Mr. Cooper is betting on the future earnings of its servicing portfolio while it rides the wave of high origination volumes seen throughout the industry.
The mortgage company produced a net income of $191 million and $2.00 per diluted share in the fourth quarter, down from $214 million and $2.18 per share
Despite the fourth quarter income reaching less than half of the year-ago level, the overall profitability continues “well above our target range” and the “balance sheet has never been in better shape,” vice chairman and CFO Chris Marshall said on the earnings call.
Mr. Cooper’s pretax origination income of $435 million — down slightly from its record $438 million from 3Q — drove the latest gain, offsetting the $29 million pretax servicing loss. The low interest rate environment, while benefiting originations, combined with fast conditional prepayment rates to hinder servicing profits.
The company financed 85,452 mortgage originations worth $24.5 billion in the fourth quarter, a 57% spike from the third quarter’s $15.6 billion and $12.6 billion during the same period a year ago. Based on the January and February loan volumes that rolled in, Marshall expects 2020’s origination strength to carry over into the new year.
Mr. Cooper also expanded its servicing portfolio to $626 billion in unpaid principal balance from $588 billion quarterly while falling slightly from $643 billion one year prior. It expects 2021 to stay consistent with 2020 as
“We have an enormous backlog of orders in the REO exchange,” Marshall said. “Even if some of them dwindle because of higher home prices, the sheer number says that once the foreclosure moratorium is lifted, the REO exchange platform is going to be extremely profitable right out of the gate. That will probably continue at very, very elevated levels for 18 months or two years.”
