Deal to acquire Flagstar’s mortgage servicing business and correspondent lending platform is projected to grow Mr. Cooper’s servicing portfolio to $1.59 trillion.
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The profits continue to roll in at loan servicing giant Mr. Cooper, which will be collecting monthly mortgage payments from nearly 7 million homeowners with the help of AI when its deal to acquire Flagstar Bank’s mortgage servicing business closes later this year.
Even before the Flagstar deal closes, Mr. Cooper’s mortgage servicing rights (MSR) portfolio has swelled by 32 percent in the last year, to $1.24 trillion as of Sept. 30, the Dallas-based servicer said Wednesday in reporting an $80 million third-quarter profit.
While that’s less than half of the $204 million profit Mr. Cooper racked up during the second quarter, loan servicers and mortgage lenders often see big swings in their profits — on paper at least — as they adjust the fair value of their mortgage servicing rights.
When mortgage rates go down, that can reduce the fair value of MSRs, since borrowers are more likely to refinance and end up with another loan servicer.
Operating revenue in Mr. Cooper’s servicing segment was up 2 percent from Q2 and 28 percent from a year ago, to $616 million. But a $125 million write-down in the fair value of the companies’ MSRs weighed on the bottom line.
“Under the current interest rate environment, which included the Federal Reserve cutting interest rates during the third quarter, the company expects downward pressure on servicing income in the fourth quarter as prepayment speeds and amortization continue to rise,” Mr. Cooper said in its latest quarterly report…