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Replies to post #669118 on Mr Cooper Group Inc fka COOP
09/13/21 2:59 PM
And as we move into 2022, the margin should benefit from slower prepayment speeds and reduced amortization. If interest rates drift upwards, we stand to mark up our MSRs, which could drive sizable gains in tangible book value. We believe this positioning is a major differentiator as most of our peers are heavily overweighted to Originations whereas our business model is much more balanced. Our cash and liquidity are strong, and we're projecting robust cash flow throughout 2021.
When short ranges finally go up, we will make more money on custodial deposits. Plus if mortgage rates rise further, we would expect additional positive marks on our MSR that would build book value. I can't give you exact guidance on how originations and servicing will offset each other, because that depends on a lot of factors, including interest rates, the yield curve, and competitive intensity in the originations sector. But what I can tell you is that we still expect to generate strong earnings and very strong cash flow in 2021.
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So I think based on the Fed's comments yesterday on inflationary pressures, I think everyone's expecting over the long term for rates to go up, which means more positive marks on our book.
They hedge the value of the MSR. They dont use the MSR as a way to make an interest rate bet. If MSR Value goes up, hedge takes a loss of roughly the same amount (hedging is not a perfect science). If MSR Value goes down, then hedge takes a gain.
MSR is a fee business. Not a way to bet on rates.
AI
