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Mr. Cooper Group Inc. (COOP)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong consolidated results: Total revenues $654M, net income $204M, diluted EPS $3.13, and operating ROTCE 15.8% . Servicing pretax operating income was $318M, while Originations contributed $47M .
  • Management raised ROTCE guidance to 16–20% for 2025–2026, up from 14–18%, citing operating leverage, fee-based services growth, and resilient balanced model across rate environments .
  • Scale and quality improved: servicing UPB reached $1,556B (+57% y/y), MSR FV increased to $11,736M (159 bps of UPB), and liquidity stood at $3.4B with capital ratio at 24.4% .
  • Originations volumes grew sequentially; however, refinance recapture fell to 35% due to one atypical acquired portfolio; excluding it, refi recapture would have been ~53%, indicating underlying strength in DTC execution .
  • Stock reaction catalysts: raised ROTCE guidance, expanding fee-income narrative (~$500M service-related fees in 2024), MSR valuation resiliency, and clear Q1 segment guidance ranges for Servicing ($315–$335M EBT) and Originations ($30–$50M EBT) .

What Went Well and What Went Wrong

What Went Well

  • Servicing scale and profitability: Pretax operating income $318M with MSR valued at 159 bps; servicing UPB reached $1,556B, supported by low prepayments and strong credit trends .
  • Fee-income traction: Service-related fee revenues totaled $500M in 2024 (>20% of total revenue), growing at double-digit pace and capital-light, supporting higher ROTCE potential .
  • Strategic execution and recognition: Closed Flagstar acquisition; won Freddie Mac SHARP Gold Award; Fitch upgraded master servicing to 1-, and Moody’s placed corporate rating on positive outlook .

Management quotes:

  • “Given our momentum, we're increasing our ROTCE guidance range to 16% to 20% for '25 and '26.” — Jay Bray
  • “Fee-based income… can generate a higher ROTCE… asset light in nature.” — Kurt Johnson
  • “Mr. Cooper is now a top 5 correspondent lender… significant improvement in share.” — Mike Weinbach

What Went Wrong

  • Refinance recapture dropped to 35% due to one at-the-money portfolio where the originator solicited customers aggressively; excluding it, recapture would have been 53% .
  • Corporate expense heavier in Q4 ($51M) from year-end accruals, stock vesting, tech write-off; expected to normalize to $40–$45M in Q2 2025 .
  • Hedge losses ($581M) offset MSR mark-ups; coverage at 85% (above 75% target), reflecting disciplined but material hedge costs amid rate volatility .

Financial Results

Consolidated metrics vs prior two quarters

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($MM)$583 $424 $654
Total Expenses ($MM)$300 $335 $367
Net Income ($MM)$204 $80 $204
Diluted EPS ($)$3.10 $1.22 $3.13
Operating ROTCE (%)15.3% 16.8% 15.8%
MSR FV (bps of UPB)153 bps 148 bps 159 bps
Liquidity ($B)$3.2 $4.1 $3.4
Capital Ratio (Tangible Net Worth/Assets, %)28.4% 27.9% 24.4%
Versus Estimates (EPS/Rev)N/A (SPGI unavailable)N/A (SPGI unavailable)N/A (SPGI unavailable)

Segment performance (Pretax and operating)

Segment MetricQ3 2024Q4 2024
Servicing Total Revenues ($MM)$256 $502
Servicing Total Expenses ($MM)$180 $185
Servicing Pretax Income ($MM)$177 $393
Servicing Pretax Operating Income ($MM)$305 $318
Originations Total Revenues ($MM)$150 $135
Originations Total Expenses ($MM)$83 $90
Originations Pretax Income ($MM)$69 $46
Originations Pretax Operating Income ($MM)$69 $47
Corporate/Other Total Expenses ($MM)$72 $92
Corporate/Other Pretax Income (Loss) ($MM)$(134) $(159)
Consolidated Pretax Operating Income ($MM)$246 $235

KPIs and portfolio metrics

KPIQ3 2024Q4 2024
Ending UPB ($B)$1,239 $1,556
MSRs UPB ($B)$678 $736
Subservicing & Other UPB ($B)$561 $820
Average UPB ($B)$1,225 $1,407
60+ Day Delinquency Rate (%)1.5% 1.6%
Annualized CPR (%)7.1% 7.5%
Modifications & Workouts (units)21,817 24,899
Originations Funded Volume ($MM)$6,825 $9,290
Originations Pull-Through Adjusted Volume ($MM)$7,491 $9,063
Refi Recapture (%)69% 35%
Recapture (%) (overall)22% 21%
Purchase Share of Funded Volume (%)69% 65%

Notes:

  • Non-GAAP pretax operating income excludes mark-to-market and other adjustments per company policy .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
ROTCEFY 2025–202614–18% (comfortable at midpoint) 16–20% Raised
Servicing EBTQ4 2024$285–$305M Actual $393M pretax; $318M pretax operating Outperformed guide (pretax)
Originations EBTQ4 2024$45–$65M Actual $46–$47M (pretax/operating) In-line lower end
Servicing EBTQ1 2025N/A$315–$335M New guide
Originations EBTQ1 2025N/A$30–$50M New guide
Corporate ExpenseQ1–Q2 2025N/AQ1 ~elevated; Q2 normalizes to $40–$45M New view

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
AI/Technology (AgentiQ, Pyro)Pyro for document extraction; platform scaling; DTC componentization Piloting AgentIQ; digital-first to lower cost per loan Full rollout of AgentiQ in servicing (400k calls/month); planned rollout to originations Accelerating deployment
Fee Income & ServicesFoundation of fee-based subservicing/master servicing growth Balanced model emphasis; fee streams steady $500M service-related fee revenue in 2024 (>20% of total) Growing share of revenue
MSR Acquisitions & ConsolidationAnnounced Flagstar acquisition ($356B UPB) Bulk pipeline slower seasonally; capacity ample Bulk pipeline returning; disciplined returns; largest servicer scale Pipeline improving
Subservicing LeadershipPro forma 50/50 owned vs subservice mix targeted Client wins; scale benefits evident Now majority subservicing; organic client growth; continued wallet share gains Increasing subservicing mix
Originations Capacity & RecaptureAdded staff/capacity; second lien volumes; readiness for rate rallies DTC outperformance; recapture ~70% DTC volumes +16% q/q; recapture impacted by one portfolio; excluding it ~53% Capacity ready; mix shift to home equity
Regulatory/LegalRatings, capital strength; MSR hedging Ginnie Mae capital rules may spur trades; well capitalized CFPB resource discussion; continued engagement; hedging coverage 85% Monitoring; no material impact near term
Master Servicing & External ValidationStrong special servicing with blue-chip clients Continued growth and efficiency Fitch master servicing upgrade to 1-; SHARP Gold Award Strengthening reputation

Management Commentary

  • “Operating ROTCE was 15.8%. Tangible book value grew 12% year-over-year to $71.61 per share… we delivered these results by closing on the acquisition of Flagstar’s mortgage banking operations and onboarding 1.1 million customers.” — Jay Bray
  • “Servicing generated $318 million in pretax income… Given the low level of prepayments, we project strong cash flows… Originations remained resilient despite the sharp sell-off in December… Mr. Cooper is now a top 5 correspondent lender.” — Jay Bray
  • “Fee income… totaled $500 million… more than 20% of our total revenue… capital or liquidity-light, contributing to our growing ROTCE.” — Mike Weinbach
  • “We marked up the MSR… 159 basis points of UPB or 5.5 multiple… Offsetting this gain were $581 million in hedge losses (85% coverage)… stable and predictable results.” — Kurt Johnson
  • “Given our momentum, we're increasing our ROTCE guidance range to 16% to 20% for '25 and '26.” — Jay Bray

Q&A Highlights

  • ROTCE guidance drivers: Fee-based services and originations are asset-light, supporting the high end; operating leverage from scale and tech; balanced model resilient across rate scenarios .
  • Bulk MSR pipeline & returns: Activity is returning; disciplined acquisition approach; returns remain solid, though not cycle-best; hedging has performed well .
  • Xome monetization optionality: Management remains open to monetizing all or part of Xome when value is right; views it as countercyclical asset with growing market share .
  • Servicing expense efficiency: Expenses at 5.3 bps; continued reductions expected via scale, technology, and AI investments; increasing tech spend due to strong execution .
  • Originations capacity & mix: Buffer capacity maintained to capture rate dips; near-term focus on home equity and cash-out; second-lien product gaining investor acceptance, enabling better pricing to customers .

Estimates Context

  • S&P Global (Capital IQ) quarterly consensus for COOP (Primary EPS and Revenue) was unavailable at the time of this analysis due to API limits; therefore, estimate comparisons are not presented here. Estimates from S&P Global were unavailable to retrieve today.

Key Takeaways for Investors

  • Raised ROTCE guidance to 16–20% for 2025–2026 underscores confidence in the fee-income model and operating leverage; expect narrative shift toward capital-light earnings streams supporting multiple expansion .
  • Servicing scale and profitability remain the anchor: MSR FV at 159 bps, pretax operating income $318M, and UPB $1,556B (+57% y/y) provide durable cash flow visibility even in higher-for-longer rate scenarios .
  • Originations positioned for rate volatility: Capacity in place; DTC volumes improved; while Q4 recapture was depressed by a single portfolio, underlying recapture and home-equity growth are supportive through 2025 .
  • Balance sheet solid: $3.4B liquidity and 24.4% capital ratio after Flagstar funding; hedging coverage maintained near/above target, enabling predictable results amid rate moves .
  • Fee-income narrative is gaining traction: $500M in service-related fee revenues (>20% of total), growing double-digit, capital-light — a key driver to the upper end of ROTCE guide and potential re-rating .
  • Near-term trading implications: Watch for Q1 segment EBT delivery (Servicing $315–$335M; Originations $30–$50M) and any bulk MSR deal flow acceleration; fee-income updates are incremental positives .
  • Medium-term thesis: Continued consolidation and subservicing client wins, AI/digital execution lowering unit costs, and balanced model resilience suggest sustainable mid-to-high-teens ROTCE with optionality from Xome monetization .

Additional Relevant Press Releases (Q4 2024 context)

  • COOP announced date for Q4 2024 results call (Feb 12, 2025) .
  • Leadership transition at Xome: CEO Mike Rawls to retire; Chris Marshall to lead operations, reinforcing growth and monetization optionality .
  • Board addition: Andrew Bon Salle (ex-Fannie Mae) joined the Board effective Jan 1, 2025, adding capital markets and mortgage leadership depth .