicing business and preparing to launch an MSR fund later this year [12][15] Market Conditions and Future Outlook - Management noted a cautious outlook regarding the impact of the end of student loan forgiveness on borrowers, with 16% of customers having outstanding student loans [16] - The company is optimistic about the potential for creating shareholder value and achieving higher returns on equity as it executes its strategic plan [4][54] Other Important Information - The company has seen a significant improvement in its internal DTC purchase recapture, with refinance recapture rates at 80%, nearly four times the industry average [42] - The integration of the Rushmore Servicing acquisition is ongoing, with expectations for it to enhance the company's capabilities in managing delinquent portfolios [126][134] Q&A Session Summary Question: Expectations for prepay speeds going into the back half of the year - Management expects prepay speeds to be slightly up, with a long-term range of 12% to 20% being reasonable [34][58] Question: Insights on the origination side and gain on sale margin - The decrease in gain on sale margin is attributed to a mix shift, with expectations for margins to improve as efficiencies from Project Flash are realized [38][40] Question: Impact of the HomePoint acquisition on servicing revenues - The HomePoint acquisition is expected to contribute positively, with onboarding planned for late 2023 or early 2024 [125][97] Question: Financing expectations for MSR transactions - The company has established strong financing partnerships and does not anticipate needing seller financing for MSR purchases [70][91] Question: Future growth of the DTC platform - The DTC platform is expected to grow in line with portfolio growth, with more inventory leading to more opportunities for originations [106][107]