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Loan servicing giant Mr. Cooper’s investments in technology are paying off in the form of higher profit margins as it continues to grow its mortgage servicing portfolio, company executives said Wednesday in reporting a $204 million fourth-quarter profit.
Aided by the $1.3 billion acquisition of Flagstar Bank’s servicing business in November, Mr. Cooper ended the year with a $1.556 trillion mortgage servicing rights portfolio, up 57 percent from a year ago.
The Dallas-based loan servicer now collects monthly payments from 6.7 million borrowers on behalf of investors, a business that generated $393 million in pretax income during the quarter.
On a call with investment analysts Wednesday, Mr. Cooper Chairman and CEO Jay Bray called the acquisition of Flagstar Bank’s mortgage business “by far the largest acquisition in our history and one of the largest customer transfers in the history of the mortgage industry.”
Mr. Cooper’s serving portfolio surpasses $1.5T
Source: Mr. Cooper regulatory filings.
Jay Bray
Mr. Cooper’s acquisition of Flagstar added $59 billion in owned servicing rights and $275 billion in subservicing, “making us the largest servicer in the U.S. by a significant margin,” Bray said. “In fact, we are more than 50 percent larger than number two.”
Bray said that in 2022, Mr. Cooper executives realized that rising interest rates would lead many mortgage lenders to sell mortgage servicing rights at bargain prices.
In 2023, Mr. Cooper said it was spending several hundred million dollars a year on call center operations, and launched a multiyear artificial intelligence project that it expected to produce $50 million in annual savings at the outset.
Mr. Cooper’s investment in AI and other technology has created an economy of scale that “make[s] us the best buyer of mortgage servicing rights in all channels,” Bray boasted Wednesday.
Over the past two years, Mr. Cooper has acquired $440 billion in mortgage servicing rights on favorable terms, including $84 billion in rights acquired from Home Point Capital for $324 million in 2023.
As a loan servicer, Mr. Cooper doesn’t hold mortgages on its books but earns fees for “servicing” those loans on behalf of investors — collecting monthly payments from borrowers, and helping them (or foreclosing on them) when they fall behind on their payments.
Mortgage servicers are also in a good position to offer refinancing to borrowers, and Mr. Cooper funded 32,954 mortgages in Q3 totaling $9.3 billion, up 36 percent from Q2.
Bray said that over the next two years, Mr. Cooper “will stay laser-focused on unit costs leveraging our lead in technology,” and continue investing in its direct-to-consumer and correspondent mortgage originations platforms to generate higher volumes and gain market share.
Shares in Mr. Cooper, which in the past 12 months have changed hands for as little as $70.01 and as much as $108.35, closed near the top of that range Wednesday, at $106.71.
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