Mr. Cooper has nearly 200,000 customers in forbearance but is no longer worried about liquidity

Jay Bray: Forbearance could rise when May mortgage payments come due

Despite having nearly 200,000 of its customers in forbearance, the nation’s largest nonbank mortgage servicer is no longer concerned about having enough money to front the principal and interest payments it is required to send investors on loans in forbearance.

Mr. Cooper, the nonbank formerly known as Nationstar Mortgage, revealed Thursday that it currently has 194,118 customers in forbearance, which represents 5.6% of its total portfolio. That’s an increase of more than 100,000 customers from earlier this month.

Despite that increase, Mr. Cooper CEO Jay Bray told HousingWire Thursday that the company is prepared to cover servicing advances even if the number of borrowers in forbearance quadruples.

In its first quarter earnings information, the nonbank disclosed that it is preparing for as many as 20% of its 3.7 million customers to need forbearance, but Bray said that the take up rate is actually lower than the company originally expected.

Bray cautioned that the numbers could jump soon.

“Our current volumes are running below what we originally expected,” Bray told HousingWire Thursday. “And so, we’ll see. My theory is that you’re going to see these come in waves. I think you’ll see a lot coming in early May when the May payment comes due. But right now, you know the volume is less than what we projected.”

Despite that, Bray said that Mr. Cooper is now in a financial position to cover all the advances it could be required to make.

“On the liquidity side, we’ve solved that equation,” Bray said. “We’ve gotten additional capacity from a couple different lenders, a total of $850 million in additional capacity from a borrowing standpoint. So, frankly in any kind of scenario that we can see, we think we’re in good shape.”

Despite that, Bray still thinks that the government or Federal Reserve may still need to step in and provide other servicers with a liquidity facility even after Fannie Mae and Freddie Mac’s recent announcement that servicers will only be required to cover four months of missed payments.

“The forbearance plan that exists today is something that we’re big supporters of,” Bray said. “We worked with Fannie, Freddie and all the others to get it in place. Early on, we advocated pretty strongly for a program through the Treasury or Fed, just because we felt like that was the best thing for the industry. And when we look at the possible numbers on the forbearance plans that could happen, I still think that is something that would be good for the industry.”

Bray commended the work that the GSEs have done thus far to support the mortgage industry.

“Fannie and Freddie have been amazing partners and we speak to them daily and they’ve been truly accessible, responsive and proactive in helping us work through it,” Bray said.

“The FHFA coming out and clarifying the four months was good,” he said. “We had expected that because obviously we’re in constant communication with (the GSEs), but making it official, I think was a great thing. It brings clarity for potential lenders. Obviously, this brings clarity to us from an operational standpoint in liquidity and capacity planning. We were very happy to see that come out official.”

According to Bray, Mr. Cooper is now in position to not need to lean on government sources for funding, whether it’s a Treasury or Fed facility or Ginnie Mae’s program.

“I think there’s a little confusion in the marketplace, right? Because if you look at the solutions that are out there today, you have the Ginnie Mae program, PTAP, which is a good thing,” Bray said. “For us, that’s more like a backstop, but it’s a good thing for the industry.”

Other companies may need it, though.

“There’s still, I think, a need for the medium or small players for some more solutions,” Bray continued. “I think it’s still the right thing for the industry. I think the (Mortgage Bankers Association) is going to continue to advocate for it and we’re supportive of that.”

“It’s something that we don’t need,” he said. “But, again, from an industry standpoint, I still get it’s something MBA should still advocate for and we’re supportive of.”

As for whether the Fed and/or Treasury are going to provide that much-asked-for facility, Bray said that the government seems to be taking a “wait and see” approach on whether it will be necessary.

“I don’t have a great insight into it, but my sense is that it’s status quo,” Bray said when asked if he was aware of any movement towards a federal facility.

“I think it’s probably consistent with what you’ve seen in the past in that there’s a little bit of wait and see mentality,” Bray said. “I think people want to see what the May numbers look like. They want to see how many people are actually tapping into the Ginnie facility. I think there are plans in place and if they were needed, they’d implement them, but I still think it’s a wait and see mode.”

As for Mr. Cooper’s business itself, the company reported a net loss of $171 million in the first quarter, reflecting a negative $383 million mark-to-market on its servicing portfolio.

But the company’s mortgage originations were more than double what they were in the first quarter of last year.

According to the company, Mr. Cooper had total originations of $12.4 billion in the first quarter, up from $5.7 billion in the first quarter of 2019. Of that $12.4 billion, correspondent was responsible for $5.5 billion, consumer direct was responsible for $6.4 billion, and $500 million came from wholesale, which Mr. Cooper recently shut down.

Bray said that the company made the decision to shutter its wholesale channel so that the company could focus direct and correspondent.

“We didn’t feel like we could scale it to the degree we could scale the correspondent business and the direct to consumer business,” Bray said. “The thinking is, it’s better to do fewer things well than to spread ourselves too thin.”

When asked why the company’s originations were so much higher this year than last, Bray said it was all about refinances, which accounted for 74% of its originations in Q1.

Bray was also effusive in his praise for the work of his company’s staff, approximately 95% of which are now working from home.

“I’m so proud of what our team did to shift us to work from home,” Bray said. “Our productivity is quite good. On the origination side, it’s actually a little better than it was when we were in the office.”

And according to Bray, employees of the company, based in the Dallas metro area, are going to continue working from home for now.

Bray said that despite Texas Gov. Greg Abbott’s recent move to reopen Texas’ economy, Mr. Cooper’s employees will be home-based through at least June 1.

“We’re going to be a follower there, not a leader,” Bray said.

“Our primary concern is our team members and so we are communicating with our team members that you definitely will not be coming back into the office prior to June 1,” Bray continued.

“We’re going to go slow,” he said. “The health and safety of our team members is absolutely the first priority. We’re going to take all the precautions necessary.”

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