Mr. Cooper lays off workers as originations nosedive

Quarterly origination earnings in 2022 are expected to fall to between $65 million and $85 million

Add Mr. Cooper Group to the list of mortgage originators and servicers reducing staff: pink slips arrived for 250 employees in the first quarter, as the company faced declines in the earnings from loan originations. And the company is forecasting a few tough origination quarters ahead.

“While the mortgage industry experienced record high origination volumes in recent years and resources were scaled up to meet consumer demand, the industry now faces higher interest rates leading to lower originations volume,” a spokesperson for Mr. Cooper Group said in a statement.

On Thursday, Mr. Cooper Group reported its first quarter earnings, with a net profit of $658 million, due to gains with mortgage servicing rights (MSR) and a deal with the fintech Sagent to create a cloud-native servicing platform.

During a conference call with analysts, Chris Marshall, vice chairman and president, said that rationalizing capacity is an unavoidable theme for everyone in originations. “In the second quarter, you will see us taking charge of staff reductions related to our lower originations.”

Given the magnitude of the rate increases over the last 90 days, the company forecasts quarterly origination volume earnings in the range of $65 million to $85 million for the rest of 2022, compared to $157 million in the first quarter. The Q1 2022 figure represented already a 14% decline quarter-over-quarter and a 57% drop year-over-year.

Also, the company forecasts funded loan volume of around $8 billion. Mr. Cooper Group originated $11.6 billion from January to March, down 32.5% quarter-over-quarter and 54% year-over-year.  

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The Gain-on-sale margin somewhat surprisingly increased to 1.53% in the first quarter, compared to 1.41% in the previous three months. (Executives said Thursday it was due to origination declines focused on the correspondent channel, which has lower margins.) In the first quarter of 2021, the GOS margin was at 1.63%. 

In April, the company announced the promotion of two of its own into executive vice president roles. Jaime Gow is holding the executive vice president and chief financial officer position. Meanwhile, Ethan Elzen landed as executive vice president of business development and operational finance. 

According to Jay Bray, chairman and CEO, the promotion of both executives will play an important role as the company continues to grow to “a $1 trillion servicer.” Mr. Cooper ended the first quarter with $796 billion in unpaid principal balance (UPB), a 12% increase quarter-over-quarter and a 27% growth year-over-year.

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