Mr. Cooper Group reported the delivery of an “exceptional” third quarter, with mortgage originations generating $69 million in pretax income.
The figure “significantly exceeded our guidance,” CEO and Chairman Jay Bray said during an earnings call. The company’s Q3 return was up markedly from $38 million in the second quarter.
“This was of course due in part to the drop in mortgage rates in the quarter,” said Bray. “However, we’ve also benefited from investments we’ve been making in both our direct-to-consumer (DTC) and correspondent platforms.”
Mr. Cooper funded 25,582 loans in the third quarter, representing roughly $6.8 billion in unpaid balances, broken down into $2.3 billion in DTC and $4.5 billion in the correspondent channel. That dollar volume is up from $3.8 billion quarter over quarter, with DTC up from $2.3 billion and correspondent up from $.1 billion.
On the servicing side, Mr. Cooper totaled 5.4 million customers during the quarter, with an unpaid principal balance of $1.239 trillion, a marginal quarterly uptick but an annual gain of 32%. While its third-quarter pretax income of $177 million on the servicing side was down from $354 million, operating income after accounting for mark-to-market adjustments rose from $288 million to $305 million from Q2 to Q3.
“I’m extremely pleased with our strong performance in servicing and exceptional execution in originations, where volumes increased 80% quarter-over-quarter, as our direct-to-consumer channel helped customers take advantage of the rally in mortgage rates during September, while our correspondent channel implemented a number of new initiatives which were well-received by clients,” added Mr. Cooper President Mike Weinbach.
Notably, despite excitement about strong origination activity, the firm’s net income across all business lines is down considerably. All-encompassing third-quarter net income totaled $80 million from July through September was $80 million, down from $204 million in the preceding quarter.
Looking ahead, Weinbach tempered originations expectations for the fourth quarter, noting that the recent upward trend of mortgage rates blunts some refinance opportunity and projecting pretax originations income between $45 million and $65 million, a range he described as a “more normalized level of profitability.”
