Mr. Cooper credits reverse mortgage portfolio sale with strong balance sheet

Mortgage servicing, origination and transaction-based services company Mr. Cooper Group held its Q4 2021 earnings presentation this week, and credits its recent exit from the reverse mortgage business as helping to provide one of the strongest balance sheets in the company’s history. This is according to statements made by Mr. Cooper Chairman and CEO Jay Bray and vice chairman, president and CFO Chris Marshall.

Bray in particular credited the sale of Mr. Cooper’s reverse mortgage portfolio as a major contributor to a historically strong balance sheet for the company.

“I am […] pleased to report that the board has authorized an additional $200 million bringing our total authorization to $252 million as of today,” Bray said on the earnings call. “The balance sheet is in the strongest shape of the company’s history, thanks to the sale of the reverse business we achieved and surpassed our target of 15% tangible net worth of assets, while at the same time simplifying our financials and streamlining our business model.”

Similar attribution to the exit was given by Marshall, placing the reverse exit in context with the broader earnings statements.

“Overall, we were extremely pleased especially given the market that’s starting to normalize,” Marshall said of the company’s financial results. “Net income for the quarter was $155 million or $2.1 per share which included a positive $46 million mark to market, a $20 million loss from discontinued operations, which represents two months of activity in the reverse business, which is now gone and adjustments of $31 million, most of which relate to the sale of zone field services.

Last July, Mr. Cooper announced the sale of its reverse mortgage servicing portfolio – operating under the Champion Mortgage brand – to Mortgage Assets Management, LLC (MAM). Terms of the deal were not disclosed.

“From a strategic standpoint, this is a major transaction – we can now completely focus on our core origination and servicing segments. It also improves profitability, strengthens our capital ratios, and positions us to accelerate growth,” Bray said at the time the sale was announced.

The sale was ultimately completed in December, 2021. As noted at the time the sale was announced, Marshall detailed that the decision about selling the Champion portfolio was not because reverse mortgage servicing endangered Mr. Cooper or depressed its profitability, but because the company sought to streamline its financial statements and instead accentuate what it aims to do with its core businesses.

“Measured from inception, Champion Mortgage has been a profitable operation for Mr. Cooper, but it is not a material driver of our business,” said Marshall this past summer of the Mr. Cooper Group/MAM deal. “This transaction strengthens our business model, simplifies our financial statements, and allows us to reallocate liquidity into our core operations. These benefits will contribute to even stronger momentum for Mr. Cooper.”

Read Mr. Cooper’s Q4 2021 earnings release.

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