Investors warned of “break even” second quarter as rising mortgage rates put a bigger-than-expected dent in loan originations.
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Rising mortgage rates are putting a bigger-than-expected dent in loan servicing giant Mr. Cooper’s loan originations, prompting the company to lay off more than 400 additional workers and to warn investors that it expects only “break-even” second quarter net income.
Mr. Cooper’s main business is collecting mortgage payments from nearly 4 million borrowers. Rising mortgage rates make that business more profitable, since borrowers the company collects payments from are less likely to refinance their mortgage and potentially end up with another loan servicer.
But rising mortgage rates are also limiting the company’s ability to originate mortgages. As interest rates have soared, Mr. Cooper’s direct lending business — refinancing homeowners’ existing loans — has shrunk by 32 percent from a year ago, with $7.8 billion in loans refinanced during the first quarter of 2022.
Mr. Cooper’s shrinking originations business prompted the company to lay off 250 workers during the first quarter. On an April 28 earnings call, Mr. Cooper CEO Jay Bray warned that more layoffs were in the works.
The company has cut about 420 additional employees, most of whom work in loan originations, a spokesperson for Mr. Cooper confirmed to Inman. The layoffs, first reported on Thursday by an industry publication, Asset Securitization Report, represent about 5 percent of Mr. Cooper’s workforce, the spokesperson said.
“The mortgage industry is facing an environment of rapidly increasing interest rates and rising inflation, which…