NRZ at risk for similar writedowns?
Mr. Cooper Looking at a 2Q19 MSR Markdown of at Least $334 Million
July 11, 2019 Paul Muolo firstname.lastname@example.org
Mr. Cooper, the parent company of the nation’s third largest mortgage servicer, is bracing for a $334 million (at least) second-quarter markdown on its massive MSR portfolio, according to a new report from Wedbush Securities.
“What’s good for mortgage [origination] volumes is bad for mortgage servicing rights (MSR) values and with rates down again, we are expecting a fair value writedown that equals or more likely exceeds the $334 million writedown taken in 1Q19,” writes Wedbush analyst Henry Coffey.
As Wedbush and other research firms have pointed out: Mr. Cooper does not hedge its MSR positions, resulting in large non-cash marks when rates decline from quarter to quarter, and write-ups when interest rates increase.
Despite the anticipated MSR charge, Wedbush has an “outperform” rating on Mr. Cooper, noting: “The stock is cheap on a number of measures…”
At March 31, Mr. Cooper/Nationstar Mortgage serviced $631.9 billion of one- to four-family mortgages, according to Inside Mortgage Finance.