Q3 was a busy quarter for Mr. Cooper Group. The company, which operates mainly as Mr. Cooper and Xome, saw $64 million in predecessor GAAP losses in Q3 and $1 billion in successor GAAP income. Altogether, that brought Mr. Cooper Group to $54 million in adjusted income during the quarter in which the company rebranded itself and completed a big merger.
“This was an extraordinary quarter for our company,” said Jay Bray, chairman and CEO of Mr. Cooper Group Inc. “We completed the WMIH Corp. merger and renamed the company. We've made strides in all our business segments.”
The merger was the acquisition of Assurant Mortgage Solutions (Xome), which Bray said increased Xome's profitability by 56 percent in the quarter. That was due to steady income in the originations side.
In its Q3 report, the company also announced that it is working out the acquisition of Pacific Union Financial.
“We believe this acquisition is complementary to our business and significantly increases our originations volume and capabilities,” Bray said. “Subject to regulatory approvals, the transaction will also allow us to grow our servicing portfolio by approximately $25 billion upon closing in early 2019.”
The company's servicing business earned $81 million in combined adjusted pretax income, or 6.5 basis points of adjusted profitability in Q3. Combined adjusted pretax profitability improved 12 percent from the prior quarter, while expenses improved by $9 million, according to the report. The company said that was primarily due to a decrease in interest expense related to MSR financing and higher float income.
Mr. Cooper boarded $37 billion UPB in the quarter to close the third quarter servicing portfolio at $514 billion UPB. That puts the company on track to reach its goal of 5 percent growth for the year, with an expectation to end the year at $535 billion UPB.
Mr. Cooper remains confident in achieving adjusted servicing profitability in excess of 6.0 basis points on average for the full year 2018 which will be propelled by a lower prepayment environment and continued efficiencies.
Originations earned $33 million in combined adjusted pretax income in Q3, mainly due to gain on sale revenue, the report stated. The company claimed nearly 23,000 loans in the third quarter, totaling approximately $5.1 billion UPB. About $2.4 billion came from the consumer direct channel and $2.7 billion from the correspondent channel. In the consumer direct channel, refinance recapture increased 8 percent quarter-over-quarter to 57 percent. The correspondent channel has grown over the past year making Mr. Cooper the 10th largest correspondent lender in the U.S.
The report also stated that Xome “will continue to focus on the AMS integration and transformation throughout 2019, and expects to fully ramp up the capture of Mr. Cooper's field services opportunities by mid-2019.”