Mr. Cooper Group Q2 2025 Earnings Report

Mr. Cooper Group EPS Results

• Actual EPS: $3.13
• Consensus EPS: $3.28
• Beat/Miss: Missed by -$0.15
• One Year Ago EPS: $3.10

Mr. Cooper Group Revenue Results

• Actual Revenue: $608.00 million
• Expected Revenue: $669.23 million
• Beat/Miss: Missed by -$61.23 million
• YoY Revenue Growth: +8.60%

Mr. Cooper Group Announcement Details

• Quarter: Q2 2025
• Date: 7/23/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 23, 2025
• Conference Call Time: 7:00AM ET

Mr. Cooper Group (NASDAQ:COOP)., together with its subsidiaries, operates as a non-bank servicer of residential mortgage loans in the United States. The company operates through Servicing and Originations segments. The Servicing segment performs activities on behalf of investors or owners of the underlying mortgages and mortgage servicing rights, including collecting and disbursing borrower payments, investor reporting, customer service, modifying loans, performing collections, foreclosures, and the sale of real estate owned. The Originations segment originates residential mortgage loans through its direct-to-consumer and correspondent channels. The company provides its services under the Mr. Cooper and Xome brands. The company was formerly known as WMIH Corp. and changed its name to Mr. Cooper Group Inc. in October 2018. Mr. Cooper Group Inc. was incorporated in 2015 and is based in Coppell, Texas.

Mr. Cooper Group Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Operating ROTCE was 17.2% in Q2, up from 16.8% last quarter and comfortably within the 16–20% guidance range, reflecting a solid recurring performance.
• Positive Sentiment: Servicing generated $332 million in pretax income, up 15% YoY, driven by 13% revenue growth and only 6% expense growth, with cost to serve nearly 50% below industry average.
• Positive Sentiment: Originations delivered $64 million pretax income on $9.4 billion in fundings, with DTC volumes up about 40% sequentially and successful home equity securitizations completed.
• Positive Sentiment: The balance sheet remains strong with a 26.6% capital ratio, $3.8 billion in liquidity, and delinquencies down to 1%, underscoring robust financial position and asset quality.
• Negative Sentiment: Persistent high mortgage rates and affordability challenges continue to pressure home sales and home prices in some markets, constraining overall market activity.

Presentation

[Kenneth Posner, SVP - IR & Strategic Planning at Mr Cooper Group]

Good morning. My name is Ken Posner, and I'm SVP of Strategic Planning and Investor Relations at Mr. Cooper Group. With me today are Jay Bray, Chairman and CEO Mike Weinberg, President and Curt Johnson, Executive Vice President and CFO. This morning, we'll be reviewing the company's financial performance for second quarter twenty twenty five, and you can find the slides accompanying our remarks on our Investor Relations webpage at investors.mrcoopergroup.com.

[Kenneth Posner, SVP - IR & Strategic Planning at Mr Cooper Group]

As a reminder, we may refer to non GAAP measures, which are reconciled to GAAP results in the appendix to the slide deck and press release. Also, we may make forward looking statements, which you should understand could be affected by risk factors that we've identified in our 10 ks and other SEC filings. We are not undertaking any commitment to update these statements if conditions change. Finally, due to the pending combination with Rocket, we will not be taking questions on today's call. With that, I'll turn it over to Jay.

[Jay Bray, Chairman & CEO at Mr Cooper Group]

Good morning, everyone. I'm going to start on Slide three with a review of second quarter highlights. Then I'll turn it over to Mike to take you through a more detailed discussion of operating results, and Kurt will wrap up with the financials. In summary, this was a very solid quarter, marked by consistent, recurring and predictable performance. Operating ROTCE was 17.2%, up from 16.8% last quarter and squarely within our guidance range of 16% to 20%.

[Jay Bray, Chairman & CEO at Mr Cooper Group]

As you know, we paused our stock repurchase program due to the pending merger with Rocket. If we normalize the capital ratio back to where it was at year end, our ROTC would have been in the upper end of our guidance range. I'm very pleased with these results. In fact, I'd say the company is fine on all cylinders. This is a real achievement considering the difficult environment.

[Jay Bray, Chairman & CEO at Mr Cooper Group]

With persistent high mortgage rates contributing to ongoing affordability challenges, sluggish home sales, and home prices coming under pressure in some markets. According to the NBA's latest survey, originators have lost money in 10 out of the last 12 quarters. In contrast, mister Cooper has produced solid double digit returns for nearly two and a half years straight, which demonstrates the power of our scale platform and balanced business model. Over this time, the key themes for our performance have been very consistent, operating leverage, fee income, and nimble execution and originations. These themes reflect the combination of people, scale, and technology, And this formula for success is accelerating as we roll out AI, which is driving even better experiences for our customers as well as incremental efficiencies.

[Jay Bray, Chairman & CEO at Mr Cooper Group]

At the end of the day, however, it's people who produce results, and we put a lot of care into creating a purposeful and inclusive environment. I was very pleased to see the company recognized by the Great Places to Work Foundation as one of the best places to work in Texas. To all my Cooper teammates, I'd like to say thank you once again for your consistent, amazing work. The balance sheet is in great shape with a super strong capital ratio of 26.6% and robust liquidity at $3,800,000,000 Asset quality remains pristine with delinquencies declining in the quarter to 1%, and our hedging program continues to perform as expected. Now turning to the segments.

[Jay Bray, Chairman & CEO at Mr Cooper Group]

Servicing generated 332,000,000 in pretax income, up 15% year over year, while originations generated 64,000,000 despite elevated rates. I was pleased with our momentum in home equity loans, where we completed two securitizations during the quarter and by our continued strong performance in the correspondent channel where we are a top five player in climbing. Separately, I'm excited to announce that after a concerted multiyear effort, we have successfully launched our maiden MSR fund with 200,000,000 in initial commitments and plans to scale rapidly from here. We're working with blue chip fixed income investors who know us well and who see our platform as integral to maximizing MSR economics. By doing a good job for these investors, we'll build out an important asset light strategy to grow our platform.

[Jay Bray, Chairman & CEO at Mr Cooper Group]

Finally, I will mention that we're thrilled to see Rocket close the acquisition of Redfin, which is a major component of the integrated homeownership platform, which we are so excited to be building together. We're working very closely with Rocket on post close integration plan to ensure once the deal closes that we hit the ground running with strong momentum in place to deliver the benefits of this platform to our clients, our partners, and investors. And with that, I'll turn the call over to Mike.

[Mike Weinbach, President at Mr Cooper Group]

Thanks, Jay, and good morning, everyone. If you'll turn to Slide four, I'll start with the servicing portfolio, which is holding steady around 1,500,000,000,000.0 following the successful acquisition of Flagstar as we prepare for the merger with Rocket while also maintaining our pricing discipline within the bulk and correspondent channels. Starting with subservicing, we continue to have a very strong market position. The slight decline in UPB this quarter is driven by a single client who is pursuing a different strategy.

[Mike Weinbach, President at Mr Cooper Group]

During the second quarter, we deboarded $12,000,000,000 in loans for this client, and we deboarded the remaining roughly $50,000,000,000 earlier this month. Otherwise, we're enjoying very strong momentum with organic growth, and I'm pleased to report a new client win that is bringing a sizable portfolio of about 40,000,000,000 in loans that we expect to board by year end. Turning to the owned portfolio, we're pleased with the flows coming from our corresponding co issue channels, and we've been bidding on select bulk pools, which meet our asset quality standards and return targets. Recent wins include a sizable portfolio from a major institution, which values our seamless onboarding process and high quality customer care. We expect to board about $20,000,000,000 in MSR acquisitions in the third quarter.

[Mike Weinbach, President at Mr Cooper Group]

For the remainder of the year, we'd expect the total portfolio to be flat, plus or minus, as we stick to our pricing discipline and work on integration planning with Rocket. If you'll turn to Slide five, let's talk about servicing income, which came in at 332,000,000, up 15% year over year. The key theme here remains operating leverage, which you can see in revenues up 13% year over year, tracking significant portfolio growth, especially in subservicing, while operating expenses were up only 6%. What you're seeing here is not only the benefits of our growing scale, but our team's relentless focus on process improvement, which is the secret sauce behind providing the best possible customer experience and driving incremental efficiency. According to the latest data from the 2024 MBA benchmark survey, our cost to serve is now nearly 50% below the industry average, with the gap having expanded considerably from the year before, and these numbers do not include the incremental scale benefits reflected in our 2025 results.

[Mike Weinbach, President at Mr Cooper Group]

A key benefit of scale is having the resources to invest in innovation. And as you know, we're continuing to invest in and implement new AI solutions since this technology is uniquely suited for optimizing large call center operations. Last quarter, we shared some color on our proprietary agent IQ application, which helps team members with customer calls by interpreting the questions, tracking sentiment in real time, putting explanatory material and customer information at agent's fingertips, and generating call summaries. With the first version of agent IQ now fully rolled out, we're moving forward to beta test true agentic features where the system will execute simple tasks on its own, like answering questions and fetching data and chat engagements subject, of course, to rigorous quality control, including human supervision. Let's move on to slide six and talk about originations, where we generated 64,000,000 in pretax income and 9,400,000,000.0 in fundings.

[Mike Weinbach, President at Mr Cooper Group]

As Jay mentioned, the DTC channel is enjoying very strong momentum. Volumes were up roughly 40% sequentially with home equity and cash out refinances together making up nearly 60% of the mix this quarter as we continue to help customers responsibly access the equity in their homes. We successfully completed two home equity securitizations during the quarter and received very favorable feedback from investors who appreciate the power of our loss mitigation capabilities and our long track record of keeping customers in their homes. We believe there's a very substantial opportunity with home equity loans. Our customers have in total more than 900,000,000,000 in available equity, which represents a massive multiyear ramp of business for our DTC team.

[Mike Weinbach, President at Mr Cooper Group]

We view home equity as a mainstream consumer product, representing the easiest and most cost effective manner for homeowners to access the equity for a wide variety of uses. Turning to rate and term refinances. The opportunity in the current environment is obviously somewhat limited, but I point out that 22% of our customers have note rates above 6%, which positions us for sizable volumes whenever rates next rally, even if it's only briefly. One final comment on GTC. I'd like to give a shout out to the team for staying laser focused on operations.

[Mike Weinbach, President at Mr Cooper Group]

Thanks to your tireless work, turn times measured from lots of funding were six days faster in the second quarter than a year ago, which is a substantial improvement with 68% higher volumes. I'll wrap up with a quick comment on the correspondent channel, where our team continues to do a fantastic job bringing value to our sellers and fine tuning our pricing and capital market strategy to optimize execution. Over the last year, we've become a consistent top five player in this channel, and we expect the power of our platform to drive further share gains, subject, of course, to maintaining margin discipline. With that, I'll turn the call over to Kurt.

[Kurt Johnson, EVP & CFO at Mr Cooper Group]

Thanks, Mike, and good morning, everyone. I'll start on Slide seven and provide some additional commentary around the second quarter financials. To summarize, net income was $198,000,000 which included $269,000,000 in pretax operating income, a $30,000,000 positive mark on net of hedges, offset by $15,000,000 in adjustments and $7,000,000 in intangible amortization. Let me start by unpacking the adjustments. This quarter, we had approximately $9,000,000 in costs related to the Rocket merger and $4,000,000 associated with Flagstar.

[Kurt Johnson, EVP & CFO at Mr Cooper Group]

Other miscellaneous adjustments, which net to $2,000,000 include losses associated with equity investments, legal fees related to the fund launch, a vendor expense write off and an offsetting reserve release related to the Homepoint portfolio. Full details are, as always, listed in the appendix. In terms of operating results, Mike covered both servicing and originations, and I'll mention that the corporate segment incurred $48,000,000 in expenses. For the third quarter of twenty five, we anticipate corporate expenses remaining at this level due to IT investments, which we are continuing to make in our servicing platform, including projects like the ejecting applications Mike mentioned, as well as additional investments in our correspondent chain. Turning to the mark to market line, interest rate volatility was relatively muted this quarter.

[Kurt Johnson, EVP & CFO at Mr Cooper Group]

We marked up the MSR by $59,000,000 to reflect rising interest rates and lower CPRs as well as non interest rate related factors like cost to serve and OAS spreads. These changes resulted in a quarter end valuation of 156 basis points of UPB or a 5.4 multiple of the base service stream. Offsetting the gain were $29,000,000 in hedge losses and our target hedge ratio remained 75%. Turning to Slide eight, I'll briefly touch on asset quality, which is a strategic focus for us. As you can see from the chart, our high quality portfolio continues to perform extremely well with MSR delinquencies down by six basis points in the quarter to 1%.

[Kurt Johnson, EVP & CFO at Mr Cooper Group]

Low delinquencies reflect our thoughtful portfolio construction evident the high FICO scores and low LTV ratios for our customers as well as our loss mitigation capabilities, which we believe are best in class. As we've commented in the last few quarters, we're closely monitoring the Ginnie Mae sector, especially FHA, where delinquencies have increased, although they remain well below peers. Due to our conservative risk appetite, we've limited FHA loans to 15% of our MSR portfolio. In addition, we've largely avoided the 2023 and 2024 vintages, which we regard as posing higher risk. FHA recently tightened the standards for its loan modification programs, limiting availability to once every twenty four months.

[Kurt Johnson, EVP & CFO at Mr Cooper Group]

We view this as a prudent move by FHA to prevent recidivism from what are otherwise extremely helpful programs for customers struggling with financial hardship. Having said that, the change will reduce the population of delinquent customers who qualify for these programs. Additionally, as you probably heard, the end of the student loan moratorium has led to a rise in student loan delinquencies. In our portfolio, roughly 16% of customers have student loans and we did see elevated student loan delinquencies as high as 8.7 in April before settling down to 7.9% in June. We are closely watching our FAK customers who also have student loans, but for us this population represents only 3.5% of our total portfolio and is largely associated with customers with significant equity positions.

[Kurt Johnson, EVP & CFO at Mr Cooper Group]

Therefore, we do not believe this portfolio poses a material risk to our performance. Turning to Slide nine, I'll end my remarks with an update on our key balance sheet metrics. Liquidity ended the quarter at $3,800,000,000 slightly lower than the prior quarter, primarily due to the timing of a bulk MSR portfolio acquisition right at quarter end. Looking ahead, we anticipate continued strong operating cash flow, supporting a robust liquidity position throughout the remainder of the year. Our capital ratio, measured by tangible net worth to assets, ended the quarter at 26.6 percent, up from 24.4% at year end, thanks to strong earnings and the absence of stock repurchases during the quarter, which we suspended due to the ROCCAT transaction.

[Kurt Johnson, EVP & CFO at Mr Cooper Group]

As Jay mentioned, if you normalize our capital ratio, we'd be earning in the upper end of our guidance range, which we believe reflects exceptional performance for a mortgage company at this point in the cycle. Looking ahead to the third quarter, we guide you to expect continued consistent performance. With that, I'd like to wrap up by thanking you for your interest in Mr. Cooper.

Participants

Analysts

• Kenneth Posner, SVP - IR & Strategic Planning at Mr Cooper Group
• Jay Bray, Chairman & CEO at Mr Cooper Group
• Mike Weinbach, President at Mr Cooper Group
• Kurt Johnson, EVP & CFO at Mr Cooper Group