In addition to collecting payments from 4.6 million customers on behalf of investors, Mr. Cooper is also a mortgage originator, funding loans through a “direct to consumer” channel that offers refinancing to homeowners it collects payments from, and through a correspondent channel that purchases or originates loans from mortgage bankers.
Rising mortgage rates have taken a toll on both channels, with total originations dropping from more than $20 billion a quarter during the pandemic refinancing boom to less than $4 billion a quarter last year.
Although mortgage rates retreated in the final two months of 2023, Mr. Cooper saw originations dwindle to $2.7 billion during the fourth quarter, down 20 percent from the previous quarter and 16 percent from a year ago.
Disruption caused by last fall’s cyberattack, which forced the company to implement a four-day precautionary shutdown that affected both loan servicing and loan originations.
While Mr. Cooper had previously estimated that its mortgage originations business would rack up as much as $10 million in pretax operating losses due to the data breach, it ended up generating $10 million in pretax operating income instead.
Bray said that from 2019 to 2021, when mortgage rates were near historic lows, “the entire mortgage industry enjoyed outsized returns, thanks to the massive refinance wave that generated what will probably turn out to be once-in-a-lifetime margins.”
“During 2022, we passed through an inflection point as the market struggled with the sharpest mortgage rate increases in recent memory, which impacted originations immediately while it took servicing a few quarters to ramp up.”
Marshall said that as rates began to rise, the company’s direct to consumer channel “did a fantastic job pivoting to cash-out refinance. Since then, we’ve rolled out second liens and are now making great progress with purchase recapture, which, together, make up more than a third of our total volumes.”
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