Mr Cooper Group Inc fka COOP

[jerrylev]

Important titbits from NSM earnings conference call:

"Regarding Servicing :"The business is poised to reap significant benefits of a rising rate environment".

"The mortgage market is healthy, with low default rates and home equity at record levels. In fact, the average Mr. Cooper customer has $100,000 of home equity available. Yet, student and consumer debt load is creating financial stress for some customers, and we can play a broader role in the financial lives of these customers. There are currently 60 million outstanding mortgages in the U.S. and approximately 19 million or 30% of these customers have substantial home equity combined with high interest rate consumer debt. "

3 main points:

- When servicing, you get a percentage point that you receive based on the size of the loan payment. The higher the payment due to higher loan amount and also based on HIGHER INTEREST RATE, the more money that you will get from servicing.

- When originating loans, the higher the rate, the more payment it will be. Just like everything else, from gas price to consumer interest rate, it will go up the moment that there is a rumor of a price hike even before it happens. And when price or interest goes down, the reverse does not happen, i.e. price or interest rate comes down slowly. So it goes up very fast on just rumor and comes down slowly based on actual data. And so you reap benefits based on the price volatility.

Now if you sell mortgages while the interest rate was high and the interest rate comes down then the value of your loan goes up.

- Mr Cooper average loan amount goes up with rise in real estate price. If you happen to live in certain parts of the country, you know that you cannot buy any house under 1M dollar. This will create a double whammy for NSM: new buyers will have to pay higher loan amount, and existing customers can refinance using their high home equity to pay other debts such as student loans and consumer debt.

And most importantly unlike in 2008, " The mortgage market is healthy, with low default rates and home equity at record levels".

LIKE I SAID, WMIH + NSM + KKR ARE IN THE RIGHT BUSINESS AT THE RIGHT TIME.