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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________________________________________________________
 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______                    
Commission file number: 001-14667
mrcoopergrouplogor1a01.jpg
________________________________________________________________________________________________________
Mr. Cooper Group Inc.
(Exact name of registrant as specified in its charter)
Delaware 91-1653725
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
8950 Cypress Waters Blvd, Coppell, TX
 75019
(Address of principal executive offices) (Zip Code)
(469) 549-2000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.01 par value per shareCOOPThe Nasdaq Stock Market
____________________________________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.
Large Accelerated FilerxAccelerated Filer
Non-Accelerated Filer¨Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
Number of shares of common stock, $0.01 par value, outstanding as of April 19, 2024 was 64,720,963.


MR. COOPER GROUP INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
 
  Page
PART I
Item 1.
Condensed Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023
Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2024 and 2023
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2

PART I. Financial Information

Item 1. Financial Statements
MR. COOPER GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions of dollars, except share data)
March 31, 2024December 31, 2023
 (unaudited) 
Assets
Cash and cash equivalents$578 $571 
Restricted cash157 169 
Mortgage servicing rights at fair value9,796 9,090 
Advances and other receivables, net of reserves of $144 and $170, respectively
914 996 
Mortgage loans held for sale at fair value1,070 927 
Property and equipment, net of accumulated depreciation of $147 and $141, respectively
55 53 
Deferred tax assets, net426 472 
Other assets1,779 1,918 
Total assets$14,775 $14,196 
Liabilities and Stockholders’ Equity
Unsecured senior notes, net $4,137 $3,151 
Advance, warehouse and MSR facilities, net 4,087 4,302 
Payables and other liabilities1,691 1,995 
MSR related liabilities - nonrecourse at fair value455 466 
Total liabilities10,370 9,914 
Commitments and contingencies (Note 15)
Common stock at $0.01 par value - 300 million shares authorized, 93.2 million shares issued
1 1 
Additional paid-in-capital1,051 1,087 
Retained earnings4,483 4,302 
Treasury shares at cost - 28.5 million and 28.6 million shares, respectively
(1,130)(1,108)
Total stockholders’ equity4,405 4,282 
Total liabilities and stockholders’ equity$14,775 $14,196 

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited).
3

MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(millions of dollars, except for earnings per share data)
 Three Months Ended March 31,
20242023
Revenues:
Service related, net$478 $261 
Net gain on mortgage loans held for sale86 69 
Total revenues564 330 
Expenses:
Salaries, wages and benefits159 148 
General and administrative158 113 
Total expenses317 261 
Interest income158 85 
Interest expense(170)(110)
Other expense, net(3)(9)
Total other income (expense), net(15)(34)
Income before income tax expense (benefit)232 35 
Less: Income tax expense (benefit)51 (2)
Net income$181 $37 
Earnings per share
Basic$2.80 $0.54 
Diluted$2.73 $0.52 
    
See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited).
4

MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(millions of dollars, except share data)
Common Stock
Shares
(in thousands)
AmountAdditional Paid-in CapitalRetained EarningsTreasury Share AmountTotal Nationstar Stockholders’
Equity
Balance at January 1, 202369,266 $1 $1,104 $3,802 $(850)$4,057 
Shares issued / (surrendered) under incentive compensation plan870 — (43)— 19 (24)
Share-based compensation— — 5 — — 5 
Repurchase of common stock(2,083)— — — (89)(89)
Net income— — — 37 — 37 
Balance at March 31, 202368,053 $1 $1,066 $3,839 $(920)$3,986 
Balance at January 1, 202464,599 $1 $1,087 $4,302 $(1,108)$4,282 
Shares issued / (surrendered) under incentive compensation plan657  (44) 17 (27)
Share-based compensation  8   8 
Repurchase of common stock(537)   (39)(39)
Net income   181  181 
Balance at March 31, 202464,719 $1 $1,051 $4,483 $(1,130)$4,405 

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited).

5

MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions of dollars)
Three Months Ended March 31,
 20242023
Operating Activities
Net income$181 $37 
Adjustments to reconcile net income to net cash attributable to operating activities:
Deferred tax expense (benefit)46 (4)
Net gain on mortgage loans held for sale(86)(69)
Provision for servicing and non-servicing reserves15 9 
Fair value changes in mortgage servicing rights(10)230 
Fair value changes in MSR related liabilities6 6 
Depreciation and amortization for property and equipment and intangible assets8 9 
Loss (gain) on MSR hedging activities122 (59)
Loss on MSR sales12  
Other operating activities18 30 
Sales proceeds and loan payment proceeds for mortgage loans held for sale3,195 2,931 
Mortgage loans originated and purchased for sale, net of fees(2,942)(2,760)
Repurchases of loan assets out of Ginnie Mae securitizations(386)(222)
Changes in assets and liabilities:
Advances and other receivables56 76 
Other assets(56)66 
Payables and other liabilities(151)(120)
Net cash attributable to operating activities28 160 
Investing Activities
Property and equipment additions, net of disposals(8)(5)
Purchase of mortgage servicing rights(740)(114)
Proceeds on sale of mortgage servicing rights and excess yield38 15 
Other investing activities(5)(3)
Net cash attributable to investing activities(715)(107)
Financing Activities
(Decrease) increase in advance, warehouse and MSR facilities(215)51 
Settlements and repayment of excess spread financing(17)(22)
Issuance of unsecured senior notes1,000  
Repurchase of common stock(39)(89)
Other financing activities(47)(28)
Net cash attributable to financing activities682 (88)
Net decrease in cash, cash equivalents, and restricted cash(5)(35)
Cash, cash equivalents, and restricted cash - beginning of period740 702 
Cash, cash equivalents, and restricted cash - end of period(1)
$735 $667 
Supplemental Disclosures of Non-cash Investing Activities
Purchase of mortgage servicing rights holdback$48 $1 
Sale of mortgage servicing rights holdback$2 $ 

(1)The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the condensed consolidated balance sheets.
March 31, 2024March 31, 2023
Cash and cash equivalents$578 $534 
Restricted cash157 133 
Total cash, cash equivalents, and restricted cash$735 $667 
See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited). 
6

MR COOPER GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(millions of dollars, except per share data, or unless otherwise stated)

1. Nature of Business and Basis of Presentation

Nature of Business
Mr. Cooper Group Inc., collectively with its consolidated subsidiaries, (“Mr. Cooper,” the “Company,” “we,” “us” or “our”) provides servicing, origination and transaction-based services related to single family residences throughout the United States with operations under its primary brands: Mr. Cooper®, Xome® and Rushmore Servicing®. Mr. Cooper is one of the largest home loan servicers and originators in the country focused on delivering a variety of servicing and lending products, services and technologies.

The Company has provided a glossary of terms, which defines certain industry-specific and other terms that are used herein, in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Form 10-Q.

Basis of Presentation
The interim condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Reports on Form 10-K for the year ended December 31, 2023.

The interim condensed consolidated financial statements are unaudited; however, in the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation of the results of the interim periods have been included. Dollar amounts are reported in millions, except per share data and other key metrics, unless otherwise noted.

Basis of Consolidation
The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, other entities in which the Company has a controlling financial interest and those variable interest entities (“VIE”) where the Company’s wholly-owned subsidiaries are the primary beneficiaries. Assets and liabilities of VIEs and their respective results of operations are consolidated from the date that the Company became the primary beneficiary through the date the Company ceases to be the primary beneficiary. The Company applies the equity method of accounting to investments where it is able to exercise significant influence, but not control, over the policies and procedures of the entity and owns less than 50% of the voting interests. Investments in certain companies over which the Company does not exert significant influence are recorded at fair value, or at cost upon election of measurement alternative, at the end of each reporting period. Intercompany balances and transactions on consolidated entities have been eliminated.

Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates, and such differences could be material, due to factors such as adverse changes in the economy, changes in interest rates, secondary market pricing for loans held for sale and derivatives, strength of underwriting and servicing practices, changes in prepayment assumptions, declines in home prices or discrete events adversely affecting specific borrowers.

Recent Accounting Guidance Adopted
The Company did not adopt any accounting guidance during the three months ended March 31, 2024 that had a material impact on its condensed consolidated financial statements or disclosures.


7

2. Acquisitions

Acquisition of Assets
During the second quarter of 2023, the Company acquired certain assets and liabilities of Rushmore Loan Management Services LLC (“Rushmore”) for a total purchase price of $34 (the “Rushmore Transaction”). Assets acquired were recorded in the Servicing segment and primarily included subservicing contracts and related servicing advances and receivables. The Company accounted for the transaction as an asset acquisition in accordance with Accounting Standard Codification Topic 805, Business Combinations (“ASC 805”), whereby the purchase price represents relative fair value of assets and liabilities acquired.

Acquisition of Roosevelt Management Company and Affiliated Companies
In July 2023, the Company acquired all the equity interests of Roosevelt Management Company, LLC (“Roosevelt”), an investment management firm, and its affiliated subsidiaries including Rushmore Loan Management Services LLC and other entities, for a total purchase price of $28 (“Roosevelt Transaction”). The Company accounted for the transaction as a business combination in accordance with ASC 805 using the acquisition method of accounting. Under the acquisition method of accounting, the Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess of the purchase price over those fair values allocated to goodwill. The Company recorded $4 of intangible assets and $21 of goodwill based on the purchase price allocation. $5 and $16 of the goodwill is assigned to Servicing segment and Corporate/Other segment, respectively. The goodwill will be deductible for tax purposes. The financial results of Rushmore and Roosevelt were included in Servicing segment and Corporate/Other segment, respectively. The Company finalized its allocation of fair value of consideration transferred during the three months ended December 31, 2023.

Acquisition of Home Point Capital Inc.
In May 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) and a mortgage servicing rights purchase and sale agreement (“Purchase Agreement”) with Home Point Capital Inc. (“Home Point”), a Delaware corporation. Per the Merger Agreement, the Company agreed to commence a tender offer to acquire all of the outstanding shares of common stock of Home Point, other than certain excluded shares. The Home Point transactions closed in the third quarter of 2023 for total consideration of approximately $658. The Purchase Agreement was a bulk purchase of a portion of Home Point’s mortgage servicing rights (“MSR”) portfolio for $335. The Merger Agreement was the tender offer to acquire outstanding shares of common stock of Home Point, which included the benefit of the cash paid in the bulk purchase of Home Point’s MSR portfolio. The net consideration paid for the two transactions was $323, or $2.33 per share.

The Company accounted for the two transactions as one business combination (“Home Point Acquisition”) in accordance with ASC 805 using the acquisition method of accounting. Under the acquisition method of accounting, the Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The Company acquired $1.2 billion MSR and assumed an unsecured senior note with a principal balance of $500, among other acquired net assets. During the third quarter of 2023, the Company recorded a preliminary bargain purchase gain of $96 in “other income (expense), net” within the condensed consolidated statements of operations and reported under Corporate/Other segment, which represents the excess of the estimated fair value of net assets acquired over the consideration transferred. The purchase price allocation is subject to change as the Company obtains additional information and finalizes its review during the measurement period (up to one year from the acquisition date). The primary area of the preliminary allocation of fair value of consideration transferred that is not yet finalized is related to potential tax adjustments. The Company believes it was able to negotiate a bargain purchase price due to seller’s operational challenges from significant market volatility, as well as the seller’s desire to exit the business in an expedited manner.


8

3. Mortgage Servicing Rights and Related Liabilities

The following table sets forth the carrying value of the Company’s MSR and the related liabilities. In estimating the fair value of all mortgage servicing rights and related liabilities, the impact of the current environment was considered in the determination of key assumptions.
MSRs and Related LiabilitiesMarch 31, 2024December 31, 2023
MSRs - fair value$9,796 $9,090 
Excess spread financing at fair value$420 $437 
Mortgage servicing rights financing at fair value35 29 
MSR related liabilities - nonrecourse at fair value$455 $466 

Mortgage Servicing Rights
The following table sets forth the activities of MSRs:
Three Months Ended March 31,
MSRs - Fair Value20242023
Fair value - beginning of period$9,090 $6,654 
Additions:
Servicing retained from mortgage loans sold64 54 
Purchases and acquisitions of servicing rights663 102 
Dispositions:
Sales of servicing assets and excess yield(42)(15)
Changes in fair value:
Changes in valuation inputs or assumptions used in the valuation model (MSR MTM)189 (105)
Changes in valuation due to amortization(179)(125)
Other changes(1)
11 1 
Fair value - end of period$9,796 $6,566 

(1)Amounts primarily represent negative fair values reclassified from the MSR asset to reserves as underlying loans are removed from the MSR and other reclassification adjustments.

During the three months ended March 31, 2024 and 2023, the Company sold $3,144 and $1,256 in unpaid principal balance (“UPB”) of MSRs, of which $3,003 and $271 were retained by the Company as subservicer, respectively.

MSRs are segregated between investor type into agency and non-agency pools (referred to herein as “investor pools”) based upon contractual servicing agreements with investors at the respective balance sheet date to evaluate the MSR portfolio and fair value of the portfolio. Agency investors consist of Government National Mortgage Association (“Ginnie Mae” or “GNMA”) and the GSEs, Federal National Mortgage Association (“Fannie Mae” or “FNMA”) and Federal Home Loan Mortgage Corp (“Freddie Mac” or “FHLMC”). Non-agency investors consist of investors in private-label securitizations.

The following table provides a breakdown of UPB and fair value for the Company’s MSRs:
March 31, 2024December 31, 2023
MSRs - UPB and Fair Value Breakdown by Investor PoolsUPBFair ValueUPBFair Value
Agency$604,112 $9,463 $561,656 $8,774 
Non-agency26,621 333 26,286 316 
Total$630,733 $9,796 $587,942 $9,090 

Refer to Note 13, Fair Value Measurements, for further discussion on key weighted-average inputs and assumptions used in estimating the fair value of MSRs.

9

The following table shows the hypothetical effect on the fair value of the Company’s MSRs when applying certain unfavorable variations of key assumptions to these assets for the dates indicated:
Option Adjusted Spread
Total Prepayment Speeds
Cost to Service per Loan
MSRs - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
March 31, 2024
Mortgage servicing rights$(362)$(697)$(220)$(427)$(83)$(167)
December 31, 2023
Mortgage servicing rights$(368)$(706)$(219)$(425)$(89)$(178)

These hypothetical sensitivities should be evaluated with care. The effect on fair value of an adverse change in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.

Excess Spread Financing - Fair Value
The Company had excess spread financing liability of $420 and $437, with UPB of $72,397 and $74,219 as of March 31, 2024 and December 31, 2023, respectively. Refer to Note 13, Fair Value Measurements, for key weighted-average inputs and assumptions used in the valuation of excess spread financing liability.

The following table shows the hypothetical effect on the Company’s excess spread financing fair value when applying certain unfavorable variations of key assumptions to these liabilities for the dates indicated:
Option Adjusted Spread
Prepayment Speeds
Excess Spread Financing - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
March 31, 2024
Excess spread financing$15 $31 $10 $19 
December 31, 2023
Excess spread financing$16 $32 $10 $20 

These hypothetical sensitivities should be evaluated with care. The effect on fair value of an adverse change in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects. Also, a positive change in the above assumptions would not necessarily correlate with the corresponding decrease in the net carrying amount of the excess spread financing. Excess spread financing’s cash flow assumptions that are utilized in determining fair value are based on the related cash flow assumptions used in the financed MSRs. Any fair value change recognized in the financed MSRs attributable to related cash flows assumptions would inherently have an inverse impact on the carrying amount of the related excess spread financing.

Mortgage Servicing Rights Financing - Fair Value
The Company had MSR financing liability of $35 and $29 as of March 31, 2024 and December 31, 2023, respectively. Refer to Note 2, Significant Accounting Policies, for further discussion on MSR financing, and Note 13, Fair Value Measurements, for key weighted-average inputs and assumptions used in the valuation of the MSR financing liability.
10


Revenues - Service Related, net
The following table sets forth the items comprising total “revenues - service related, net”:
Three Months Ended March 31,
Revenues - Service Related, net20242023
Contractually specified servicing fees(1)
$514 $384 
Other service-related income(1)
22 14 
Incentive and modification income(1)
18 6 
Servicing late fees(1)
30 21 
Mark-to-market adjustments - Servicing
MSR MTM189 (105)
(Loss) gain on MSR hedging activities(122)59 
Loss on MSR sales(12) 
Reclassifications(2)
(6)(9)
Excess spread / MSR financing MTM(6)(6)
Total mark-to-market adjustments - Servicing43 (61)
Amortization, net of accretion
MSR amortization(179)(125)
Excess spread accretion9 10 
Total amortization, net of accretion(170)(115)
Originations service fees(3)
16 11 
Corporate/Xome related service fees22 19 
Other(4)
(17)(18)
Total revenues - Service Related, net$478 $261 

(1)The Company recognizes revenue on an earned basis for services performed. Amounts include subservicing related revenues. Amounts also include servicing fees from loans sold with servicing retained of $185 and $177 for the three months ended March 31, 2024 and 2023, respectively.
(2)Reclassifications include the impact of negative modeled cash flows which have been transferred to reserves on advances and other receivables. The negative modeled cash flows relate to advances and other receivables associated with inactive and liquidated loans that are no longer part of the MSR portfolio.
(3)Amounts include fees collected from customers for originated loans and from other lenders for loans purchased through the correspondent channel, and include loan application, underwriting, and other similar fees.
(4)Other represents the excess servicing fee that the Company pays to the counterparties under the excess spread financing arrangements, portfolio runoff and the payments made associated with MSR financing arrangements.


4. Advances and Other Receivables

Advances and other receivables, net, consists of the following:
Advances and Other Receivables, NetMarch 31, 2024December 31, 2023
Servicing advances, net of $12 and $13 purchase discount
$998 $1,065 
Receivables from agencies, investors and prior servicers, net of zero and $6 purchase discount
60 101 
Reserves(144)(170)
Total advances and other receivables, net$914 $996 

11

The following table sets forth the activities of the servicing reserves for advances and other receivables:
Three Months Ended March 31,
Reserves for Advances and Other Receivables20242023
Balance - beginning of period$170 $137 
Provision(1)
15 9 
Reclassifications(2)
9 7 
Write-offs(3)
(50)(5)
Balance - end of period$144 $148 

(1)The Company recorded a provision of $6 and $9 through the MTM adjustments in “revenues - service related, net” in the consolidated statements of operations during the three months ended March 31, 2024 and 2023, respectively.
(2)Reclassifications represent required reserves provisioned within other balance sheet accounts as associated serviced loans become inactive or liquidate.
(3)Write-offs represent fully reserved items which have been processed in the normal course of business.

Purchase Discount for Advances and Other Receivables
The following tables set forth the activities of the purchase discounts for advances and other receivables:
Three Months Ended March 31,
20242023
Purchase Discount for Advances and Other ReceivablesServicing AdvancesReceivables from Agencies, Investors and Prior ServicersServicing AdvancesReceivables from Agencies, Investors and Prior Servicers
Balance - beginning of period$13 $6 $12 $7 
Utilization of purchase discounts(1)(6)(3) 
Balance - end of period$12 $ $9 $7 

Credit Loss for Advances and Other Receivables
The following table sets forth the activities of the CECL allowance for advances and other receivables:
Three Months Ended March 31,
CECL Allowance for Advances and Other Receivables20242023
Balance - beginning of period$35 $36 
Provision1 2 
Write-offs(1)
(19) 
Balance - end of period(2)
$17 $38 

(1)Write-offs represent fully reserved items which have been processed in the normal course of business.
(2)As of March 31, 2024, $17 was recorded in reserves. As of March 31, 2023, $31 and $7 were recorded in reserves and purchase discount for advances and other receivables, respectively.

The Company determined that the credit-related risk associated with applicable financial instruments typically increases with the passage of time. The CECL reserve methodology considers these financial instruments collectible to a point in time of 39 months. Any projected remaining balance at the end of the collection period is considered a loss and factors into the overall CECL loss rate required.

12

5. Mortgage Loans Held for Sale

Mortgage loans held for sale are recorded at fair value as set forth below:
Mortgage Loans Held for SaleMarch 31, 2024December 31, 2023
Mortgage loans held for sale – UPB$1,071 $924 
Mark-to-market adjustment(1)
(1)3 
Total mortgage loans held for sale$1,070 $927 

(1)The mark-to-market adjustment includes net change in unrealized gain/loss, premium on correspondent loans and fees on direct-to-consumer loans. The mark-to-market adjustment is recorded in “revenues - net gain on mortgage loans held for sale” in the condensed consolidated statements of operations.

The following table sets forth the activities of mortgage loans held for sale:
Three Months Ended March 31,
Mortgage Loans Held for Sale20242023
Balance - beginning of period$927 $893 
Loans sold (at carrying value) and loan payments received(3,186)(2,940)
Mortgage loans originated and purchased, net of fees2,942 2,760 
Repurchase of loans out of Ginnie Mae securitizations(1)
386 222 
Net change in unrealized gain on retained loans held for sale3 9 
Net transfers of mortgage loans held for sale(2)
(2)(7)
Balance - end of period$1,070 $937 

(1)The Company has the optional right to repurchase any individual loan in a Ginnie Mae securitization pool if that loan meets certain criteria, including being delinquent greater than 90 days. The majority of Ginnie Mae repurchased loans are repurchased in connection with loan modifications and loan resolution activity, with the intent to re-pool into new Ginnie Mae securitizations upon re-performance of the loan or to otherwise sell to third-party investors. Therefore, these loans are classified as held for sale.
(2)Amounts reflect transfers to other assets for loans transitioning into REO status and transfers to advances and other receivables, net, for claims made on certain government insurance mortgage loans. Transfers out are net of transfers in upon receipt of proceeds from an REO sale or claim filing.

For the three months ended March 31, 2024 and 2023, the Company recorded a total realized gain of $9 and loss of $9 from total sales proceeds of $3,162 and $2,931, respectively, on the sale of mortgage loans held for sale.

The total UPB and fair value of mortgage loans held for sale on non-accrual status was as follows:
March 31, 2024December 31, 2023
Mortgage Loans Held for SaleUPBFair ValueUPBFair Value
Non-accrual(1)
$38 $31 $42 $36 

(1)Non-accrual UPB includes $31 and $35 of UPB related to Ginnie Mae repurchased loans as of March 31, 2024 and December 31, 2023, respectively.

The total UPB of mortgage loans held for sale for which the Company has begun formal foreclosure proceedings was $29 and $30 as of March 31, 2024 and December 31, 2023, respectively.

13

6. Loans Subject to Repurchase from Ginnie Mae

Loans are sold to Ginnie Mae in conjunction with the issuance of mortgage-backed securities. The Company, as the issuer of the mortgage-backed securities, has the unilateral right to repurchase any individual loan in a Ginnie Mae securitization pool if that loan meets certain criteria, including payments not being received from borrowers for greater than 90 days. Once the Company has the unilateral right to repurchase a delinquent loan, it has effectively regained control over the loan and recognizes these rights to the loan on its condensed consolidated balance sheets and establishes a corresponding repurchase liability regardless of the Company’s intention to repurchase the loan. The Company had loans subject to repurchase from Ginnie Mae of $856 and $966 as of March 31, 2024 and December 31, 2023, respectively, which are included in both “other assets” and “payables and other liabilities” in the condensed consolidated balance sheets.


7. Goodwill and Intangible Assets

The Company had goodwill of $141 as of March 31, 2024 and December 31, 2023, and intangible assets of $26 and $28 as of March 31, 2024 and December 31, 2023, respectively. Goodwill and intangible assets are included in “other assets” within the condensed consolidated balance sheets.


8. Derivative Financial Instruments

Derivative instruments are used as part of the overall strategy to manage exposure to interest rate risks related to mortgage loans held for sale and IRLCs (“the pipeline”) and the MSR portfolio. The Company economically hedges the pipeline separately from the MSR portfolio primarily using third-party derivative instruments. Such derivative instruments utilized by the Company include IRLCs, LPCs, forward MBS and Treasury futures. The changes in value on the derivative instruments associated with pipeline hedging are recorded in earnings as a component of “revenues - net gain on mortgage loans held for sale” on the condensed consolidated statements of operations and condensed consolidated statement of cash flows, while changes in the value of derivative instruments associated with the MSR portfolio fair value are recorded in “revenues - service related, net” on the condensed consolidated statements of operations and in “loss (gain) on MSR hedging activities” on the condensed consolidated statements of cash flows.
14

The following tables provide the outstanding notional balances, fair values of outstanding positions and recorded gains/(losses) for the derivative financial instruments. Gains/(losses) include both realized and unrealized gains/(losses) of each derivative financial instrument.
March 31, 2024Three Months Ended March 31, 2024
Derivative Financial InstrumentsExpiration
Dates
Outstanding
Notional
Fair
Value
Gain/(Loss)
Assets
Mortgage loans held for sale
Loan sale commitments2024$399 $15 $4 
Derivative financial instruments
IRLCs2024$765 $27 $6 
LPCs2024244 1 (1)
Forward MBS trades20241,801 9 (2)
Treasury futures20242,969 18 (95)
Total derivative financial instruments - assets$5,779 $55 $(92)
Liabilities
Derivative financial instruments
IRLCs2024$2 $ $ 
LPCs202491   
Forward MBS trades20243,930 10 (28)
Treasury futures2024343 1  
Total derivative financial instruments - liabilities$4,366 $11 $(28)

March 31, 2023Three Months Ended March 31, 2023
Derivative Financial InstrumentsExpiration
Dates
Outstanding
Notional
Fair
Value
Gain/(Loss)
Assets
Mortgage loans held for sale
Loan sale commitments2023$399 $12 $2 
Derivative financial instruments
IRLCs2023$940 $33 $11 
LPCs2023484 3 2 
Forward MBS trades20231,056 18 35 
Treasury futures20232,445 71 71 
Total derivative financial instruments - assets$4,925 $125 $119 
Liabilities
Derivative financial instruments
IRLCs2023$25 $ $ 
LPCs202385  1 
Forward MBS trades20231,439 10 (47)
Treasury futures2023193 1 (23)
Total derivative financial instruments - liabilities$1,742 $11 $(69)

15

As of March 31, 2024, the Company held $68 and $5 in collateral deposits and collateral obligations on derivative instruments, respectively. As of December 31, 2023 the Company held $8 and $56 in collateral deposits and collateral obligations on derivative instruments, respectively. Collateral deposits and collateral obligations are recorded in “other assets” and “payables and other liabilities,” respectively, in the Company’s condensed consolidated balance sheets. The Company does not offset fair value amounts recognized for derivative instruments with amounts collected or deposited on derivative instruments in the condensed consolidated balance sheets.


9. Indebtedness

Advance, Warehouse and MSR Facilities
March 31, 2024December 31, 2023
Maturity DateCollateralCapacity AmountOutstandingCollateral PledgedOutstandingCollateral Pledged
Advance Facilities
$350 advance facilityOct 2024Servicing advance receivables$350 $122 $158 $132 $169 
$300 advance facilitySep 2025Servicing advance receivables300 271 305 250 326 
$250 advance facility(1)
Nov 2024Servicing advance receivables250 230 313 273 364 
$50 advance facility(2)
Dec 2024Servicing advance receivables50 27 49 27 49 
Advance facilities principal amount 650 825 682 908 
Warehouse Facilities
$1,500 warehouse facilityJun 2024Mortgage loans or MBS1,500 141 141 107 104 
$750 warehouse facilityJun 2024Mortgage loans or MBS750 138 175 137 176 
$750 warehouse facilityOct 2024Mortgage loans or MBS750 172 190 155 166 
$500 warehouse facilityJun 2024Mortgage loans or MBS500 54 58 72 78 
$350 warehouse facilityAug 2024Mortgage loans or MBS350 138 141 73 75 
$250 warehouse facility(3)
Sep 2025Mortgage loans or MBS250 177 203 158 177 
$200 warehouse facilityDec 2024Mortgage loans or MBS200 10 10 82 84 
$200 warehouse facilityJan 2025Mortgage loans or MBS200 11 21 12 21 
$100 warehouse facilityJul 2024Mortgage loans or MBS100 52 61 25 33 
$100 warehouse facilityApr 2025Mortgage loans or MBS100 
$100 warehouse facility (2)
Dec 2024Mortgage loans or MBS100 656511
$1 warehouse facilityDec 2024Mortgage loans or MBS1     
Warehouse facilities principal amount958 1,065 822 915 
MSR Facilities
$1,500 warehouse facility(4)
Apr 2026MSR1,500 800 2,571 980 1,455 
$1,500 warehouse facility(1)
Nov 2024MSR1,500 250 2,334 300 2,164 
$950 warehouse facility(3)
Sep 2025MSR950 5851,6335451,306
$500 warehouse facility Jun 2025MSR500 335724405655
$500 warehouse facilityApr 2026MSR500 250788305634
$500 warehouse facilityJun 2025MSR500 250753250677
$50 warehouse facilityNov 2024MSR50 25682967
MSR facilities principal amount 2,4958,8712,8146,958
Advance, warehouse and MSR facilities principal amount 4,103 $10,7614,318 $8,781
Unamortized debt issuance costs(16)(16)
Advance, warehouse and MSR facilities, net$4,087$4,302

(1)Total capacity for this facility is $1,750, of which $250 is internally allocated for advance financing and $1,500 is internally allocated for MSR financing; capacity is fully fungible and is not restricted by these allocations.
(2)Total capacity for this facility is $100, of which $50 is a sublimit for advance financing.
(3)The capacity amount for this facility increased from $1,000 to $1,200 during the three months ended March 31, 2024. $950 of the $1,200 is a sublimit for MSR financing.
(4)The capacity increased in April 2024 to $1,750.

16

The weighted average interest rate for advance facilities was 7.8% and 7.2% for the three months ended March 31, 2024 and 2023, respectively. The weighted average interest rate for warehouse and MSR facilities was 7.9% and 7.0% for the three months ended March 31, 2024 and 2023, respectively.

Unsecured Senior Notes
Unsecured senior notes consist of the following:
Unsecured Senior NotesMarch 31, 2024December 31, 2023
$1,000 face value, 7.125% interest rate payable semi-annually, due February 2032(1)
$1,000 $ 
$850 face value, 5.500% interest rate payable semi-annually, due August 2028
850 850 
$650 face value, 5.125% interest rate payable semi-annually, due December 2030
650 650 
$600 face value, 6.000% interest rate payable semi-annually, due January 2027
600 600 
$600 face value, 5.750% interest rate payable semi-annually, due November 2031
600 600 
$550 face value, 5.000% interest rate payable semi-annually, due February 2026
500 500 
Unsecured senior notes principal amount4,200 3,200 
Purchase discount and unamortized debt issuance costs
(63)(49)
Unsecured senior notes, net $4,137 $3,151 

(1)In February 2024, the Company completed the offering of $1,000 unsecured senior notes due 2032 (the “2032 notes”) and used the net proceeds from the offering to repay a portion of the amounts outstanding on its MSR facilities.

The ratios included in the indentures for the unsecured senior notes are incurrence-based compared to the customary ratio covenants that are often found in credit agreements that require a company to maintain a certain ratio. The incurrence-based covenants limit the issuer(s) and restricted subsidiaries ability to incur additional indebtedness, pay dividends, make certain investments, create liens, consolidate, merge or sell substantially all of their assets or enter into certain transactions with affiliates. The indentures contain certain events of default, including (subject, in some cases, to customary cure periods and materiality thresholds) defaults based on (i) the failure to make payments under the applicable indenture when due, (ii) breach of covenants, (iii) cross-defaults to certain other indebtedness, (iv) certain bankruptcy or insolvency events, (v) material judgments and (vi) invalidity of material guarantees.

The indentures provide that on or before certain fixed dates, the Company may redeem up to 40% of the aggregate principal amount of the unsecured senior notes with the net proceeds of certain equity offerings at fixed redemption prices, plus accrued and unpaid interest, to the redemption dates, subject to compliance with certain conditions. In addition, the Company may redeem all or a portion of the unsecured senior notes at any time on or after certain fixed dates at the applicable redemption prices set forth in the indentures plus accrued and unpaid interest, to the redemption dates. No notes were repurchased or redeemed during the three months ended March 31, 2024 and 2023.

As of March 31, 2024, the expected maturities of the Company’s unsecured senior notes based on contractual maturities are as follows:
Year Ending December 31,Amount
2024 through 2025$ 
2026500 
2027600 
2028850 
Thereafter2,250 
Total unsecured senior notes principal amount$4,200 

Financial Covenants
The Company’s credit facilities contain various financial covenants which primarily relate to required tangible net worth amounts, liquidity reserves, leverage requirements, and profitability requirements, which are measured at Nationstar Mortgage LLC, the Company’s primary operating subsidiary, and Rushmore Loan Management Services LLC. The Company was in compliance with its required financial covenants as of March 31, 2024.


17

10. Securitizations and Financings

Variable Interest Entities
In the normal course of business, the Company enters into various types of on- and off-balance sheet transactions with special purpose entities (“SPEs”) determined to be VIEs, which primarily consist of securitization trusts established for a limited purpose. Generally, these SPEs are formed for the purpose of securitization transactions in which the Company transfers assets to an SPE, which then issues to investors various forms of debt obligations supported by those assets.

The Company has determined that the SPEs created in connection with certain advance facilities trusts should be consolidated as the Company is the primary beneficiary of each of these entities.

A summary of the assets and liabilities of the Company’s transactions with VIEs included in the Company’s condensed consolidated balance sheets is presented below:
March 31, 2024December 31, 2023
Consolidated Transactions with VIEsTransfers
Accounted for as
Secured
Borrowings
Transfers
Accounted for as
Secured
Borrowings
Assets
Restricted cash$105 $111 
Advances and other receivables, net463 495 
Total assets$568 $606 
Liabilities
Advance facilities, net(1)
$391 $382 
Payables and other liabilities2 1 
Total liabilities$393 $383 

(1)Refer to advance facilities in Note 9, Indebtedness, for additional information.

The following table shows a summary of the outstanding collateral and certificate balances for securitization trusts for which the Company was the transferor, including any retained beneficial interests and MSRs, that were not consolidated by the Company:
Unconsolidated Securitization TrustsMarch 31, 2024December 31, 2023
Total collateral balances - UPB$859 $881 
Total certificate balances$830 $849 

The Company has not retained any variable interests in the unconsolidated securitization trusts that were outstanding as of March 31, 2024 and December 31, 2023. Therefore, it does not have a significant maximum exposure to loss related to these unconsolidated VIEs.

A summary of mortgage loans transferred by the Company to unconsolidated securitization trusts that are 60 days or more past due are presented below:
Principal Amount of Transferred Loans 60 Days or More Past DueMarch 31, 2024December 31, 2023
Unconsolidated securitization trusts$88 $91 


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11. Earnings Per Share

Basic earnings per share of common stock is computed by dividing net income by the weighted average number of common stock outstanding during the period. Diluted earnings per share of common stock is computed by dividing net income by the sum of the weighted average number of shares of common stock and any dilutive securities outstanding during the period. The Company’s potentially dilutive securities are share-based awards. The Company applies the treasury stock method to determine the dilutive weighted average number of shares of common stock outstanding based on the outstanding share-based awards. As of March 31, 2024 and December 31, 2023, the Company had 10 million preferred shares authorized at par value of $0.00001 per share, with zero shares issued and outstanding and aggregate liquidation preference of zero dollars.

The following table sets forth the computation of basic and diluted net income per common share (amounts in millions, except per share amounts):
Three Months Ended March 31,
Computation of Earnings Per Share20242023
Net income$181 $37 
Weighted average shares of common stock outstanding (in thousands):
Basic64,629 69,008 
Dilutive effect of stock awards1,638 1,471 
Diluted66,267 70,479 
Earnings per common share
Basic$2.80 $0.54 
Diluted$2.73 $0.52 


12. Income Taxes

For the three months ended March 31, 2024 and 2023, the effective tax rate for operations was 21.9% and (5.6)%, respectively. The effective tax rates differed from the statutory federal rate of 21% primarily due to state income taxes and nondeductible executive compensation.

The effective tax rate increased during the three months ended March 31, 2024, as compared to the same period in 2023, primarily due to the impact of quarterly discrete tax items relative to income before taxes for the respective period, including the excess tax benefit from share-based compensation.


13. Fair Value Measurements

Fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a three-tiered fair value hierarchy has been established based on the level of observable inputs used in the measurement of fair value (e.g., Level 1 representing quoted prices for identical assets or liabilities in an active market; Level 2 representing values using observable inputs other than quoted prices included within Level 1; and Level 3 representing estimated values based on significant unobservable inputs).

There have been no significant changes to the valuation techniques and inputs used by the Company in estimating fair values of Level 2 and Level 3 assets and liabilities as disclosed in the Company’s Annual Reports on Form 10-K for the year ended December 31, 2023.

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The following tables present the estimated carrying amount and fair value of the Company’s financial instruments and other assets and liabilities measured at fair value on a recurring basis:
 March 31, 2024
  Recurring Fair Value Measurements
Fair Value - Recurring BasisTotal Fair ValueLevel 1Level 2Level 3
Assets
Mortgage loans held for sale$1,070 $ $988 $82 
Mortgage servicing rights9,796   9,796 
Equity investments9 1  8 
Derivative financial instruments
IRLCs27   27 
LPCs1   1 
Forward MBS trades9  9  
Treasury Futures18  18  
Liabilities
Derivative financial instruments
Forward MBS trades10  10  
Treasury futures1  1  
Mortgage servicing rights financing35   35 
Excess spread financing420   420 

 December 31, 2023
  Recurring Fair Value Measurements
Fair Value - Recurring BasisTotal Fair ValueLevel 1Level 2Level 3
Assets
Mortgage loans held for sale$927 $ $846 $81 
Mortgage servicing rights9,090   9,090 
Equity investments9 1  8 
Derivative financial instruments
Treasury futures113  113  
IRLCs21   21 
Forward MBS trades22