Xoom I'm curious as to how long before Piper Sandler comes out with a new Target price since the New Analyst worked under Kevin Barker.How much did they talk about COOP before Kevin Joined COOP. No matter what a few people say ,buddies share information and the Questions asked by the new analyst seemed quite rehearsed to me as well as the quick replies. Here are the two analysts I paid attention too.
Operator: Thank you. [Operator Instructions] And our first question is going to come from the
line of Crispin Love with Piper Sandler. Your line is open. Please go ahead.
Crispin Love: Thanks, and good morning. I appreciate taking my questions. Just first -- can you
discuss a little bit what you're seeing competition-wise in the origination segment, as you've seen
a solid improvement in margins and then also a pick-up in volumes in the quarter? And do you
think that you can hold margins steady or they might pull back a bit from the elevated levels you
had in the first quarter?
Mike Weinbach: Yeah, hi, it's Mike. As we look across the originations market, obviously with
rates up, it continues to be a challenging market. But at the same time as our portfolio grows, we
have more opportunities to help customers take advantage of the equity they have in their homes,
find ways to have a lower rate or if they're looking to move, help them with a purchase in a new
home.
So we don't give specific guidance on margins, but we feel good about the opportunities we've
had to be consistently profitable in this space and to continue to take great care of our customers.
So, we expect it to continue to be a competitive market if rates are higher. Obviously, that'll
change if rates come down, but we mostly focus on being there to serve our customers regardless
of the rate environment.
Crispin Love: I appreciate the color there. And then you also -- you mentioned that the MSR
bulk purchase market remains attractive and you put some numbers around that as well. But let's
dig a little bit deeper there and discuss, one the competition you're seeing, and then, two what
types of portfolios you're most interested in, and -- is it higher coupon, lower coupon, more
agency, or just any other color? Thank you, and I appreciate you taking my questions.
Jay Bray: Sure. Hey, this is Jay. Look, we think the bulk market is extremely attractive. I think
as Mike pointed out, we looked at over 50 opportunities in the quarter and it's a mix. It's a blend
of legacy portfolios, as well as at-the-money, kind of newly originated portfolios. And our
approach is just to maintain our discipline. We look at all these portfolios. We run them. We have
more data and more information probably than anybody in the industry around how certain
sellers are going to perform, how the collateral is going to perform from a prepayment
standpoint, default standpoint, et cetera. And we just exercise our consistent discipline in hitting
our targeted returns.
So I won't say we're indifferent with respect to what the portfolios look -- come out or what's in
the market, but we'll just continue to exercise our discipline and hit our targeted returns. But
we're very, very bullish on the opportunity, and we just actually bought some additional
portfolios this week. So we think the market is there and it's going to continue to be there.
Operator: Thank you. [Operator Instructions] And our next question is going to come from the
line of Bose George with KBW. Your line is open. Please go ahead.
Bose George: Hey, everyone. Good morning. Can you talk about the potential longer-term
growth in the servicing portfolio? I mean, could we see, you know, $2 trillion at some point and
would regulators see that as a concern or as a plus as servicing moves towards larger, well-
capitalized servicers like you?
Mike Weinbach: Yeah, hey Bose, it's Mike. Happy to start with that one and Jay and Kurt can
chime in as well. In the past, we had a target of reaching $1 trillion in servicing. I think as we
move forward, you're going to hear us talking a lot more about targeted returns. So we are not
targeting a certain size. We look at what the market offers. And as Jay just talked about, we're
disciplined in terms of the way we price opportunities and so the market really dictate what our
future growth is. We feel good about the ability to continue to earn good returns for our
shareholders.
The only thing I'd add though is, if you look at the market overall, there's about $14 trillion in
mortgages outstanding and actually over $30 trillion of equity in the homeowner's homes. And
that's grown probably from $10 trillion a decade ago. So there's been some slow and steady
growth in the market. You'd expect that to continue. In addition, it's a challenging business. It
requires -- making sure you're making the investments to stay compliant with Federal, State &
Local Laws and rolling out new programs that investors ask for four years.
So we're continually investing back in the business, and I think part of the reason you're seeing
us grow is because there's a lot of other people in the mortgage ecosystem who are focused on
something other than servicing, helping homeowners get into new homes, leading investment
and management platforms. And people have been able to partner with us either through us
offering subservicing where they could focus on what they do best or focusing on originations
and selling what they originate to be able to fund their business, which has allowed us to grow.
So a long way of saying, even with our growth in servicing, it's still a single digit share of an
overall market. And we think there's a lot of reasons for the market to continue consolidating. So
the rest of the ecosystem can focus on what they do best.
Jay Bray: Yeah, the only thing I would add Bose, is that if you look at our performance,
scorecard standpoint, I mean we're consistently number one, number two from all of our
stakeholders. And so I think there's a lot of confidence in Mr. Cooper as a servicer. And it's just
natural, to Mike's point, it's a large scale matters, technology matters, investment matters. You
know, if you look at other financial services, you know, types of companies, market share can
grow considerably. And so we don't see any impediment to growth from here.
The last comment I would make is about half of our portfolio is subservicing, right? And so we
don't really have the capital risk or -- it's completely capitalized business. So long answer to your
question, but that's how we think about it.
Bose George: That's great, that's very helpful, thanks. And then actually just a question on the
corporate segment outlook there. Actually, this quarter's number a reasonable run rate going
forward? I mean, there are a couple of little blips, but is this kind of a reasonable level?
Jay Bray: No, I think we've actually made some investments in the corporate segment to look
to reduce it going forward. We think there's an opportunity in the coming quarters to actually
reduce expenses in the corporate segment. So you shouldn't think -- you should really look at that
as an investment that we made to actually identify some future savings.
Bose George: So, just specifically, some of the expenses in the first quarter were the
investments, so you see it kind of trending down from here.
Jay Bray: Exactly.
Kurt Johnson: Although, Bose it's Kurt, I just wanted to comment that the debt expense had
only two out of three months on the new billion dollar issuance. So that will take up slightly, but
it's pretty close to our run rate. And we do call that out separately.
Bose George: Okay, perfect. Thanks a lot.
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