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 June 30, 20222023
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 July 22, 202220, 2023 was 71,650,299.66,848,546.


Table of Contents
MR. COOPER GROUP INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
 
  Page
PART I
Item 1.
Condensed Consolidated Balance Sheets as of June 30, 20222023 (unaudited) and December 31, 20212022
Condensed Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 20222023 and 20212022
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Six Months Ended June 30, 20222023 and 20212022
Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June, 30,2023 and 2022 and 2021
16. Segment Information
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

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Table of Contents
PART I. Financial Information

Item 1. Financial Statements
MR. COOPER GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions of dollars, except share data)
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
(unaudited)  (unaudited) 
AssetsAssetsAssets
Cash and cash equivalentsCash and cash equivalents$514 $895 Cash and cash equivalents$517 $527 
Restricted cashRestricted cash115 146 Restricted cash170 175 
Mortgage servicing rights at fair valueMortgage servicing rights at fair value6,151 4,223 Mortgage servicing rights at fair value7,149 6,654 
Advances and other receivables, net of reserves of $150 and $167, respectively892 1,228 
Advances and other receivables, net of reserves of $156 and $137, respectivelyAdvances and other receivables, net of reserves of $156 and $137, respectively802 1,019 
Mortgage loans held for sale at fair valueMortgage loans held for sale at fair value2,072 4,381 Mortgage loans held for sale at fair value1,187 893 
Property and equipment, net of accumulated depreciation of $112 and $122, respectively72 98 
Property and equipment, net of accumulated depreciation of $141 and $122, respectivelyProperty and equipment, net of accumulated depreciation of $141 and $122, respectively61 65 
Deferred tax assets, netDeferred tax assets, net750 991 Deferred tax assets, net657 703 
Other assetsOther assets2,329 2,242 Other assets2,601 2,740 
Total assetsTotal assets$12,895 $14,204 Total assets$13,144 $12,776 
Liabilities and Stockholders’ EquityLiabilities and Stockholders’ EquityLiabilities and Stockholders’ Equity
Unsecured senior notes, netUnsecured senior notes, net$2,672 $2,670 Unsecured senior notes, net$2,676 $2,673 
Advance and warehouse facilities, net3,407 4,997 
Advance, warehouse and MSR facilities, netAdvance, warehouse and MSR facilities, net3,512 2,885 
Payables and other liabilitiesPayables and other liabilities2,223 2,392 Payables and other liabilities2,395 2,633 
MSR related liabilities - nonrecourse at fair valueMSR related liabilities - nonrecourse at fair value556 778 MSR related liabilities - nonrecourse at fair value482 528 
Total liabilitiesTotal liabilities8,858 10,837 Total liabilities9,065 8,719 
Commitments and contingencies (Note 15)Commitments and contingencies (Note 15)00Commitments and contingencies (Note 15)
Preferred stock at $0.00001 - 10 million shares authorized, zero shares issued, zero shares outstanding; aggregate liquidation preference of zero
 — 
Common stock at $0.01 par value - 300 million shares authorized, 93.2 million shares issuedCommon stock at $0.01 par value - 300 million shares authorized, 93.2 million shares issued1 Common stock at $0.01 par value - 300 million shares authorized, 93.2 million shares issued1 
Additional paid-in-capitalAdditional paid-in-capital1,094 1,116 Additional paid-in-capital1,074 1,104 
Retained earningsRetained earnings3,688 2,879 Retained earnings3,981 3,802 
Treasury shares at cost - 21.6 million and 19.4 million shares, respectively(747)(630)
Total Mr. Cooper stockholders’ equity4,036 3,366 
Non-controlling interests1 
Treasury shares at cost - 26.4 million and 24.0 million shares, respectivelyTreasury shares at cost - 26.4 million and 24.0 million shares, respectively(977)(850)
Total stockholders’ equityTotal stockholders’ equity4,037 3,367 Total stockholders’ equity4,079 4,057 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$12,895 $14,204 Total liabilities and stockholders’ equity$13,144 $12,776 

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited).
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MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(millions of dollars, except for earnings per share data)
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
20222021202220212023202220232022
Revenues:Revenues:Revenues:
Service related, netService related, net$460 $(8)$1,215 $572 Service related, net$402 $460 $663 $1,215 
Net gain on mortgage loans held for saleNet gain on mortgage loans held for sale139 582 436 1,261 Net gain on mortgage loans held for sale84 139 153 436 
Total revenuesTotal revenues599 574 1,651 1,833 Total revenues486 599 816 1,651 
Expenses:Expenses:Expenses:
Salaries, wages and benefitsSalaries, wages and benefits203 277 431 554 Salaries, wages and benefits156 203 304 431 
General and administrativeGeneral and administrative125 148 235 325 General and administrative122 125 235 235 
Total expensesTotal expenses328 425 666 879 Total expenses278 328 539 666 
Interest incomeInterest income50 51 86 97 Interest income117 50 202 86 
Interest expenseInterest expense(111)(119)(217)(245)Interest expense(122)(111)(232)(217)
Other (expense) income, netOther (expense) income, net(5)486 217 486 Other (expense) income, net(5)(5)(14)217 
Total other (expense) income, netTotal other (expense) income, net(66)418 86 338 Total other (expense) income, net(10)(66)(44)86 
Income from continuing operations before income tax expense205 567 1,071 1,292 
Income before income tax expenseIncome before income tax expense198 205 233 1,071 
Less: Income tax expenseLess: Income tax expense54 140 262 306 Less: Income tax expense56 54 54 262 
Net income from continuing operations151 427 809 986 
Net income from discontinued operations 12  14 
Net incomeNet income151 439 809 1,000 Net income$142 $151 $179 $809 
Less: Undistributed earnings attributable to participating stockholders  
Net income attributable to common stockholders$151 $435 $809 $991 
Earnings from continuing operations per common share attributable to Mr. Cooper:
Earnings per shareEarnings per share
BasicBasic$2.08 $4.91 $11.04 $11.13 Basic$2.10 $2.08 $2.62 $11.04 
DilutedDiluted$2.03 $4.72 $10.74 $10.65 Diluted$2.07 $2.03 $2.57 $10.74 
Earnings from discontinued operations per common share attributable to Mr. Cooper:
Basic$ $0.14 $ $0.16 
Diluted$ $0.13 $ $0.15 
Earnings per common share attributable to Mr. Cooper:
Basic$2.08 $5.05 $11.04 $11.29 
Diluted$2.03 $4.85 $10.74 $10.80 
    
See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited).
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MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(millions of dollars, except share data)
Preferred StockCommon StockCommon Stock
Shares
(in thousands)
AmountShares
(in thousands)
AmountAdditional Paid-in CapitalRetained EarningsTreasury Share AmountTotal Mr. Cooper Stockholders’ EquityNon-controlling InterestsTotal Stockholders’
Equity
Balance at March 31, 20211,000 $— 86,135 $$1,113 $1,995 $(206)$2,903 $$2,904 
Shares issued / (surrendered) under incentive compensation plan— — 14 — (1)— — (1)— (1)
Share-based compensation— — — — — — — 
Net income— — — — — 439 — 439 — 439 
Balance at June 30, 20211,000 $— 86,149 $$1,120 $2,434 $(206)$3,349 $$3,350 
Shares
(in thousands)
AmountAdditional Paid-in CapitalRetained EarningsTreasury Share AmountTotal Mr. Cooper Stockholders’ EquityNon-controlling InterestsTotal Stockholders’
Equity
Balance at March 31, 2022Balance at March 31, 2022 $ 73,906 $1 $1,085 $3,537 $(647)$3,976 $1 $3,977 Balance at March 31, 202273,906 $$1,085 $3,537 $(647)$3,976 $$3,977 
Shares issued / (surrendered) under incentive compensation planShares issued / (surrendered) under incentive compensation plan  6        Shares issued / (surrendered) under incentive compensation plan— — — — — — — 
Share-based compensationShare-based compensation    9   9  9 Share-based compensation— — — — — 
Repurchase of common stockRepurchase of common stock  (2,261)   (100)(100) (100)Repurchase of common stock(2,261)— — — (100)(100)— (100)
Net incomeNet income     151  151  151 Net income— — — 151 — 151 — 151 
Balance at June 30, 2022Balance at June 30, 2022 $ 71,651 $1 $1,094 $3,688 $(747)$4,036 $1 $4,037 Balance at June 30, 202271,651 $$1,094 $3,688 $(747)$4,036 $$4,037 
Balance at March 31, 2023Balance at March 31, 202368,053 $1 $1,066 $3,839 $(920)$3,986 $ $3,986 
Shares issued / (surrendered) under incentive compensation planShares issued / (surrendered) under incentive compensation plan7        
Share-based compensationShare-based compensation  8   8  8 
Repurchase of common stockRepurchase of common stock(1,212)   (57)(57) (57)
Net incomeNet income   142  142  142 
Balance at June 30, 2023Balance at June 30, 202366,848 $1 $1,074 $3,981 $(977)$4,079 $ $4,079 

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

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MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(millions of dollars, except share data)
Preferred StockCommon StockCommon Stock
Shares
(in thousands)
AmountShares
(in thousands)
AmountAdditional Paid-in CapitalRetained EarningsTreasury Share AmountTotal Mr. Cooper Stockholders’ EquityNon-controlling InterestsTotal Stockholders’
Equity
Shares
(in thousands)
AmountAdditional Paid-in CapitalRetained EarningsTreasury Share AmountTotal Mr. Cooper Stockholders’ EquityNon-controlling InterestsTotal Stockholders’
Equity
Balance at January 1, 20211,000 $— 89,457 $$1,126 $1,434 $(58)$2,503 $$2,504 
Balance at January 1, 2022Balance at January 1, 202273,777 $$1,116 $2,879 $(630)$3,366 $$3,367 
Shares issued / (surrendered) under incentive compensation planShares issued / (surrendered) under incentive compensation plan— — 1,197 — (20)— — (20)— (20)Shares issued / (surrendered) under incentive compensation plan856 — (39)— 18 (21)— (21)
Share-based compensationShare-based compensation— — — — 14 — — 14 — 14 Share-based compensation— — 17 — — 17 — 17 
Repurchase of common stockRepurchase of common stock— — (4,505)— — — (148)(148)— (148)Repurchase of common stock(2,982)— — — (135)(135)— (135)
Net incomeNet income— — — — — 1,000 — 1,000 — 1,000 Net income— — — 809 — 809 — 809 
Balance at June 30, 20211,000 $— 86,149 $$1,120 $2,434 $(206)$3,349 $$3,350 
Balance at June 30, 2022Balance at June 30, 202271,651 $$1,094 $3,688 $(747)$4,036 $$4,037 
Balance at January 1, 2022 $ 73,777 $1 $1,116 $2,879 $(630)$3,366 $1 $3,367 
Balance at January 1, 2023Balance at January 1, 202369,266 $1 $1,104 $3,802 $(850)$4,057 $ $4,057 
Shares issued / (surrendered) under incentive compensation planShares issued / (surrendered) under incentive compensation plan  856  (39) 18 (21) (21)Shares issued / (surrendered) under incentive compensation plan877  (43) 19 (24) (24)
Share-based compensationShare-based compensation    17   17  17 Share-based compensation  13   13  13 
Repurchase of common stockRepurchase of common stock  (2,982)   (135)(135) (135)Repurchase of common stock(3,295)   (146)(146) (146)
Net incomeNet income     809  809  809 Net income   179  179  179 
Balance at June 30, 2022 $ 71,651 $1 $1,094 $3,688 $(747)$4,036 $1 $4,037 
Balance at June 30, 2023Balance at June 30, 202366,848 $1 $1,074 $3,981 $(977)$4,079 $ $4,079 

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

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MR. COOPER GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions of dollars)
Six Months Ended June 30,Six Months Ended June 30,
20222021 20232022
Operating ActivitiesOperating ActivitiesOperating Activities
Net incomeNet income$809 $1,000 Net income$179 $809 
Less: Net income from discontinued operations 14 
Net income from continuing operations809 986 
Adjustments to reconcile net income from continuing operations to net cash attributable to operating activities:
Adjustments to reconcile net income to net cash attributable to operating activities:Adjustments to reconcile net income to net cash attributable to operating activities:
Deferred tax expenseDeferred tax expense241 215 Deferred tax expense46 241 
Net gain on mortgage loans held for saleNet gain on mortgage loans held for sale(436)(1,261)Net gain on mortgage loans held for sale(153)(436)
Provision for servicing and non-servicing reservesProvision for servicing and non-servicing reserves11 21 Provision for servicing and non-servicing reserves18 11 
Fair value changes in mortgage servicing rightsFair value changes in mortgage servicing rights(663)190 Fair value changes in mortgage servicing rights239 (663)
Fair value changes in MSR related liabilitiesFair value changes in MSR related liabilities131 Fair value changes in MSR related liabilities(6)131 
Depreciation and amortization for property and equipment and intangible assetsDepreciation and amortization for property and equipment and intangible assets20 31 Depreciation and amortization for property and equipment and intangible assets18 20 
Gain on sale of business (487)
Gain on disposition of assetsGain on disposition of assets(223)— Gain on disposition of assets (223)
Loss on MSR hedging activitiesLoss on MSR hedging activities52 229 
Gain on MSR salesGain on MSR sales(32)(1)
Other operating activitiesOther operating activities39 32 Other operating activities34 39 
Repurchases of forward loan assets out of Ginnie Mae securitizations(2,686)(5,812)
Repurchases of loan assets out of Ginnie Mae securitizationsRepurchases of loan assets out of Ginnie Mae securitizations(547)(2,686)
Mortgage loans originated and purchased for sale, net of feesMortgage loans originated and purchased for sale, net of fees(19,370)(47,560)Mortgage loans originated and purchased for sale, net of fees(6,593)(19,370)
Sales proceeds and loan payment proceeds for mortgage loans held for saleSales proceeds and loan payment proceeds for mortgage loans held for sale24,510 52,923 Sales proceeds and loan payment proceeds for mortgage loans held for sale6,842 24,056 
Changes in assets and liabilities:Changes in assets and liabilities:Changes in assets and liabilities:
Advances and other receivablesAdvances and other receivables311 48 Advances and other receivables197 311 
Other assetsOther assets4 101 Other assets(39)256 
Payables and other liabilitiesPayables and other liabilities(116)Payables and other liabilities(106)(142)
Net cash attributable to operating activities - continuing operations2,582 (567)
Net cash attributable to operating activities - discontinued operations 453 
Net cash attributable to operating activitiesNet cash attributable to operating activities2,582 (114)Net cash attributable to operating activities149 2,582 
Investing ActivitiesInvesting ActivitiesInvesting Activities
Acquisition of assetsAcquisition of assets(34)— 
Property and equipment additions, net of disposalsProperty and equipment additions, net of disposals(9)(26)Property and equipment additions, net of disposals(10)(9)
Purchase of mortgage servicing rightsPurchase of mortgage servicing rights(1,151)(217)Purchase of mortgage servicing rights(841)(1,151)
Proceeds on sale of mortgage servicing rights275 13 
Proceeds on sale of mortgage servicing rights and excess yieldProceeds on sale of mortgage servicing rights and excess yield312 275 
Other investing activitiesOther investing activities (17)Other investing activities(3)— 
Net cash attributable to investing activities - continuing operations(885)(247)
Net cash attributable to investing activities - discontinued operations — 
Net cash attributable to investing activitiesNet cash attributable to investing activities(885)(247)Net cash attributable to investing activities(576)(885)
Financing ActivitiesFinancing ActivitiesFinancing Activities
(Decrease) increase in advance and warehouse facilities(1,597)1,047 
Repayments of excess spread financing(292)— 
Settlements of excess spread financing(61)(81)
Increase (decrease) in advance, warehouse and MSR facilitiesIncrease (decrease) in advance, warehouse and MSR facilities630 (1,597)
Settlements and repayment of excess spread financingSettlements and repayment of excess spread financing(40)(353)
Repurchase of common stockRepurchase of common stock(135)(148)Repurchase of common stock(146)(135)
Other financing activitiesOther financing activities(24)(23)Other financing activities(32)(24)
Net cash attributable to financing activities - continuing operations(2,109)795 
Net cash attributable to financing activities - discontinued operations (441)
Net cash attributable to financing activitiesNet cash attributable to financing activities(2,109)354 Net cash attributable to financing activities412 (2,109)
Net decrease in cash, cash equivalents, and restricted cashNet decrease in cash, cash equivalents, and restricted cash(412)(7)Net decrease in cash, cash equivalents, and restricted cash(15)(412)
Cash, cash equivalents, and restricted cash - beginning of periodCash, cash equivalents, and restricted cash - beginning of period1,041 913 Cash, cash equivalents, and restricted cash - beginning of period702 1,041 
Cash, cash equivalents, and restricted cash - end of period(1)
Cash, cash equivalents, and restricted cash - end of period(1)
$629 $906 
Cash, cash equivalents, and restricted cash - end of period(1)
$687 $629 
Supplemental Disclosures of Non-cash Investing ActivitiesSupplemental Disclosures of Non-cash Investing ActivitiesSupplemental Disclosures of Non-cash Investing Activities
Equity consideration received from disposition of assetsEquity consideration received from disposition of assets$250 $— Equity consideration received from disposition of assets$ $250 
Purchase of mortgage servicing rightsPurchase of mortgage servicing rights$45 $Purchase of mortgage servicing rights$57 $45 
Forward mortgage servicing rights sales price holdback$15 $— 
Consideration from sale of business$ $499 
Mortgage servicing rights sales price holdbackMortgage servicing rights sales price holdback$ $15 

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(1)The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the condensed consolidated balance sheets.
June 30, 2022June 30, 2021June 30, 2023June 30, 2022
Cash and cash equivalentsCash and cash equivalents$514 $716 Cash and cash equivalents$517 $514 
Restricted cashRestricted cash115 113 Restricted cash170 115 
Restricted cash within assets of discontinued operations 77 
Total cash, cash equivalents, and restricted cashTotal cash, cash equivalents, and restricted cash$629 $906 Total cash, cash equivalents, and restricted cash$687 $629 
See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited). 
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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® and Xome®. Mr. Cooper is one of the largest home loan originatorsservicers and servicersoriginators in the country focused on delivering a variety of servicing and lending products, services and technologies. The Company’s corporate website is located at www.mrcoopergroup.com. 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.

During the second quarter of 2023, the Company entered into a transaction with Rushmore Loan Management Services, LLC (“Rushmore”) to acquire certain assets and assume certain liabilities 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, whereby the purchase price represents relative fair value of assets and liabilities acquired.

In May 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Home Point Capital Inc., a Delaware corporation (“Home Point”). Per the Merger Agreement, the Company has agreed to commence a tender offer to acquire all of the outstanding shares of common stock of Home Point, other than certain excluded shares, for $2.33 per share. The transaction is expected to close in the third quarter of 2023, subject to customary conditions including receipt of regulatory approvals.

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, 2021.2022.

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.

Share-based compensation for restricted stock units granted to employees of the Company, consultants, and non-employee directors is based on the fair market value of the Company’s common stock on the grant date and recognized as an expense over the requisite employee service period on a straight-line basis using an accelerated attribution model. Shares for these awards are issued to employees from treasury stock.

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. These investments are initially measured at cost and subsequently adjusted for the Company’s proportionate share of earnings and losses in the investee. Investments in certain companies over which the Company does not exert significant influence are recorded at fair value, or at cost and updated for observable price changes upon election of measurement alternative, at the end of each reporting period. Intercompany balances and transactions on consolidated entities have been eliminated.

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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 due to factors such as adverse changes in the economy, macro-economic uncertainty, 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 and such differences could be material.

Reclassifications
Certain reclassifications have been made in the 20212022 condensed consolidated statement of cash flows to conform to 20222023 presentation. Such reclassifications were not material and did not affect total revenues or net income.

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Recent Accounting Guidance Adopted
The Company did not adopt any accounting guidance during the six months ended June 30, 20222023 that had a material impact on its condensed consolidated financial statements or disclosures.


2. Dispositions

Sale of Mortgage Servicing Platform
On March 31, 2022, the Company completed the sale of certain assets and liabilities of its servicing and subservicing technology platform for performing and non-performing mortgage loans (the “Mortgage Servicing Platform”) to Sagent M&C, LLC (“Sagent”), in exchange for Class A-1 Common Units equal to 19.9% ownership of Sagent, and the sale of certain tangible personal property of the Company used in the conduct of the Mortgage Servicing Platform in exchange for $9.9 in cash, for total consideration of $260 (the “Sagent Transaction”). In connection with the Sagent Transaction, the Company recorded a gain of $223, which was included in other“other (expense) income, netnet” within the condensed consolidated statements of operations, and recorded $4 transaction costs during the six months ended June 30, 2022. No transaction costs were recorded in the three months ended June 30, 2022. The net carrying amount of assets and liabilities transferred in connection with the Sagent Transaction was $31 and reported under Corporate/Other.

The Company accountedaccounts for the equity interest under the equity method of accounting, as the Company has the ability to exercise significant influence over Sagent’s operating and financial decisions but does not own a majority equity interest or otherwise control the respective entity. Under the equity method of accounting, the investment is initially stated at cost and subsequently adjusted for additional investments and the Company’s proportionate share of Sagent’s earnings or losses and distributions. The initial cost of the equity interest recorded was $250, which represented the fair value as of March 31, 2022.

Sale of Reverse Servicing Portfolio
In 2021, the Company completed the sale of its reverse servicing portfolio, operating under Champion Mortgage brand (“Champion”), to Mortgage Assets Management, LLC and its affiliates (“MAM”) for total consideration of $1,640. Upon close of the transaction, MAM assumed Champion’s reverse portfolio and related operations. The Company recorded transaction costsa loss of $5$4 and $11 during the three and six months ended June 30, 2021. The carrying amounts of assets and liabilities associated with the reverse servicing operation were reported under the Servicing segment. The sale of business represents a strategic shift in the Company’s operations. Therefore, the sale of the reverse servicing portfolio qualifies for reporting as discontinued operations, and the related results of operations are reported as discontinued operations in the condensed consolidated statements of operations for prior periods presented.

As part of the transaction, the Company entered into a transitional servicing agreement with MAM, under which the Company was compensated for continuing to subservice the reverse loans through the date that the loans were transferred out of Company’s servicing system. The transfer of the loans out of the Company’s servicing system was completed on April 1, 2022. In addition, the Company retained certain loans, primarily2023, respectively, related to previously liquidated loans. Asthe Company's proportionate share of net loss of Sagent. The Company’s investment in Sagent was $226 as of June 30, 2022, the retained total assets and total liabilities were $34 and $26, respectively. As of December 31, 2021, the retained total assets and total liabilities were $55 and $39, respectively. The retained assets and liabilities are included in other assets, and payables and other liabilities, respectively, on the condensed consolidated balance sheets.2023.

The following table sets forth the condensed consolidated statements of operations data for discontinued operations for the three and six months ended June 30, 2021:
Three Months Ended June 30, 2021Six Months Ended June 30, 2021
Revenue - service related, net$$
Salaries, wages and benefits expense(8)(16)
General and administrative expense71 64 
Interest income43 87 
Interest expense(30)(64)
Loss on classification as discontinued operations(61)(61)
Income from discontinued operations before income tax expense16 19 
Less: Income tax expense
Net income from discontinued operations$12 $14 

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3. Mortgage Servicing Rights and Related Liabilities

The following table sets forth the carrying value of the Company’s mortgage servicing rights (“MSRs”) 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 LiabilitiesMSRs and Related LiabilitiesJune 30, 2022December 31, 2021MSRs and Related LiabilitiesJune 30, 2023December 31, 2022
MSRs - fair valueMSRs - fair value$6,151 $4,223 MSRs - fair value$7,149 $6,654 
Excess spread financing - fair value$532 $768 
Mortgage servicing rights financing - fair value24 10 
Excess spread financing at fair valueExcess spread financing at fair value$459 $509 
Mortgage servicing rights financing at fair valueMortgage servicing rights financing at fair value23 19 
MSR related liabilities - nonrecourse at fair valueMSR related liabilities - nonrecourse at fair value$556 $778 MSR related liabilities - nonrecourse at fair value$482 $528 

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Mortgage Servicing Rights
The following table sets forth the activities of MSRs:
Six Months Ended June 30,Six Months Ended June 30,
MSRs - Fair ValueMSRs - Fair Value20222021MSRs - Fair Value20232022
Fair value - beginning of periodFair value - beginning of period$4,223 $2,703 Fair value - beginning of period$6,654 $4,223 
Additions:Additions:Additions:
Servicing retained from mortgage loans soldServicing retained from mortgage loans sold360 554 Servicing retained from mortgage loans sold133 360 
Purchases of servicing rightsPurchases of servicing rights1,178 218 Purchases of servicing rights870 1,178 
Dispositions:Dispositions:Dispositions:
Sales of servicing assets(289)(12)
Sales of servicing assets and excess yieldSales of servicing assets and excess yield(280)(289)
Changes in fair value:Changes in fair value:Changes in fair value:
Changes in valuation inputs or assumptions used in the valuation model (MSR MTM)Changes in valuation inputs or assumptions used in the valuation model (MSR MTM)1,124 321 Changes in valuation inputs or assumptions used in the valuation model (MSR MTM)34 1,124 
Changes in valuation due to amortizationChanges in valuation due to amortization(461)(511)Changes in valuation due to amortization(273)(461)
Other changes(1)Other changes(1)16 34 Other changes(1)11 16 
Fair value - end of periodFair value - end of period$6,151 $3,307 Fair value - end of period$7,149 $6,151 

(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 six months ended June 30, 20222023 and 2021,2022, the Company sold $20,052$1,605 and $1,076$20,052 in unpaid principal balance (“UPB”) of MSRs, of which $19,367$590 and $1,008$19,367 were retained by the Company as subservicer, respectively.

During the three months ended June 30, 2023, certain agencies entered into agreements with the Company to purchase excess servicing cash flows (“excess yield”) on certain agency loans with a total UPB of approximately $41,958 for total proceeds of $294. The Company recorded a gain of $33 through the mark-to-market adjustments within “revenues - service related, net” in the condensed consolidated statements of operations.

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 primarily consist of government sponsored enterprises (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae” or “FNMA”) and the Federal Home Loan Mortgage Corp (“Freddie Mac” or “FHLMC”), the Federal National Mortgage Association (“Fannie Mae” or “FNMA”), and the Government National Mortgage Association (“Ginnie Mae” or “GNMA”). 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:
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
MSRs - UPB and Fair Value BreakdownUPBFair ValueUPBFair Value
Investor Pools
MSRs - UPB and Fair Value Breakdown by Investor PoolsMSRs - UPB and Fair Value Breakdown by Investor PoolsUPBFair ValueUPBFair Value
AgencyAgency$364,436 $5,806 $302,851 $3,859 Agency$431,876 $6,848 $380,502 $6,322 
Non-agencyNon-agency32,951 345 36,357 364 Non-agency27,600 301 30,880 332 
TotalTotal$397,387 $6,151 $339,208 $4,223 Total$459,476 $7,149 $411,382 $6,654 

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.

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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:
Discount RateTotal Prepayment SpeedsCost to Service per Loan
Option Adjusted Spread(1)
Total Prepayment SpeedsCost to Service per Loan
MSRs - Hypothetical SensitivitiesMSRs - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
MSRs - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
June 30, 2022
June 30, 2023June 30, 2023
Mortgage servicing rightsMortgage servicing rights$(258)$(495)$(150)$(293)$(66)$(132)Mortgage servicing rights$(286)$(549)$(157)$(305)$(69)$(139)
December 31, 2021
Discount RateTotal Prepayment SpeedsCost to Service per Loan
MSRs - Hypothetical SensitivitiesMSRs - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
December 31, 2022December 31, 2022
Mortgage servicing rightsMortgage servicing rights$(141)$(272)$(148)$(286)$(46)$(93)Mortgage servicing rights$(266)$(511)$(136)$(264)$(61)$(122)

(1)Beginning in the second quarter of 2023, the Company valued MSRs using a stochastic option adjusted spread (“OAS”) instead of a static discount rate. Refer to Note 13, Fair Value Measurements, for further discussion.

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 $532$459 and $768$509, with UPB of $78,838 and $83,706 as of June 30, 20222023 and December 31, 2021,2022, respectively. Refer to Note 13, Fair Value Measurements, for key weighted-average inputs and assumptions used in the valuation of excess spread financing liability. In June 2022, the Company entered into an assignment agreement with an investor to repurchase excess spread liabilities for a total purchase price of $277.

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:
Discount RatePrepayment Speeds
Option Adjusted Spread(1)
Prepayment Speeds
Excess Spread Financing - Hypothetical SensitivitiesExcess Spread Financing - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
Excess Spread Financing - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
June 30, 2022
June 30, 2023June 30, 2023
Excess spread financingExcess spread financing$20 $42 $13 $26 Excess spread financing$16 $34 $6 $18 
December 31, 2021
Discount RatePrepayment Speeds
Excess Spread Financing - Hypothetical SensitivitiesExcess Spread Financing - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
December 31, 2022December 31, 2022
Excess spread financingExcess spread financing$26 $54 $28 $58 Excess spread financing$19 $40 $11 $22 

(1)Beginning in the second quarter of 2023, the Company valued excess spread financing using a stochastic OAS instead of a static discount rate. Refer toNote 13, Fair Value Measurements, for further discussion.

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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 $24$23 and $10$19 as of June 30, 20222023 and December 31, 2021,2022, respectively. Refer to Note 13, Fair Value Measurements, for key weighted-average inputs and assumptions used in the valuation of the MSR financing liability.
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Servicing Segment Revenues - Service Related, net
The following table sets forth the items comprising total revenues for the Servicing segment:“revenues - service related, net”:
Three Months Ended June 30,Six Months Ended June 30,
Total Revenues - Servicing2022202120222021
Contractually specified servicing fees(1)
$378 $275 $705 $551 
Other service-related income(1)
20 214 68 359 
Incentive and modification income(1)
9 14 18 28 
Late fees(1)
19 16 38 34 
Mark-to-market adjustments(2)
200 (140)753 225 
Amortization, net of accretion(3)
(199)(198)(401)(365)
Other(4)
(32)(76)(70)(159)
Total revenues - Servicing$395 $105 $1,111 $673 
Three Months Ended June 30,Six Months Ended June 30,
Revenues - Service Related, net2023202220232022
Contractually specified servicing fees(1)
$407 $378 $791 $705 
Other service-related income(1)
19 39 33 72 
Incentive and modification income(1)
8 14 18 
Servicing late fees(1)
23 19 44 38 
Mark-to-market adjustments - Servicing
MSR MTM139 326 34 1,124 
Loss on MSR hedging activities(111)(89)(52)(229)
Gain on MSR sales32 32 
Reclassifications(2)
(9)(6)(18)(12)
Excess spread /MSR financing MTM12 (32)6 (131)
Total mark-to-market adjustments - Servicing63 200 2 753 
Amortization, net of accretion
MSR amortization(148)(226)(273)(461)
Excess spread accretion11 27 21 60 
Total amortization, net of accretion(137)(199)(252)(401)
Originations service fees(3)
16 24 27 66 
Corporate/Xome related service fees21 22 40 34 
Other(4)
(18)(32)(36)(70)
Total revenues - Service Related, net$402 $460 $663 $1,215 

(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 $176 and $170 for the three months ended June 30, 2023 and 2022, respectively, and $353 and $316 for the six months ended June 30, 2023 and 2022, respectively.
(2)Mark-to-market (“MTM”) adjustmentsReclassifications include fair value adjustments on MSR, excess spread financing and MSR financing liabilities. The amount of MSR MTM includes 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. The impact of negative modeled cash flows was $6 and $8 for the three months ended June 30, 2022 and 2021 and $12 and $20 for the six months ended June 30, 2022 and 2021, respectively.
(3)Amortization is net of excess spread accretion of $27Amounts include fees collected from customers for originated loans and $70 duringfrom other lenders for loans purchased through the three months ended June 30, 2022correspondent channel, and 2021, respectively. For the six months ended June 30, 2022include loan application, underwriting, and 2021, amortization is net of excess spread accretion of $60 and $146, respectively.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.


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4. Advances and Other Receivables

Advances and other receivables, net, consists of the following:
Advances and Other Receivables, NetAdvances and Other Receivables, NetJune 30, 2022December 31, 2021Advances and Other Receivables, NetJune 30, 2023December 31, 2022
Servicing advances, net of $14 and $19 purchase discount, respectively$915 $1,263 
Receivables from agencies, investors and prior servicers, net of $8 and $12 purchase discount, respectively127 132 
Servicing advances, net of $9 and $12 purchase discount, respectivelyServicing advances, net of $9 and $12 purchase discount, respectively$849 $1,053 
Receivables from agencies, investors and prior servicers, net of $7 purchase discountReceivables from agencies, investors and prior servicers, net of $7 purchase discount109 103 
ReservesReserves(150)(167)Reserves(156)(137)
Total advances and other receivables, netTotal advances and other receivables, net$892 $1,228 Total advances and other receivables, net$802 $1,019 

The following table sets forth the activities of the servicing reserves for advances and other receivables:
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
Reserves for Advances and Other ReceivablesReserves for Advances and Other Receivables2022202120222021Reserves for Advances and Other Receivables2023202220232022
Balance - beginning of periodBalance - beginning of period$152 $206 $167 $208 Balance - beginning of period$148 $152 $137 $167 
Provision and other additions(1)
18 26 34 41 
ProvisionProvision9 18 12 
Reclassifications(1)
Reclassifications(1)
9 12 16 22 
Write-offsWrite-offs(20)(41)(51)(58)Write-offs(10)(20)(15)(51)
Balance - end of periodBalance - end of period$150 $191 $150 $191 Balance - end of period$156 $150 $156 $150 

(1)The Company recorded a provision of $6 and $8 through the MTM adjustments in revenues - service related, net, in the condensed consolidated statements of operations during the three months ended June 30, 2022 and 2021, respectively, and $12 and $20 during the six months ended June 30, 2022 and 2021, respectively, for inactive and liquidated loans that are no longer part of the MSR portfolio. Other additionsReclassifications represent reclassifications of required reserves provisioned within other balance sheet accounts as associated serviced loans become inactive or liquidate.

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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 June 30,Three Months Ended June 30,
2022202120232022
Purchase Discount for Advances and Other ReceivablesPurchase Discount for Advances and Other ReceivablesServicing AdvancesReceivables from Agencies, Investors and Prior ServicersServicing AdvancesReceivables from Agencies, Investors and Prior ServicersPurchase Discount for Advances and Other ReceivablesServicing AdvancesReceivables from Agencies, Investors and Prior ServicersServicing AdvancesReceivables from Agencies, Investors and Prior Servicers
Balance - beginning of periodBalance - beginning of period$16 $8 $63 $20 Balance - beginning of period$9 $7 $16 $
Utilization of purchase discountsUtilization of purchase discounts(2) (37)— Utilization of purchase discounts  (2)— 
Balance - end of periodBalance - end of period$14 $8 $26 $20 Balance - end of period$9 $7 $14 $
Six Months Ended June 30,
20222021
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$19 $12 $72 $21 
Utilization of purchase discounts(5)(4)(46)(1)
Balance - end of period$14 $8 $26 $20 

Six Months Ended June 30,
20232022
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$12 $7 $19 $12 
Utilization of purchase discounts(3) (5)(4)
Balance - end of period$9 $7 $14 $

Credit Loss for Advances and Other Receivables
During the three and six months ended June 30, 2022,2023, the Company decreased and increased the current expected credit loss (“CECL”) reserve by $3 and $7,$1, respectively. During the three and six months ended June 30, 2021, 2022, the Company increased the CECL reserve by $3 and $4,$7, respectively. In addition, the Company had no write-offs during the three months ended June 30, 2022 and wrote off $5 of the CECL reserve during the six months ended June 30, 2022. As of June 30, 2022,2023, the total CECL reserve was $33,$37, of which $25$30 and $8$7 were recorded in reserves and purchase discount for advances and other receivables, respectively. As of June 30, 20212022, the total CECL reserve was $42,$33, of which $25 and $17$8 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 increaseincreases 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.

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5. Mortgage Loans Held for Sale

Mortgage loans held for sale are recorded at fair value as set forth below:
Mortgage Loans Held for SaleMortgage Loans Held for SaleJune 30, 2022December 31, 2021Mortgage Loans Held for SaleJune 30, 2023December 31, 2022
Mortgage loans held for sale – UPBMortgage loans held for sale – UPB$2,098 $4,257 Mortgage loans held for sale – UPB$1,211 $921 
Mark-to-market adjustment(1)
Mark-to-market adjustment(1)
(26)124 
Mark-to-market adjustment(1)
(24)(28)
Total mortgage loans held for saleTotal mortgage loans held for sale$2,072 $4,381 Total mortgage loans held for sale$1,187 $893 

(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 salesale” in the condensed consolidated statements of operations.

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The following table sets forth the activities of mortgage loans held for sale:
Six Months Ended June 30,Six Months Ended June 30,
Mortgage Loans Held for SaleMortgage Loans Held for Sale20222021Mortgage Loans Held for Sale20232022
Balance - beginning of periodBalance - beginning of period$4,381 $5,720 Balance - beginning of period$893 $4,381 
Loans sold(24,251)(52,128)
Loans sold and loan payments receivedLoans sold and loan payments received(6,845)(24,251)
Mortgage loans originated and purchased, net of feesMortgage loans originated and purchased, net of fees19,370 47,560 Mortgage loans originated and purchased, net of fees6,593 19,370 
Repurchase of loans out of Ginnie Mae securitizations(1)Repurchase of loans out of Ginnie Mae securitizations(1)2,686 5,812 Repurchase of loans out of Ginnie Mae securitizations(1)547 2,686 
Net change in unrealized loss on retained loans held for sale(115)(5)
Net change in unrealized gain (loss) on retained loans held for saleNet change in unrealized gain (loss) on retained loans held for sale5 (115)
Net transfers of mortgage loans held for sale(1)(2)
Net transfers of mortgage loans held for sale(1)(2)
1 
Net transfers of mortgage loans held for sale(1)(2)
(6)
Balance - end of periodBalance - end of period$2,072 $6,961 Balance - end of period$1,187 $2,072 

(1)Amount reflectsThe 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.

DuringFor the six months ended June 30, 2023 and 2022, total realized loss was $3 and 2021, the Company received$195 from total sales proceeds of $24,510$6,722 and $52,923,$23,863, respectively, on the sale of mortgage loans held for sale, resulting in gains of $259 and $795, respectively.sale.

The total UPB and fair value of mortgage loans held for sale on non-accrual status was as follows:
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
Mortgage Loans Held for SaleMortgage Loans Held for SaleUPBFair ValueUPBFair ValueMortgage Loans Held for SaleUPBFair ValueUPBFair Value
Non-accrual(1)
Non-accrual(1)
$113 $103 $104 $94 
Non-accrual(1)
$80 $68 $102 $87 

(1)Non-accrual UPB includes $103$67 and $94$90 of UPB related to Ginnie Mae repurchased loans as of June 30, 20222023 and December 31, 2021,2022, respectively.

The total UPB of mortgage loans held for sale for which the Company has begun formal foreclosure proceedings was $46$48 and $16$65 as of June 30, 20222023 and December 31, 2021,2022, respectively.

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6. Loans Subject to Repurchase from Ginnie Mae

Forward loansLoans are sold to Ginnie Mae in conjunction with the issuance of mortgage backedmortgage-backed securities. The Company, as the issuer of the mortgage backedmortgage-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 $1,4001,650 and $1,496$1,865 as of June 30, 20222023 and December 31, 2021,2022, respectively, which are included in both other assets“other assets” and payables“payables and other liabilitiesliabilities” in the condensed consolidated balance sheets. Loans subject to repurchase from Ginnie Mae as of June 30, 2022 and December 31, 2021 include $1,241 and $1,301 loans in forbearance related to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), respectively, whereby no payments have been received from borrowers for greater than 90 days.


7. Goodwill and Intangible Assets

The Company had goodwill of $120 as of June 30, 20222023 and December 31, 2021,2022, and intangible assets of $11$28 and $148 as of June 30, 20222023 and December 31, 2021,2022, respectively. In connection with the Rushmore Transaction, the Company recorded $23 intangible assets in 2023, which primarily consist of subservicing customer relationships. See Note 1, Nature of Business and Basis of Presentation for further details. Goodwill and intangible assets are included in other assets“other assets” within the condensed consolidated balance sheets.


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8. Derivative Financial Instruments

Derivative instruments are used as part of the overall strategy to manage exposure to marketinterest rate risks primarily associated with fluctuations in interest rates related to mortgage loans held for sale and IRLCs (“the Originationspipeline”) and Servicing segments. Derivativethe 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 primarily include interest rate lock commitments (“IRLCs”), loan purchase commitments (“LPCs”),IRLCs, LPCs, forward Mortgage Backed Securities (“MBS”) purchase commitments, EurodollarMBS and Treasury futures and interest rate swap futures. The changes in value on the derivative instruments associated with pipeline hedging loans held for sale fair value are recorded in earnings as a component of “revenues - net gain on mortgage loans held for salesale” 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, netnet” on the condensed consolidated statements of operations and in changes in other assets or other liabilities“(gain) loss on MSR hedging activities” on the condensed consolidated statements of cash flows.
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The following tables provide the outstanding notional balances, fair values of outstanding positions and recorded gains/(losses) for the derivative financial instruments. Gains(losses)Gains/(losses) include both realized and unrealized gains gains/(losses) of each derivative financial instrument.
June 30, 2022Six Months Ended June 30, 2022June 30, 2023Six Months Ended June 30, 2023
Derivative Financial InstrumentsDerivative Financial InstrumentsExpiration
Dates
Outstanding
Notional
Fair
Value
Gains/(Losses)Derivative Financial InstrumentsExpiration
Dates
Outstanding
Notional
Fair
Value
Gains/(Losses)
AssetsAssetsAssets
Mortgage loans held for saleMortgage loans held for saleMortgage loans held for sale
Loan sale commitmentsLoan sale commitments2022$246 $8 $(17)Loan sale commitments2023$556 $8 $(1)
Derivative financial instrumentsDerivative financial instrumentsDerivative financial instruments
IRLCsIRLCs20222,103 62 (72)IRLCs2023$1,041 $30 $8 
LPCsLPCs2022325 3  LPCs2023200 1  
Forward MBS tradesForward MBS trades20231,712 10 43 
Treasury futuresTreasury futures202230  3 Treasury futures202372   
Forward MBS trades20221,798 12 429 
Total derivative financial instruments - assetsTotal derivative financial instruments - assets$4,256 $77 $360 Total derivative financial instruments - assets$3,025 $41 $51 
LiabilitiesLiabilitiesLiabilities
Derivative financial instrumentsDerivative financial instrumentsDerivative financial instruments
IRLCsIRLCs2022$56 $1 $(1)IRLCs2023$18 $ $ 
LPCsLPCs2022186 1 1 LPCs2023234 1  
Forward MBS tradesForward MBS trades20231,175 3 (50)
Treasury futuresTreasury futures2022902 18 (185)Treasury futures20232,510 20 (44)
Forward MBS trades20221,716 13 (31)
Total derivative financial instruments - liabilitiesTotal derivative financial instruments - liabilities$2,860 $33 $(216)Total derivative financial instruments - liabilities$3,937 $24 $(94)

June 30, 2022Six Months Ended June 30, 2022
Derivative Financial InstrumentsExpiration
Dates
Outstanding
Notional
Fair
Value
Gains/(Losses)
Assets
Mortgage loans held for sale
Loan sale commitments2022$246 $$(17)
Derivative financial instruments
IRLCs2022$2,103 $62 $(72)
LPCs2022325 — 
Forward MBS trades20221,798 12 429 
Treasury futures202230 — 
Total derivative financial instruments - assets$4,256 $77 $360 
Liabilities
Derivative financial instruments
IRLCs2022$56 $$(1)
LPCs2022186 
Forward MBS trades20221,716 13 (31)
Treasury futures2022902 18 (185)
Total derivative financial instruments - liabilities$2,860 $33 $(216)

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June 30, 2021Six Months Ended June 30, 2021
Derivative Financial InstrumentsExpiration
Dates
Outstanding
Notional
Fair
Value
Gains/(Losses)
Assets
Mortgage loans held for sale
Loan sale commitments2021$1,514 $39 $(63)
Derivative financial instruments
IRLCs20216,730 204 (210)
LPCs20211,984 10 (29)
Forward MBS trades20219,749 27 271 
Swap futures202160 — 
Total derivative financial instruments - assets$18,523 $241 $33 
Liabilities
Derivative financial instruments
IRLCs2021$$— $— 
LPCs2021708 (1)
Forward MBS trades202111,747 25 (126)
Swap futures2021— — (4)
Total derivative financial instruments - liabilities$12,464 $26 $(131)

TheAs of June 30, 2023, the Company held $37$93 and $27$9 in collateral deposits asand collateral obligations on derivative instruments, respectively. As of June 30, 2022 and December 31, 2021,2022 the Company held $49 and $1 in collateral deposits and collateral obligations on derivative instruments, respectively. Collateral deposits and collateral obligations are recorded in “other assets” and “payables and other assetsliabilities”, 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.


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9. Indebtedness

Advance, Warehouse and WarehouseMSR Facilities
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
Maturity DateCollateralCapacity AmountOutstandingCollateral PledgedOutstandingCollateral PledgedMaturity DateCollateralCapacity AmountOutstandingCollateral PledgedOutstandingCollateral Pledged
Advance FacilitiesAdvance FacilitiesAdvance Facilities
$400 advance facility(1)
August 2023Servicing advance receivables$400 $173 $243 $234 $318 
$350 advance facility$350 advance facilityOctober 2022Servicing advance receivables350 156 186 160 197 $350 advance facilityOctober 2024Servicing advance receivables$350 $134 $169 $150 $189 
$350 advance facilityJanuary 2023Servicing advance receivables350 145 172 162 190 
$300 advance facility(1)
$300 advance facility(1)
November 2024Servicing advance receivables300 259 354 308 410 
$250 advance facility$250 advance facilityJanuary 2024Servicing advance receivables250 183 210 171 209 
$75 advance facility$75 advance facilityDecember 2022Servicing advance receivables75 49 70 58 89 $75 advance facilityDecember 2023Servicing advance receivables75 34 65 40 45 
Advance facilities principal amountAdvance facilities principal amount523 671 614 794 Advance facilities principal amount610 798 669 853 
Warehouse FacilitiesWarehouse FacilitiesWarehouse Facilities
$4,000 warehouse facilityFebruary 2023Mortgage loans or MBS4,000 661 771 1,224 1,341 
$2,500 warehouse facilityOctober 2022Mortgage loans or MBS2,500 532 550 991 1,024 
$1,500 warehouse facilityJune 2023Mortgage loans or MBS1,500 180 180 356 345 
$750 warehouse facilityOctober 2022Mortgage loans or MBS750 241 253 256 270 
$600 warehouse facility(2)
September 2023Mortgage loans or MBS600 91 101 409 425 
$1500 Warehouse Facility$1500 Warehouse FacilityJune 2024Mortgage loans or MBS1,500 251 252 206 272 
$750 Warehouse Facility$750 Warehouse FacilityJune 2024Mortgage loans or MBS750 186 239 135 133 
$750 Warehouse Facility$750 Warehouse FacilityOctober 2023Mortgage loans or MBS750 155 161 202 209 
$500 Warehouse Facility$500 Warehouse FacilityJune 2024Mortgage loans or MBS500 78 84 76 80 
$500 Warehouse Facility$500 Warehouse FacilityAugust 2023Mortgage loans or MBS500 101 103 31 32 
$300 Warehouse Facility$300 Warehouse FacilityAugust 2023Mortgage loans or MBS300 183 188 115 117 
$250 Warehouse Facility(2)
$250 Warehouse Facility(2)
September 2024Mortgage loans or MBS250 47 52 14 17 
$200 Warehouse Facility$200 Warehouse FacilityDecember 2024Mortgage loans or MBS200 59 61 18 21 
$100 Warehouse Facility$100 Warehouse FacilityApril 2024Mortgage loans or MBS100 29 39 19 28 
$100 Warehouse Facility$100 Warehouse FacilityApril 2024Mortgage loans or MBS100 
$75 Warehouse Facility$75 Warehouse FacilityDecember 2023Mortgage loans or MBS75 181811
Warehouse facilities principal amountWarehouse facilities principal amount1,107 1,197 817 910 
MSR FacilitiesMSR Facilities
$1,450 warehouse facility(1)
$1,450 warehouse facility(1)
November 2024MSR1,450 250 2,185 260 2,284 
$1,000 warehouse facility$1,000 warehouse facilityApril 2025MSR1,000 550 1,235 380 927 
$750 warehouse facility(2)
$750 warehouse facility(2)
September 2024MSR750 3201,1413801,482
$500 warehouse facility$500 warehouse facilityJune 2023Mortgage loans or MBS500 9 10 188 194 $500 warehouse facilityJune 2024MSR500 265713365732
$500 warehouse facility$500 warehouse facilitySeptember 2022Mortgage loans or MBS500 117 120 419 430 $500 warehouse facilityApril 2025MSR500 199383
$500 warehouse facility$500 warehouse facilityJune 2023Mortgage loans or MBS500 57 68 39 39 $500 warehouse facilityJune 2025MSR500 200424
$500 warehouse facilityAugust 2023Mortgage loans or MBS500 31 32 38 39 
$450 warehouse facilityApril 2023Mortgage loans or MBS450   87 89 
$325 warehouse facilityDecember 2022Mortgage loans or MBS325 1 1 67 67 
$250 warehouse facility(3)
April 2023Mortgage loans or MBS250   
$200 warehouse facilityApril 2023Mortgage loans or MBS200 19 25 46 58 
$30 warehouse facility(4)
January 2022Mortgage loans or MBS   — — 
Warehouse facilities principal amount1,939 2,111 4,125 4,327 
MSR Facilities
$800 warehouse facility(1)(5)
August 2023MSR800260 2,008 2601,107 
$600 warehouse facility(6)
April 2023MSR600400883 — 838 
$400 warehouse facility(2)
September 2023MSR400651,376745
$400 warehouse facilityJune 2024MSR400200710
$50 warehouse facility$50 warehouse facilityNovember 2023MSR50257710124$50 warehouse facilityNovember 2023MSR50 25662574
MSR facilities principal amountMSR facilities principal amount9505,0542702,814MSR facilities principal amount1,8096,1471,4105,499
Advance, warehouse and MSR facilities principal amountAdvance, warehouse and MSR facilities principal amount3,412 $7,8365,009 $7,935 Advance, warehouse and MSR facilities principal amount3,526 8,142 2,896 7,262 
Unamortized debt issuance costsUnamortized debt issuance costs(5)(12)Unamortized debt issuance costs(14)(11)
Advance and warehouse facilities, net$3,407$4,997
Advance, warehouse and MSR facilities, netAdvance, warehouse and MSR facilities, net$3,512$2,885

(1)Total capacity for this facility is $1,200,$1,750, of which $400$300 is internally allocated for advance financing and $800$1,450 is internally allocated for MSR financing; capacity is fully fungible and is not restricted by these allocations, in comparison to $1,200, $940, and $260 respectively in 2021.allocations.
(2)The capacity amount for this facility is $1,000, of which $400$750 is a sublimit for MSR financing.
(3)The capacity amount for this warehouse facility decreased from $600 to $250 in 2022.
(4)This facility was terminated in January 2022.
(5)The capacity amount for this warehouse facility increased from $260 to $800 in 2022.
(6)The capacity amount for this warehouse facility increased from $400 to $600 in 2022.

The weighted average interest rate for advance facilities was 3.1%7.5% and 3.4%3.1% for the three months ended June 30, 20222023 and 2021,2022, respectively, and 2.8%7.4% and 3.2%2.8% for the six months ended June 30, 20222023 and 2021,2022, respectively. The weighted average interest rate for warehouse and MSR facilities was 7.4% and 3.1% and 2.1% for the three months ended June 30, 20222023 and 2021,2022, respectively, and 2.6%7.2% and 2.2%2.6% for the six months ended June 30, 20222023 and 2021,2022, respectively.

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Unsecured Senior Notes
Unsecured senior notes consist of the following:
Unsecured Senior NotesUnsecured Senior NotesJune 30, 2022December 31, 2021Unsecured Senior NotesJune 30, 2023December 31, 2022
$850 face value, 5.500% interest rate payable semi-annually, due August 2028$850 face value, 5.500% interest rate payable semi-annually, due August 2028$850 $850 $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 face value, 5.125% interest rate payable semi-annually, due December 2030650 650 $650 face value, 5.125% interest rate payable semi-annually, due December 2030650 650 
$600 face value, 6.000% interest rate payable semi-annually, due January 2027$600 face value, 6.000% interest rate payable semi-annually, due January 2027600 600 $600 face value, 6.000% interest rate payable semi-annually, due January 2027600 600 
$600 face value, 5.750% interest rate payable semi-annually, due November 2031$600 face value, 5.750% interest rate payable semi-annually, due November 2031600 600 $600 face value, 5.750% interest rate payable semi-annually, due November 2031600 600 
Unsecured senior notes principal amountUnsecured senior notes principal amount2,700 2,700 Unsecured senior notes principal amount2,700 2,700 
Unamortized debt issuance costsUnamortized debt issuance costs(28)(30)Unamortized debt issuance costs(24)(27)
Unsecured senior notes, netUnsecured senior notes, net$2,672 $2,670 Unsecured senior notes, net$2,676 $2,673 

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 six months ended June 30, 20222023 and 2021.2022.

As of June 30, 2022,2023, the expected maturities of the Company’s unsecured senior notes based on contractual maturities are as follows:
Year Ending December 31,Amount
2022 through 2026$
Thereafter2,700
Total unsecured senior notes principal amount$2,700
Year Ending December 31,Amount
2023 through 2026$ 
2027600 
Thereafter2,100 
Total unsecured senior notes principal amount$2,700 

Interest Expense
Interest expense primarily includes interest incurred on advance, warehouse and warehouseMSR facilities, unsecured senior notes, excess spread financing and compensating bank balances, as well as bank fees. The Company incurred interest expense related to advance, warehouse and warehouseMSR facilities, unsecured senior notes and excess spread financing of $112 and $211 for the three and six months ended June 30, 2023, respectively, and $90 and $176 for the three and six months ended June 30, 2022, respectively, and $90 and $183 for the three and six months ended June 30, 2021, respectively.

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 the Company’s operating subsidiary, Nationstar Mortgage LLC. The Company was in compliance with its required financial covenants as of June 30, 2022.2023.


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.

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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:
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
Consolidated Transactions with VIEsConsolidated Transactions with VIEsTransfers
Accounted for as
Secured
Borrowings
Transfers
Accounted for as
Secured
Borrowings
Consolidated Transactions with VIEsTransfers
Accounted for as
Secured
Borrowings
Transfers
Accounted for as
Secured
Borrowings
AssetsAssetsAssets
Restricted cashRestricted cash$45 $50 Restricted cash$86 $78 
Advances and other receivables, netAdvances and other receivables, net358 387 Advances and other receivables, net379 398 
Total assetsTotal assets$403 $437 Total assets$465 $476 
LiabilitiesLiabilitiesLiabilities
Advance facilities, net(1)
Advance facilities, net(1)
$301 $322 
Advance facilities, net(1)
$317 $321 
Payables and other liabilitiesPayables and other liabilities Payables and other liabilities1 
Total liabilitiesTotal liabilities$301 $323 Total liabilities$318 $322 

(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 TrustsUnconsolidated Securitization TrustsJune 30, 2022December 31, 2021Unconsolidated Securitization TrustsJune 30, 2023December 31, 2022
Total collateral balances - UPBTotal collateral balances - UPB$1,034 $1,122 Total collateral balances - UPB$925 $976 
Total certificate balancesTotal certificate balances$1,012 $1,112 Total certificate balances$901 $949 

The Company has not retained any variable interests in the unconsolidated securitization trusts that were outstanding as of June 30, 20222023 and December 31, 2021.2022. 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 DuePrincipal Amount of Transferred Loans 60 Days or More Past DueJune 30, 2022December 31, 2021Principal Amount of Transferred Loans 60 Days or More Past DueJune 30, 2023December 31, 2022
Unconsolidated securitization trustsUnconsolidated securitization trusts$127 $138 Unconsolidated securitization trusts$99 $119 


11. Earnings Per Share

The Company computesBasic earnings per share usingof common stock is computed by dividing net income by the two-class method, which is an earnings allocation formula that determinesweighted average number of common stock outstanding during the period. Diluted earnings per share forof common stock is computed by dividing net income by the sum of the weighted average number of shares of common stock and any participatingdilutive securities accordingoutstanding during the period. The Company’s potentially dilutive securities are share-based awards. The Company applies the treasury stock method to dividends declared (whether paid or unpaid)determine the dilutive weighted average number of shares of common stock outstanding based on the outstanding share-based awards. As of June 30, 2023 and participation rights in undistributed earnings. The Series A Preferred Stock is considered participating securities because it has dividend rights determined on an as-converted basis in the event of Company’s declaration of a dividend or distribution for common shares. In 2021,December 31, 2022, the Company repurchased a totalhad 10 million preferred shares authorized at $0.00001, with zero shares issued and outstanding and aggregate liquidation preference of 14.8 million shares of its common stock from affiliates of Kohlberg Kravis Roberts & Co. L.P. (“KKR”), a related party of the Company. In addition, in August 2021, the Company repurchased 1.0 million shares of its preferred stock from affiliates of KKR. After giving effect to these transactions, KKR no longer held any equity interests in the Company.zero dollars.

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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 June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
Computation of Earnings Per ShareComputation of Earnings Per Share2022202120222021Computation of Earnings Per Share2023202220232022
Net income from continuing operations$151 $427 $809 $986 
Less: Undistributed earnings from continuing operations attributable to participating stockholders — 
Net income from continuing operations attributable to Mr. Cooper common stockholders$151 $423 $809 $977 
Net income from discontinued operations$ $12 $ $14 
Less: Undistributed earnings from discontinued operations attributable to participating stockholders —  — 
Net income from discontinued operations attributable to Mr. Cooper common stockholders$ $12 $ $14 
Net incomeNet income$151 $439 $809 $1,000 Net income$142 $151 $179 $809 
Less: Undistributed earnings attributable to participating stockholders  
Net income attributable to common stockholders$151 $435 $809 $991 
Earnings from continuing operations per common share attributable to Mr. Cooper:
Basic$2.08 $4.91 $11.04 $11.13 
Diluted$2.03 $4.72 $10.74 $10.65 
Earnings from discontinued operations per common share attributable to Mr. Cooper:
Basic$ $0.14 $ $0.16 
Diluted$ $0.13 $ $0.15 
Earnings per common share attributable to Mr. Cooper:
Basic$2.08 $5.05 $11.04 $11.29 
Diluted$2.03 $4.85 $10.74 $10.80 
Weighted average shares of common stock outstanding (in thousands):Weighted average shares of common stock outstanding (in thousands):Weighted average shares of common stock outstanding (in thousands):
BasicBasic72,709 86,142 73,278 87,791 Basic67,649 72,709 68,325 73,278 
Dilutive effect of stock awardsDilutive effect of stock awards1,618 2,664 2,052 3,123 Dilutive effect of stock awards957 1,618 1,316 2,052 
Dilutive effect of participating securities 839  839 
DilutedDiluted74,327 89,645 75,330 91,753 Diluted68,606 74,327 69,641 75,330 
Earnings per common shareEarnings per common share
BasicBasic$2.10 $2.08 $2.62 $11.04 
DilutedDiluted$2.07 $2.03 $2.57 $10.74 


12. Income Taxes

For the three and six months ended June 30, 2022,2023, the effective tax rate for continuing operations was 26.0%28.4% and 24.4%23.3%, respectively, which 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 and six months ended June 30, 2022 compared to the same period in 2021, primarily due to the impact of quarterly discrete tax items relative to the income before taxes for the respective periods, including the excess tax benefit from stock-based compensation and prior period tax credits.

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For the three and six months ended June 30, 2021,2022, the effective tax rate for continuing operations was 24.8%26.0% and 23.7%24.4% respectively, which differed from the statutory federal rate of 21% primarily due to state income taxes as well as unfavorable permanent differences includingand nondeductible executive compensation.

The change in effective rate during the three and six months ended June 30, 2023 as compared to 2022 is primarily attributable to the impact of quarterly discrete tax items relative to income before taxes for the respective period, including the excess tax benefit from stock-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, 2021.2022, with the exception of the following:

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Mortgage Servicing Rights – Fair Value (Level 3) – The Company estimates the fair value of its MSRs on a recurring basis using a process that combines the use of a discounted cash flow model and analysis of current market data to arrive at an estimate of fair value. Beginning in the second quarter of 2023, the Company valued MSRs using a stochastic option adjusted spread (OAS) instead of a static discount rate. OAS is the incremental spread added to the risk-free rate to reflect embedded (prepayment) optionality and other risk inherent in the MSRs to discount cash flows. The cash flow assumptions used in the discounted cash flow model incorporate prepayment speeds, OAS, costs to service, delinquencies, ancillary revenues, recapture rates and other assumptions, with the key assumptions being mortgage prepayment speeds, OAS, and cost to service. The cash flow assumptions are generated and applied based on collateral stratifications including product type, remittance type, geography, delinquency and coupon dispersion. These assumptions require the use of judgment by the Company and can have a significant impact on the fair value of the MSRs. Quarterly, management obtains third-party valuations to assess the reasonableness of the fair value calculations provided by the internal cash flow model. Because of the nature of the valuation inputs, the Company classifies these valuations as Level 3 in the fair value disclosures. See Note 3, Mortgage Servicing Rights and Related Liabilities, for more information.

Excess Spread Financing (Level 3) – The Company estimates fair value on a recurring basis based on the present value of future expected discounted cash flows with the discount rate approximating current market value for similar financial instruments. Beginning in the second quarter of 2023, the Company valued excess spread financing using a stochastic OAS instead of a static discount rate. The cash flow assumptions used in the model are based on various factors, with the key assumptions being mortgage prepayment speeds and OAS. Quarterly, management obtains a third-party valuation to assess the reasonableness of the fair value calculations provided by the internal cash flow model. As these prices are derived from a combination of internally developed valuation models and quoted market prices based on the value of the underlying MSRs, the Company classifies these valuations as Level 3 in the fair value disclosures. Excess spread financing is recorded in MSR related liabilities within the condensed consolidated balance sheets.

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:
June 30, 2022 June 30, 2023
 Recurring Fair Value Measurements  Recurring Fair Value Measurements
Fair Value - Recurring BasisFair Value - Recurring BasisTotal Fair ValueLevel 1Level 2Level 3Fair Value - Recurring BasisTotal Fair ValueLevel 1Level 2Level 3
AssetsAssetsAssets
Mortgage loans held for saleMortgage loans held for sale$2,072 $ $2,072 $ Mortgage loans held for sale$1,187 $ $1,120 $67 
Mortgage servicing rightsMortgage servicing rights6,151   6,151 Mortgage servicing rights7,149   7,149 
Equity securities59 5 — 54 
Equity investmentsEquity investments43 1 — 42 
Derivative financial instrumentsDerivative financial instrumentsDerivative financial instruments
IRLCsIRLCs62   62 IRLCs30   30 
LPCsLPCs3   3 LPCs1   1 
Forward MBS tradesForward MBS trades12  12  Forward MBS trades10  10  
LiabilitiesLiabilitiesLiabilities
Derivative financial instrumentsDerivative financial instrumentsDerivative financial instruments
IRLCs1   1 
LPCsLPCs1   1 LPCs1   1 
Forward MBS tradesForward MBS trades13  13  Forward MBS trades3  3  
Treasury futuresTreasury futures18  18  Treasury futures20  20  
Mortgage servicing rights financingMortgage servicing rights financing24   24 Mortgage servicing rights financing23   23 
Excess spread financingExcess spread financing532   532 Excess spread financing459   459 

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December 31, 2021 December 31, 2022
 Recurring Fair Value Measurements  Recurring Fair Value Measurements
Fair Value - Recurring BasisFair Value - Recurring BasisTotal Fair ValueLevel 1Level 2Level 3Fair Value - Recurring BasisTotal Fair ValueLevel 1Level 2Level 3
AssetsAssetsAssets
Mortgage loans held for saleMortgage loans held for sale$4,381 $— $4,381 $— Mortgage loans held for sale$893 $— $819 $74 
Mortgage servicing rightsMortgage servicing rights4,223 — — 4,223 Mortgage servicing rights6,654 — — 6,654 
Equity securities63 — 54 
Equity investmentsEquity investments47 — 45 
Derivative financial instrumentsDerivative financial instrumentsDerivative financial instruments
IRLCsIRLCs134 — — 134 IRLCs22 — — 22 
Forward MBS tradesForward MBS trades— — Forward MBS trades— — 
LPCsLPCs— — LPCs— — 
LiabilitiesLiabilitiesLiabilities
Derivative financial instrumentsDerivative financial instrumentsDerivative financial instruments
Forward MBS tradesForward MBS trades— — Forward MBS trades— — 
LPCsLPCs— — LPCs— — 
Swap futures— — 
Treasury futuresTreasury futures14 — 14 — 
Mortgage servicing rights financingMortgage servicing rights financing10 — — 10 Mortgage servicing rights financing19 — — 19 
Excess spread financingExcess spread financing768 — — 768 Excess spread financing509 — — 509 

The tables below present a reconciliation for all of the Company’s Level 3 assets and liabilities measured at fair value on a recurring basis:
Six Months Ended June 30, 2022
 AssetsLiabilities
Fair Value - Level 3 Assets and LiabilitiesMortgage servicing rightsEquity securitiesIRLCsExcess spread financingMortgage servicing rights financing
Balance - beginning of period$4,223 $54 $134 $768 $10 
Changes in fair value included in earnings663  (72)117 14 
Purchases1,178     
Issuances360     
Sales(289)    
Repayments   (292) 
Settlements   (61) 
Other changes16     
Balance - end of period$6,151 $54 $62 $532 $24 

Six Months Ended June 30, 2021
 AssetsLiabilities
Fair Value - Level 3 Assets and LiabilitiesMortgage servicing rightsIRLCsExcess spread financingMortgage servicing rights financing
Balance - beginning of period$2,703 $414 $934 $33 
Changes in fair value included in earnings(190)(210)14 (12)
Purchases218 — — — 
Issuances554 — — — 
Sales(12)— — — 
Settlements— — (81)— 
Other changes34 — — — 
Balance - end of period$3,307 $204 $867 $21 

Six Months Ended June 30, 2023
 AssetsLiabilities
Fair Value - Level 3 Assets and LiabilitiesMortgage servicing rightsMortgage loans held for saleEquity investmentsIRLCsExcess spread financingMortgage servicing rights financing
Balance - beginning of period$6,654 $74 $45 $22 $509 $19 
Changes in fair value included in earnings(239)2 (3)8 (10)4 
Purchases/additions (1)
870 47     
Issuances133      
Sales/dispositions (2)
(280)(54)    
Repayments (2)  (4) 
Settlements    (36) 
Other changes11      
Balance - end of period$7,149 $67 $42 $30 $459 $23 
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Six Months Ended June 30, 2022
 AssetsLiabilities
Fair Value - Level 3 Assets and LiabilitiesMortgage servicing rightsEquity investmentsIRLCsExcess spread financingMortgage servicing rights financing
Balance - beginning of period$4,223 $54 $134 $768 $10 
Changes in fair value included in earnings663 — (72)117 14 
Purchases1,178 — — — — 
Issuances360 — — — — 
Sales(289)— — — — 
Repayments— — — (292)— 
Settlements— — — (61)— 
Other changes16 — — — — 
Balance - end of period$6,151 $54 $62 $532 $24 

(1)Additions for mortgages loans held for sale include loans that are purchased or transferred in.
(2)Dispositions for mortgage loans held for sales include loans that are sold or transferred out.

The Company had immaterial LPCs assets and liabilities as of June 30, 2023 and 2022. No transfers were made in or out of Level 3 fair value assets and liabilities for the Company during the six months ended June 30, 20222023 and 2021.2022.

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The tablestable below presentpresents the quantitative information for significant unobservable inputs used in the fair value measurement of Level 3 assets and liabilities.
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
RangeWeighted AverageRangeWeighted AverageRangeWeighted AverageRangeWeighted Average
Level 3 InputsLevel 3 InputsMinMaxMinMaxLevel 3 InputsMinMaxMinMax
MSR(1)
MSRs(1)
MSRs(1)
Option adjusted spread(2)
Option adjusted spread(2)
6.8 %12.0 %8.0 %N/AN/AN/A
Discount rateDiscount rate10.4 %13.7 %11.3 %9.5 %13.7 %10.9 %Discount rateN/AN/AN/A10.4 %13.7 %11.4 %
Prepayment speedPrepayment speed6.7 %14.0 %7.7 %11.7 %16.4 %13.0 %Prepayment speed6.5 %12.7 %7.6 %6.3 %12.2 %7.2 %
Cost to service per loan(2)
$58 $114 $74 $59 $168 $77 
Average life(3)
7.9 years5.8 years
Cost to service per loan(3)
Cost to service per loan(3)
$56 $157 $83 $54 $155 $80 
Average life(4)
Average life(4)
7.9 years8.1 years
Mortgage loans held for saleMortgage loans held for sale
Market pricingMarket pricing45.0 %102.1 %77.5 %37.3 %114.7 %77.4 %
IRLCsIRLCsIRLCs
Value of servicing (reflected as a percentage of loan commitment)Value of servicing (reflected as a percentage of loan commitment) %4.5 %1.8 %(0.7)%2.4 %1.4 %Value of servicing (reflected as a percentage of loan commitment) %4.0 %2.0 %(0.6)%3.9 %2.3 %
Excess spread financing(1)
Excess spread financing(1)
Excess spread financing(1)
Option adjusted spread(2)
Option adjusted spread(2)
6.8 %12.0 %8.5 %N/AN/AN/A
Discount rateDiscount rate10.0 %13.8 %11.3 %9.5 %13.8 %11.2 %Discount rateN/AN/AN/A10.0 %13.8 %11.3 %
Prepayment speedPrepayment speed7.4 %14.0 %9.7 %12.8 %15.2 %13.4 %Prepayment speed7.3 %13.7 %9.7 %6.9 %13.3 %9.2 %
Average life(3)
6.5 years5.4 years
Average life(4)
Average life(4)
6.4 years6.6 years
Mortgage servicing rights financingMortgage servicing rights financingMortgage servicing rights financing
Advance financing and counterparty fee ratesAdvance financing and counterparty fee rates4.8 %8.5 %7.2 %4.5 %7.9 %6.5 %Advance financing and counterparty fee rates5.6 %8.8 %7.0 %5.2 %8.6 %7.1 %
Annual advance recovery ratesAnnual advance recovery rates17.7 %23.4 %19.0 %19.2 %23.0 %21.3 %Annual advance recovery rates14.0 %17.2 %15.0 %15.9 %20.6 %17.3 %

(1)The inputs are weighted by investor.
(2)OAS represents incremental spread above a risk-free rate (one-month SOFR), which is an observable input. See discussion on methodology above.
(3)Presented in whole dollar amounts.
(3)(4)Average life is included for informational purposes.

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The tables below present a summary of the estimated carrying amount and fair value of the Company’s financial instruments not carried at fair value:
June 30, 2022 June 30, 2023
Carrying
Amount
Fair Value Carrying
Amount
Fair Value
Financial InstrumentsFinancial InstrumentsLevel 1Level 2Level 3Financial InstrumentsLevel 1Level 2Level 3
Financial assetsFinancial assetsFinancial assets
Cash and cash equivalentsCash and cash equivalents$514 $514 $ $ Cash and cash equivalents$517 $517 $ $ 
Restricted cashRestricted cash115 115   Restricted cash170 170   
Advances and other receivables, netAdvances and other receivables, net892   892 Advances and other receivables, net802   802 
Loans subject to repurchase from Ginnie MaeLoans subject to repurchase from Ginnie Mae1,400  1,400  Loans subject to repurchase from Ginnie Mae1,650  1,650  
Financial liabilitiesFinancial liabilitiesFinancial liabilities
Unsecured senior notes, netUnsecured senior notes, net2,672 2,152   Unsecured senior notes, net2,676  2,322  
Advance and warehouse facilities, net3,407  3,412  
Advance, warehouse and MSR facilities, netAdvance, warehouse and MSR facilities, net3,512  3,526  
Liability for loans subject to repurchase from Ginnie MaeLiability for loans subject to repurchase from Ginnie Mae1,400  1,400  Liability for loans subject to repurchase from Ginnie Mae1,650  1,650  

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December 31, 2021December 31, 2022
Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
Financial InstrumentsFinancial InstrumentsLevel 1Level 2Level 3Financial InstrumentsLevel 1Level 2Level 3
Financial assetsFinancial assetsFinancial assets
Cash and cash equivalentsCash and cash equivalents$895 $895 $— $— Cash and cash equivalents$527 $527 $— $— 
Restricted cashRestricted cash146 146 — — Restricted cash175 175 — — 
Advances and other receivables, netAdvances and other receivables, net1,228 — — 1,228 Advances and other receivables, net1,019 — — 1,019 
Loans subject to repurchase from Ginnie MaeLoans subject to repurchase from Ginnie Mae1,496 — 1,496 — Loans subject to repurchase from Ginnie Mae1,865 — 1,865 — 
Financial liabilitiesFinancial liabilitiesFinancial liabilities
Unsecured senior notes, netUnsecured senior notes, net2,670 2,737 — — Unsecured senior notes, net2,673 — 2,209 — 
Advance and warehouse facilities, net4,997 — 5,009 — 
Advance, warehouse and MSR facilities, netAdvance, warehouse and MSR facilities, net2,885 — 2,896 — 
Liability for loans subject to repurchase from Ginnie MaeLiability for loans subject to repurchase from Ginnie Mae1,496 — 1,496 — Liability for loans subject to repurchase from Ginnie Mae1,865 — 1,865 — 


14. Capital Requirements

Certain ofFannie Mae, Freddie Mac, Ginnie Mae and certain private label mortgage investors require the Company’s secondary market investors requireCompany to maintain minimum net worth (“capital”) requirements, as specified in the respective selling and servicing agreements. In addition, these investors may require capital ratios in excess of the stated requirements to approve large servicing transfers. To the extent that these requirements are not met, the Company’s secondary market investors may utilize a range of remedies ranging from sanctions, suspension or ultimately termination of the Company’s selling and servicing agreements, which would prohibit the Company from further originating or securitizing these specific types of mortgage loans or being an approved servicer. The Company’s various capital requirements related to its outstanding selling and servicing agreements are measured based on the Company’s operating subsidiary, Nationstar Mortgage LLC. As of June 30, 2022,2023, the Company was in compliance with its selling and servicing capital requirements.


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15. Commitments and Contingencies

Litigation and Regulatory
The Company and its subsidiaries are routinely and currently involved in a significant number of legal proceedings, including, but not limited to, judicial, arbitration, regulatory and governmental proceedings related to matters that arise in connection with the conduct of the Company’s business. The legal proceedings are at varying stagesWhile it is not possible to predict the outcome of adjudication, arbitration or investigation and are generally based on alleged violations of consumer protection, securities, employment, contract, tort, common law fraud and other numerous laws, including, without limitation, the Equal Credit Opportunity Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act, Real Estate Settlement Procedures Act, National Housing Act, Homeowners Protection Act, Service Member’s Civil Relief Act, Telephone Consumer Protection Act, Truth in Lending Act, Financial Institutions Reform, Recovery, and Enforcement Act of 1989, unfair, deceptive or abusive acts or practices in violation of the Dodd-Frank Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Home Mortgage Disclosure Act, Title 11 of the United States Code (aka the “Bankruptcy Code”), False Claims Act and Making Home Affordable loan modification programs.

In addition, along with others in its industry, the Company is subject to repurchase and indemnification claims and may continue to receive claims in the future, regarding alleged breaches of representations and warranties relating to the sale of mortgage loans, the placement of mortgage loans into securitization trusts or the servicing of mortgage loans securitizations. The Company is also subject to legal actions or proceedings related to loss sharing and indemnification provisions of its various acquisitions. Certain of the pending or threatened legal proceedings include claims for substantial compensatory, punitive and/ or statutory damages or claims for an indeterminate amount of damages.

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The Company operates within highly regulated industries on a federal, state and local level. In the normal and ordinary course of its business, the Company is routinely subject to extensive examinations, investigations, subpoenas, inquiries and reviews by various federal, state and local governmental, regulatory and enforcement agencies, including the Consumer Financial Protection Bureau, the Securities and Exchange Commission, the Department of Justice, the Office of the Special Inspector General for the Troubled Asset Relief Program, the U.S. Department of Housing and Urban Development, various State mortgage banking regulators and various State Attorneys General, related to the Company’s residential loan servicing and origination practices, its financial reporting and other aspects of its businesses. Any pending or potential future investigations, subpoenas, examinations or inquiries may lead to administrative, civil or criminal proceedings or settlements, and possibly result in remedies including fines, penalties, restitution, or alterations in the Company’s business practices, and additional expenses and collateral costs. The Company is cooperating fully in these matters. Responding to these matters requires the Company to devote substantial resources, resulting in higher costs and lower net cash flows. Adverse results in any of these matters, could further increasebased on the Company’s operating expensesassessment of the facts and reduce its revenues, requirecircumstances, it to change business practices and limit its ability to grow and otherwise materially and adversely affect its business, reputation,does not believe any of these matters, individually or in the aggregate, will have a material adverse effect on the financial condition andposition, results of operation.operations or cash flows of the Company. However, actual outcomes may differ from those expected and could have a material effect on our financial position, results of operations, or cash flows in a future period.

The Company seeks to resolve all legal proceedings and other matters in the manner management believes is in the best interest of the Company and contests liability, allegations of wrongdoing and, where applicable, the amount of damages or scope of any penalties or other relief sought as appropriate in each pending matter. The Company has entered into agreements with a number of entities and regulatory agencies that toll applicable limitations periods with respect to their claims.

On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with outstanding legal and regulatory and governmental proceedings utilizing the latest information available. Where available information indicates that it is probable a liability has been incurred, and the Company can reasonably estimate the amount of the loss, an accrued liability is established. The actual costs of resolving these proceedings may be substantially higher or lower than the amounts accrued.

As a legal matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is both probable and estimable. If, at the time of evaluation, the loss contingency is not both probable and reasonably estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and reasonably estimable. Once the matter is deemed to be both probable and reasonably estimable, the Company will establish an accrued liability and record a corresponding amount to legal-related expense. The Company will continue to monitor the matterlegal matters for further developments that could affect the amount of the accrued liability that has been previously established. Legal-related expenses for the Company include legal settlements and the fees paid to external legal service providers and are included in general and administrative expenses on the condensed consolidated statements of operations. The Company recorded legal-related expenses, net of recoveries, which includes legal settlements and the fees paid to external legal service providers, of $12 and $21 during the three and six months ended June 30, 2023, respectively, and $10 and $8 for the three and six months ended June 30, 2022, respectively, and $8 and $21 for three and six months ended June 30, 2021, respectively, which are included in “expenses - general and administrative expensesadministrative” on the unaudited condensed consolidated statements of operations.

For matters for which a loss is probable or reasonably possible in future periods, whether in excess of a related accrued liability or where there is no accrued liability, the Company may be able to estimate a range of possible loss. In determining whether it is possible to provide an estimate of loss or range of possible loss, the Company reviews and evaluates its material legal matters on an ongoing basis, in conjunction with any outside counsel handling the matter. Management currently believes the aggregate range of reasonably possible loss is $4$2 to $7$4 in excess of the accrued liability (if any) related to those matters as of June 30, 2022.2023. This estimated range of possible loss is based upon currently available information and is subject to significant judgment, numerous assumptions and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary substantially from the current estimate. Those matters for which an estimate is not possible are not included within the estimated range. Therefore, this estimated range of possible loss represents what management believes to be an estimate of possible loss only for certain matters meeting these criteria. It does not represent the Company’s maximum loss exposure and the Company cannot provide assurance that its litigations reserves will not need to be adjusted in the future. Thus, the Company’s exposure and ultimate losses may be higher, possibly significantly so, than the amounts accrued or this aggregate amount.    

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In the Company’s experience, legal proceedings are inherently unpredictable. One or more of the following factors frequently contribute to this inherent unpredictability: the proceeding is in its early stages; the damages sought are unspecified, unsupported or uncertain; it is unclear whether a case brought as a class action will be allowed to proceed on that basis or, if permitted to proceed as a class action, how the class will be defined; the other party is seeking relief other than or in addition to compensatory damages (including, in the case of regulatory and governmental investigations and inquiries, the possibility of fines and penalties); the matter presents meaningful legal uncertainties, including novel issues of law; the Company has not engaged in meaningful settlement discussions; discovery has not started or is not complete; there are significant facts in dispute; predicting possible outcomes depends on making assumptions about future decisions of courts or governmental or regulatory bodies or the behavior of other parties; and there are a large number of parties named as defendants (including where it is uncertain how damages or liability, if any, will be shared among multiple defendants). Generally, the less progress that has been made in the proceedings or the broader the range of potential results, the harder it is for the Company to estimate losses or ranges of losses that is reasonably possible the Company could incur.

Based on current knowledge, and after consultation with counsel, management believes that the current legal accrued liability within payables and accrued liabilities, is appropriate, and the amount of any incremental liability arising from these matters is not expected to have a material adverse effect on the consolidated financial condition of the Company, although the outcome of such proceedings could be material to the Company’s operating results and cash flows for a particular period depending, on among other things, the level of the Company’s revenues or income for such period. However, in the event of significant developments on existing cases, it is possible that the ultimate resolution, if unfavorable, may be material to the Company’s condensed consolidated financial statements.

Other Loss Contingencies
As part of the Company’s ongoing operations, it acquires servicing rights of mortgage loan portfolios that are subject to indemnification based on the representations and warranties of the seller. From time to time, the Company will seek recovery under these representations and warranties for incurred costs. The Company believes all balances sought from sellers recorded in advances and other receivables represent valid claims. However, the Company acknowledges that the claims process can be prolonged due to the required time to perfect claims at the loan level. Because of the required time to perfect or remediate these claims, management relies on the sufficiency of documentation supporting the claim, current negotiations with the counterparty and other evidence to evaluate whether a reserve is required for non-recoverable balances. In the absence of successful negotiations with the seller, all amounts claimed may not be recovered. Balances may be written-off and charged against earnings when management identifies amounts where recoverability from the seller is not likely. As of June 30, 2022,2023, the Company believes all recorded balances for which recovery is sought from the seller are valid claims, and no evidence suggests additional reserves are warranted.

Loan and Other Commitments
The Company enters into IRLCs with prospective borrowers whereby the Company commits to lend a certain loan amount under specific terms and interest rates to the borrower. The Company also enters into LPCs with prospective sellers. These loan commitments are treated as derivatives and are carried at fair value. See Note 8, Derivative Financial Instruments, for more information.


16. Segment Information

The Company’s segments reflect the internal reporting the chief operating decision maker uses to evaluate operating performance and are based upon the Company’s organizational structure, which focuses primarily on the services offered. Corporate functionalA brief description of our current business segments is as follows:

Servicing: This segment performs operational activities on behalf of investors or owners of the underlying mortgages and mortgage servicing rights, including collecting and disbursing borrower payments, investor reporting, customer service, modifying loans where appropriate to help borrowers stay current, and when necessary performing collections, foreclosures, and the sale of REO.

Originations: This segment originates residential mortgage loans through our direct-to-consumer channel, which provides refinance options for our existing customers, and through our correspondent channel, which purchases or originates loans from mortgage bankers.

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Corporate/Other: Functional expenses are allocated to individual segments based on the actual cost of services performed, direct resource utilization, or headcount percentage for shared services. During the fourth quarter of 2022, the Company began allocating shared services based on headcount instead of an estimate of percentage use as it changed its segment measures provided to and used by the chief operating decision maker. As a result, all costs for shared services or headcount percentage for certain functions. Facility costs are allocated to individual segments based on cost per headcountheadcount. The Company recast segment information for specific facilities utilized. Group insurance costs are allocatedthe historical periods presented herein to individualreflect the allocation method change and to conform to the current presentation. The change affects total expenses for Servicing and Originations segments basedand Corporate/Other, but had no effect on global cost per headcount.condensed consolidated statements of operations. Non-allocated corporate expenses include the administrative costs of executive management and other corporate functions that are not directly attributable to the Company’s operating segments. Revenues generated on inter-segment services performed are valued based on similar services provided to external parties. Eliminations are included in Corporate/Other.


The following tables present financial information by segment:
 Three Months Ended June 30, 2023
Financial Information by SegmentServicingOriginationsCorporate/OtherConsolidated
Revenues
Service related, net$365 $16 $21 $402 
Net gain on mortgage loans held for sale3 81  84 
Total revenues368 97 21 486 
Total expenses159 59 60 278 
Interest income107 10  117 
Interest expense(73)(10)(39)(122)
Other expense, net  (5)(5)
Total other income (expenses), net34  (44)(10)
Income (loss) before income tax expense (benefit)$243 $38 $(83)$198 
Depreciation and amortization for property and equipment and intangible assets$3 $2 $4 $9 
Total assets$10,231 $1,086 $1,827 $13,144 

Three Months Ended June 30, 2022
Financial Information by SegmentServicingOriginationsCorporate/OtherConsolidated
Revenues
Service related, net$414 $24 $22 $460 
Net (loss) gain on mortgage loans held for sale(19)158 — 139 
Total revenues395 182 22 599 
Total expenses143 125 60 328 
Interest income35 15 — 50 
Interest expense(61)(10)(40)(111)
Other expense, net— — (5)(5)
Total other (expenses) income, net(26)(45)(66)
Income (loss) before income tax expense (benefit)$226 $62 $(83)$205 
Depreciation and amortization for property and equipment and intangible assets$$$(1)$
Total assets$9,645 $1,381 $1,869 $12,895 

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In the third quarter of 2021, the Company updated its presentation of segments to align with a change in the reporting package provided to the Chief Operating Decision Maker. In 2021, the Company sold its Title business, Valuations business and Field Services business. The Title, Valuations and Field Services businesses were previously reported under the Xome segment. With the sale of the majority of Xome’s operations and the related changes to business structure and internal reporting, the Xome segment is no longer considered a reportable segment. Accordingly, beginning in the third quarter of 2021, the Company began reporting Xome’s financial results within Corporate/Other. Prior year financial information has been adjusted retrospectively to reflect the updated presentation.
Six Months Ended June 30, 2023
Financial Information by SegmentServicingOriginationsCorporate/OtherConsolidated
Revenues
Service related, net$596 $27 $40 $663 
Net gain on mortgage loans held for sale3 150  153 
Total revenues599 177 40 816 
Total expenses312 115 112 539 
Interest income186 16  202 
Interest expense(136)(17)(79)(232)
Other expense, net  (14)(14)
Total other income (expenses), net50 (1)(93)(44)
Income (loss) before income tax expense (benefit)$337 $61 $(165)$233 
Depreciation and amortization for property and equipment and intangible assets$5 $4 $9 $18 
Total assets$10,231 $1,086 $1,827 $13,144 

On December 1, 2021, the Company completed the sale of its reverse servicing portfolio, operating under the Champion Mortgage brand, to MAM and its affiliates. The reverse servicing operation was previously reported in the Company’s Servicing segment. The reverse servicing operation is presented as discontinued operations in Company’s condensed financial statements for all periods presented and, as such, is not included in the continuing operations of the Servicing segment.

On March 31, 2022, the Company completed the sale of its Mortgage Servicing Platform to Sagent and recorded a gain of $223, which was included in other income, net within the condensed statements of operations and reported under Corporate/Other. Refer to Note 2, Dispositions for further details.

The following tables present financial information by segment:
 Three Months Ended June 30, 2022
Financial Information by SegmentServicingOriginationsCorporate/OtherConsolidated
Revenues
Service related, net$414 $24 $22 $460 
Net (loss) gain on mortgage loans held for sale(19)158  139 
Total revenues395 182 22 599 
Total expenses143 126 59 328 
Interest income35 15  50 
Interest expense(61)(10)(40)(111)
Other expense, net  (5)(5)
Total other (expenses) income, net(26)5 (45)(66)
Income (loss) from continuing operations before income tax expense (benefit)$226 $61 $(82)$205 
Depreciation and amortization for property and equipment and intangible assets from continuing operations$5 $5 $(1)$9 
Total assets$9,645 $1,381 $1,869 $12,895 

Three Months Ended June 30, 2021
Financial Information by SegmentServicingOriginationsCorporate/OtherConsolidated
Revenues
Service related, net$(92)$45 $39 $(8)
Net gain on mortgage loans held for sale197 385 — 582 
Total revenues105 430 39 574 
Total expenses121 226 78 425 
Interest income25 26 — 51 
Interest expense(65)(23)(31)(119)
Other income, net— — 486 486 
Total other (expenses) income, net(40)455 418 
(Loss) income from continuing operations before income tax (benefit) expense$(56)$207 $416 $567 
Depreciation and amortization for property and equipment and intangible assets from continuing operations$$$$16 
Total assets$15,973 $4,582 $2,753 $23,308 

Six Months Ended June 30, 2022
Financial Information by SegmentServicingOriginationsCorporate/OtherConsolidated
Revenues
Service related, net$1,115 $66 $34 $1,215 
Net (loss) gain on mortgage loans held for sale(4)440 — 436 
Total revenues1,111 506 34 1,651 
Total expenses265 299 102 666 
Interest income54 32 — 86 
Interest expense(115)(22)(80)(217)
Other income, net— — 217 217 
Total other (expenses) income, net(61)10 137 86 
Income before income tax expense$785 $217 $69 $1,071 
Depreciation and amortization for property and equipment and intangible assets$10 $$$20 
Total assets$9,645 $1,381 $1,869 $12,895 
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Six Months Ended June 30, 2022
Financial Information by SegmentServicingOriginationsCorporate/OtherConsolidated
Revenues
Service related, net$1,115 $66 $34 $1,215 
Net (loss) gain on mortgage loans held for sale(4)440  436 
Total revenues1,111 506 34 1,651 
Total expenses266 300 100 666 
Interest income54 32  86 
Interest expense(115)(22)(80)(217)
Other income, net  217 217 
Total other (expenses) income, net(61)10 137 86 
Income from continuing operations before income tax expense$784 $216 $71 $1,071 
Depreciation and amortization for property and equipment and intangible assets from continuing operations$10 $9 $1 $20 
Total assets$9,645 $1,381 $1,869 $12,895 

Six Months Ended June 30, 2021
Financial Information by SegmentServicingOriginationsCorporate/OtherConsolidated
Revenues
Service related, net$349 $88 $135 $572 
Net gain on mortgage loans held for sale324 937 — 1,261 
Total revenues673 1,025 135 1,833 
Total expenses231 457 191 879 
Interest income48 49 — 97 
Interest expense(136)(48)(61)(245)
Other income, net— — 486 486 
Total other (expenses) income, net(88)425 338 
Income from continuing operations before income tax expense$354 $569 $369 $1,292 
Depreciation and amortization for property and equipment and intangible assets from continuing operations$12 $10 $$31 
Total assets$15,973 $4,582 $2,753 $23,308 

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CAUTIONS REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the U.S. federal securities laws. These forward-looking statements include, without limitation, statements concerning plans, objectives, goals, projections, strategies, core initiatives, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts, including the projected impact of COVID-19 on our business, financial performance and operating results.facts. When used in this discussion, the words “anticipate,” “appears,” “believe,” “foresee,” “intend,” “should,” “expect,” “estimate,” “project,” “plan,” “may,” “could,” “will,” “are likely”likely,” and similar expressions are intended to identify forward-looking statements. These statements involve predictions of our future financial condition, performance, plans and strategies and are thus dependent on a number of factors including, without limitation, assumptions and data that may be imprecise or incorrect. Specific factors that may impact performance or other predictions of future actions have, in many but not all cases, been identified in connection with specific forward-looking statements. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances, and we are under no obligation to, and express disclaim any obligation, to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.

A number of important factors exist that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to:

economic, financialmacroeconomic and public health disruptions caused by the COVID-19 pandemic and federal, state and local governmental responses to the pandemic;U.S. residential real estate market conditions;
changes in prevailing interest rates and/or changes in home prices;
our ability to maintain or grow the size of our servicing portfolio;
our ability to maintain or grow our originations volume and profitability;
our ability to recapture voluntary prepayments related to our existing servicing portfolio;
our shift in the mix of our servicing portfolio to subservicing, which is highly concentrated;
delays in our ability to collect or be reimbursed for servicing advances;
our ability to obtain sufficient liquidity and capital to operate our business;
changesdisruptions in prevailing interest rates;the secondary home loans market;
our ability to successfully implement our strategic initiatives;initiatives and hedging strategies;
our ability to realize anticipated benefits of our previous acquisitions;
our ability to use net operating loss carryforwards and other tax attributes;
changes in our business relationships or changes in servicing guidelines with Fannie Mae, Freddie Mac and Ginnie Mae;
third-party credit, servicer and correspondent risks;
our ability to pay down debt;
our ability to manage legal and regulatory examinations and enforcement investigations and proceedings, compliance requirements and related costs;
health pandemics, hurricanes, earthquakes, fires, floods and other natural catastrophic events;
our ability to prevent cyber intrusions and mitigate cyber risks; and
our ability to maintain our various licenses and other regulatory approvals.

All of these factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for our management to predict all such factors or to assess the effect of each such new factor on our business. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and any of these statements included herein may prove to be inaccurate. Given the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements, or our objectives and plans will be achieved. Please refer to Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in this report and in our Annual Report on Form 10-K for the year ended December 31, 20212022 for further information on these and other risk factors affecting us.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021.2022. The following discussion contains, in addition to the historical information, forward-looking statements that include risks, assumptions and uncertainties that could cause actual results to differ materially from those anticipated by such statements.

Dollar amounts are reported in millions, except per share data and other key metrics, unless otherwise noted.

We have provided a glossary of terms, which defines certain industry-specific and other terms that are used herein, at the end of the MD&A section.

Overview

We are a leading servicer and originator of residential mortgage loans. Our purpose is to keep the dream of homeownership alive, and we do this as a servicer by helping mortgage borrowers manage what is typically their largest financial asset, and by helping our investors maximize the returns from their portfolios of residential mortgages. We have a track record of significant growth, having expanded our servicing portfolio from $10 billion in 2009 to $804$882 billion as of June 30, 2022.2023. We believe this track record reflects our strong operating capabilities, which include a low-cost servicing platform, strong loss mitigation skills, a commitment to compliance, a customer-centric culture, a demonstrated ability to retain customers, growing origination capabilities, and significant investment in technology.

Our strategy is to position the Company for sustainable long-term growth, drive improved efficiency and profitability, and generate a return on tangible equity of 12% or higher. Key strategic priorities include the following:

Strengthen our balance sheet by building capital and liquidity, and managing interest rate and other forms of risk;
Improve efficiency by driving continuous improvement in unit costs for our Servicing and Originations segments, as well as by taking corporate actions to eliminate costs throughout the organization;
Grow our servicing portfolio to $1 trillion in UPB by acquiring new customers and retaining existing customers;
Achieve and sustain a refinance recapture rate of 60%;
Delight our customers and keep Mr. Cooper a great place for our team members to work;
Reinvent the customer experience by acting as the customer’s advocate and by harnessing technology to deliver digital solutions that are personalized and friction-less;
Sustain the talent of our people and the culture of our organization; and
Maintain strong relationships with agencies, investors, regulators, and other counterparties and a strong reputation for compliance and customer service.

Impact of the COVID-19 Pandemic

We implemented the provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which makes available forbearance plans for up to eighteen months for borrowers under government and government agency mortgage programs, which we extended to borrowers in our private label mortgage servicing portfolio. As of June 30, 2022, approximately 1.0% of our customers were on a forbearance plan, down from a peak of 7.2% in July 2020. We include loans in forbearance related to the CARES Act, whereby no payments have been received from borrowers for greater than 90 days, in loans subject to repurchase rights from Ginnie Mae in other assets and payables and other liabilities on a gross basis. The balance decreased to $1,241 as of June 30, 2022 from $1,301 as of December 31, 2021.

Anticipated Trends

In the second quarter of 2022,2023, our servicing portfolio grew to $804$882 billion and we made progress towards our $1 trillionServicing segment generated income before income tax expense of $243. We successfully entered into an agreement to acquire Home Point Capital Inc. with $84 billion UPB. The transaction is expected to close in the third quarter and the UPB goal.portfolio is expected to board in the fourth quarter of 2023 and first quarter of 2024. We expect to see continued portfolio growth in 2022, at a measured pace, through acquisitions or execution of additional subservicing contracts for the remainder of the year. In addition, we continue to expect an increase in bulk MSR pools in the market due to macro economic conditions, and we will continue to evaluate these purchase opportunities in a disciplined and opportunistic manner. Overall, we expect our Servicing segment to benefit from rising interest rates, including decreased amortization, lower prepayment speeds and increased interest income. continue to generate strong earnings with servicing portfolio growth during the second half of 2023.

In the second quarter of 2023, our Originations segment met our strategic targetgenerated income before income tax expense of 60% refinance recapture and expect continued strong performance from refinance recapture through$38 on funded volume of $3,822. Mortgage rates rose to approximately 7% at the end of the year.second quarter of 2023 and considering the seasonality of Originations volume in the second quarter is traditionally the highest, we expect the Originations segment to operate at lower levels of profitability in the second half of the year compared to the second quarter.

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In 2022,While the recent inflation rate increase appears to have subsided, the inflation rate has continued to increase.remains relatively high. Inflationary pressures may limit a borrower’s disposable income, which can decrease customers’a borrowers’ ability to enter into mortgage transactions. Inflationary pressures along with supply chain disruptions, may also increase our operating costs. However, historically changes in interest rates have a greater impact on our financial results than changes in inflation. While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or extent as the inflation rate.


Results of Operations
Table 1. Consolidated Operations
Three Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change20232022Change
Revenues - operational(1)
Revenues - operational(1)
$399 $714 $(315)
Revenues - operational(1)
$423 $399 $24 $814 $898 $(84)
Revenues - mark-to-marketRevenues - mark-to-market200 (140)340 Revenues - mark-to-market63 200 (137)2 753 (751)
Total revenuesTotal revenues599 574 25 Total revenues486 599 (113)816 1,651 (835)
Total expensesTotal expenses328 425 (97)Total expenses278 328 (50)539 666 (127)
Total other (expenses) income, netTotal other (expenses) income, net(66)418 (484)Total other (expenses) income, net(10)(66)56 (44)86 (130)
Income from continuing operations before income tax expense205 567 (362)
Income before income tax expenseIncome before income tax expense198 205 (7)233 1,071 (838)
Less: Income tax expenseLess: Income tax expense54 140 (86)Less: Income tax expense56 54 54 262 (208)
Net income from continuing operations$151 $427 $(276)
Net incomeNet income$142 $151 $(9)$179 $809 $(630)

(1)Revenues - operational consists of total revenues, excluding mark-to-market.

During the three months ended June 30, 2022, income from continuing operationsIncome before income tax expense decreased during the three and six months ended June 30, 2023 as compared to $205 from $567 in 2021. The2022 primarily due to a decrease was primarily driven by the change in total other (expenses) income, net,revenues, partially offset by lower total expenses. The changedecrease in total other (expenses) income, netrevenue in 2023 was primarily attributable to lower MTM adjustment as the increase in mortgage rates was greater in 2022 compared to 2023. In addition, revenue decreased during the three and six months ended June 30, 2023 in our Originations segment due to completion of the sale oflower originations volume, partially offset with an increase in operational revenue in our Title business, which resultedServicing segment due to a larger servicing UPB portfolio in a $487 gain in 2021.2023. The decrease in total expenses during the three and six months ended June 30, 2023 was primarily driven by lower salaries, wages and benefits in our Originations segment due to lower headcount in both the direct-to-consumer and correspondent channels as a result of right sizing the organization consistentreducing headcount commensurate with lower origination volumes.volumes in 2022. The change in total other (expenses) income, net during the three months ended June 30, 2023 as compared to 2022 was primarily due to higher interest income earned on custodial balances in our Servicing segment driven by higher interest rates in 2023. The change in total other (expenses) income, net during the six months ended June 30, 2023 as compared to 2022 was primarily due to a $223 gain recorded in 2022 upon completion of the Sagent Transaction. See further discussions in Note 2, Dispositions, in the Segment Results section ofNotes to the MD&A.Condensed Consolidated Financial Statements.

The effective tax rate for continuing operations during the three months ended June 30, 20222023 was 26.0%28.4% as compared to 24.8%26.0% in 2021. The change in2022, and the effective tax rate isduring the six months ended June 30, 2023 was 23.3% as compared to 24.4% in 2022. The changes in effective rate are primarily attributable to the impact of quarterly discrete tax items relative to income before taxes for the respective period, including the excess tax benefit from stock-based compensation and prior period tax credits.compensation.

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Table 1.1 Consolidated Operations

Six Months Ended June 30,
20222021Change
Revenues - operational(1)
$898 $1,608 $(710)
Revenues - mark-to-market753 225 528 
Total revenues1,651 1,833 (182)
Total expenses666 879 (213)
Total other income, net86 338 (252)
Income from continuing operations before income tax expense1,071 1,292 (221)
Less: Income tax expense262 306 (44)
Net income from continuing operations$809 $986 $(177)

(1)Revenues - operational consists of total revenues, excluding mark-to-market.

During the six months ended June 30, 2022, income from continuing operations before income tax expense decreased to $1,071 from $1,292 in 2021. The decrease was primarily driven by a decrease in total other income (expenses), net and total revenues, partially offset by lower total expenses. Total other income (expenses), net decreased primarily due to a $223 gain recorded in the first quarter of 2022 upon completion of the Sagent Transaction compared to a $487 gain recorded in the second quarter of 2021 upon completion of the sale of our Title business. See further discussions in Note 2, Dispositions, in the Notes to the Condensed Consolidated Financial Statements. Total revenues decreased primarily due to a decrease in revenues from our Originations segment due to lower origination volumes, partially offset by an increase in favorable mark-to-market adjustments from our Servicing segment, both primarily driven by higher mortgage rates in 2022. The decrease in total expenses was primarily driven by lower salaries, wages and benefits in our Originations segment due to lower headcount as we right sized the organization in both the direct-to-consumer and correspondent channels as a result of lower origination volumes. See further discussions in the Segment Results section of the MD&A.

The effective tax rate for continuing operations during the six months ended June 30, 2022 was 24.4% as compared to 23.7% in 2021. The change in effective tax rate is primarily attributable to the impact of quarterly discrete tax items relative to income before taxes for the respective period, including the excess tax benefit from stock-based compensation and prior period tax credits.


Segment Results

Our operations are conducted through two segments: Servicing and Originations.

The Servicing segment performs operational activities on behalf of investors or owners of the underlying mortgages and mortgage servicing rights, including collecting and disbursing borrower payments, investor reporting, customer service, modifying loans where appropriate to help borrowers stay current, and when necessary performing collections, foreclosures, and the sale of REO.
The Originations segment originates residential mortgage loans through our direct-to-consumer channel, which provides refinance options for our existing customers, and through our correspondent channel, which purchases or originates loans from mortgage bankers.
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Refer to Note 16, Segment Information, in the Notes to the Condensed Consolidated Financial Statements for a summary of segment results.


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Servicing Segment

The Servicing segment’s strategy is to generate income by growing the portfolio and maximizing the servicing margin. We believe several competitive strengths have been critical to our long-term growth as a servicer and subservicer, including our low-cost platform that creates operating leverage, our skill in mitigating losses for investors and clients, our commitment to strong customer service, and regulatoryindustry leading compliance management, our history of successfully boarding new loans, and the ability to retain existing customers by offering attractive refinance options. We believe that our operational capabilities are reflected in our strong servicer ratings.ratings and recent agency recognition.

Table 2. Servicer Ratings
Fitch(1)
Moody’s(2)
S&P(3)
Rating dateMay 2021August 2022April 2022March 2023June 2022
ResidentialRPS2SQ2-Above Average
Master ServicerRMS2+SQ2+Above Average
Special ServicerRSS2SQ2-Above Average
Subprime ServicerRPS2SQ2-Above Average

(1)Fitch Rating Scale of 1 (Highest Performance) to 5 (Low/No Proficiency)
(2)Moody’s Rating Scale of SQ1 (Strong Ability/Stability) to SQ5 (Weak Ability/Stability)
(3)S&P Rating Scale of Strong to Weak

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The following tables set forth the results of operations for the Servicing segment:
Table 3. Servicing Segment Results of Operations
Three Months Ended June 30,Three Months Ended June 30,
20222021Change20232022Change
Amt
bps(1)
Amt
bps(1)
AmtbpsAmt
bps(1)
Amt
bps(1)
Amtbps
RevenuesRevenuesRevenues
OperationalOperational$394 20 $443 27 $(49)(7)Operational$442 21 $394 20 $48 
Amortization, net of accretionAmortization, net of accretion(199)(10)(198)(12)(1)Amortization, net of accretion(137)(7)(199)(10)62 
Mark-to-market200 10 (140)(9)340 19 
Mark-to-market adjustments - ServicingMark-to-market adjustments - Servicing63 3 200 10 (137)(7)
Total revenuesTotal revenues395 20 105 290 14 Total revenues368 17 395 20 (27)(3)
ExpensesExpensesExpenses
Salaries, wages and benefitsSalaries, wages and benefits84 4 70 14 — Salaries, wages and benefits83 4 84 (1)— 
General and administrativeGeneral and administrativeGeneral and administrative
Servicing support feesServicing support fees24 1 22 — Servicing support fees21 1 24 (3)— 
Corporate and other general and administrative expensesCorporate and other general and administrative expenses32 2 30 — Corporate and other general and administrative expenses44 2 32 12 — 
Foreclosure and other liquidation related recoveries, net(2) (8)— — 
Foreclosure and other liquidation related expenses (recoveries), netForeclosure and other liquidation related expenses (recoveries), net8  (2)— 10 — 
Depreciation and amortizationDepreciation and amortization5  — (2)— Depreciation and amortization3  — (2)— 
Total general and administrative expensesTotal general and administrative expenses59 3 51 — Total general and administrative expenses76 3 59 17 — 
Total expensesTotal expenses143 7 121 22 — Total expenses159 7 143 16 — 
Other income (expense)Other income (expense)Other income (expense)
Other interest income35 2 25 10 — 
Interest incomeInterest income107 5 35 72 
Advance interest expenseAdvance interest expense(8)(1)(8)— — (1)Advance interest expense(14) (8)(1)(6)
Other interest expenseOther interest expense(53)(3)(57)(4)Other interest expense(59)(3)(53)(3)(6)— 
Interest expenseInterest expense(61)(4)(65)(4)— Interest expense(73)(3)(61)(4)(12)
Total other expenses, net(26)(2)(40)(2)14 — 
Income (loss) before income tax expense (benefit)$226 11 $(56)(3)$282 14 
Total other income (expense), netTotal other income (expense), net34 2 (26)(2)60 
Income before income tax expenseIncome before income tax expense$243 12 $226 11 $17 
Weighted average cost - advance facilities3.1 %3.4 %(0.3)%
Weighted average cost - advance and MSR facilitiesWeighted average cost - advance and MSR facilities7.9 %3.7 %4.2 %
Weighted average cost - excess spread financingWeighted average cost - excess spread financing8.7 %9.0 %(0.3)%Weighted average cost - excess spread financing8.7 %8.7 %— %

(1)Calculated basis points (“bps”) are as follows: Annualized dollar amount/Total average UPB X 10000.

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Table 3.1 Servicing - Revenues
Three Months Ended June 30,
20222021Change
Amt
bps(1)
Amt
bps(1)
Amtbps
MSR Operational Revenue
Base servicing fees$324 16$223 14$101 2
Modification fees(2)
4 (3)
Incentive fees(2)
 — — 
Late payment fees(2)
15 114 1
Other ancillary revenues(2)
15 1210 13(195)(12)
Total MSR operational revenue358 18454 28(96)(10)
Base subservicing fees and other subservicing revenue(2)
68 365 4(1)
Total servicing fee revenue426 21519 32(93)(11)
MSR financing liability costs(5)(6)(1)1
Excess spread payments and portfolio runoff(27)(1)(70)(4)43 3
Total operational revenue394 20443 27(49)(7)
Amortization, Net of Accretion
MSR amortization(226)(11)(268)(16)42 5
Excess spread accretion27 170 4(43)(3)
Total amortization, net of accretion(199)(10)(198)(12)(1)2
Mark-to-Market Adjustments
MSR MTM326 16(200)(13)526 29
MTM Adjustments(3)
(94)(4)31 2(125)(6)
Excess spread / financing MTM(32)(2)29 2(61)(4)
Total MTM adjustments200 10(140)(9)340 19
Total revenues - Servicing$395 20$105 6$290 14
Three Months Ended June 30,
20232022Change
Amt
bps(1)
Amt
bps(1)
Amtbps
MSR Operational Revenue
Base servicing fees$345 16$324 16$21 
Modification fees(2)
5 
Late payment fees(2)
16 115 1
Other ancillary revenues(2)
15 115 1— 
Total MSR operational revenue381 18358 1823 
Subservicing-related revenue(2)
79 368 311 
Total servicing fee revenue460 21426 2134 
MSR financing liability costs(7)(5)(2)
Excess spread payments and portfolio runoff(11)(27)(1)16 1
Total operational revenue442 21394 2048 1
Amortization, Net of Accretion
MSR amortization(148)(7)(226)(11)78 4
Excess spread accretion11 27 1(16)(1)
Total amortization, net of accretion(137)(7)(199)(10)62 3
Mark-to-Market Adjustments - Servicing
MSR MTM139 7326 16(187)(9)
Loss on MSR hedging activities(111)(5)(89)(4)(22)(1)
Gain on MSR sales32 131 1
Reclassifications(3)
(9)(6)(3)
Excess spread / MSR financing MTM12 (32)(2)44 2
Total mark-to-market adjustments - Servicing63 3200 10(137)(7)
Total revenues - Servicing$368 17$395 20$(27)(3)

(1)Calculated basis points (“bps”) are as follows: Annualized dollar amount/Total average UPB X 10000.
(2)Certain ancillary and other non-base fees related to subservicing operations are separately presented as other subservicing revenues.subservicing-related revenue.
(3)MTM Adjustments includesReclassifications 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. The impact of negative modeled cash flows was $6 and $8 during the three months ended June 30, 2022 and 2021, respectively. In addition, MTM Adjustments included a negative $89 and positive $39 impact from MSR hedging activities during the three months ended June 30, 2022 and 2021, respectively.

Servicing Segment Revenues
The following provides the changes in revenues for the Servicing segment:

Servicing - Operational revenue decreasedincreased during the three months ended June 30, 20222023 as compared to 20212022 primarily due to a decrease in other ancillary revenue from early-buyout revenues associated with loans bought out of GNMA securitization, modified and redelivered following GNMA guidelines primarily driven by a decrease in mortgage loans remaining in forbearance program in 2022. The decrease was partially offset by an increase in base servicing fees primarily due toas a result of a larger servicing UPB portfolio in 2022.2023.

MSR amortization decreased during the three months ended June 30, 20222023 as compared to 2021,2022, primarily due to lower prepayments driven by higher mortgage rates in 2022,2023, partially offset by a higher average MSR UPB and higher average MSR fair value.UPB.

The change in MSR MTM and excess spread and financing MTMdecreased during the three months ended June 30, 20222023 compared to 2021, was primarily due to an2022, as the increase in mortgage rates was greater in 2022 compared to 2021, which impacted prepayment speeds and increased the fair value of the MSR.2023.

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Subservicing - There were no material changes for Subservicing fees during the three months ended June 30, 20222023 as compared to 2021.2022.

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Servicing Segment Expenses
Total expenses increased during the three months ended June 30, 20222023 as compared to 2021,2022, primarily driven by an increase in salaries, wagescorporate and benefits resulting from higher headcount-related costsother general and administrative expenses and change in foreclosure and other liquidation related expenses (recoveries), net. The increase in corporate and other general and administrative expenses was primarily due to growth ofin our servicing portfolio.portfolio and an increase in allocated cost in 2023 primarily due to a higher percentage of total headcount in the Servicing segment following the workforce reduction in the Originations segment in 2022. The change in foreclosure and other liquidation related expenses (recoveries), net was primarily driven by non-operating expense accruals and increases in reserves for advances and settlements in 2023.

Servicing Segment Other Income (Expenses), net
Total other expenses,income (expenses), net decreasedchanged during the three months ended June 30, 20222023 as compared to 2021,2022, primarily due to higher other interest income drivenattributable to higher interest rates, partially offset by higher interest income earned on custodial balances due to higher interest rates.expense from MSR and advance financing.

Table 4. Servicing Segment Results of Operations
Six Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change
Amt
bps(1)
Amt
bps(1)
AmtbpsAmt
bps(1)
Amt
bps(1)
Amtbps
RevenuesRevenuesRevenues
OperationalOperational$759 20 $813 26 $(54)(6)Operational$849 20 $759 20 $90 — 
Amortization, net of accretionAmortization, net of accretion(401)(11)(365)(12)(36)Amortization, net of accretion(252)(6)(401)(11)149 
Mark-to-market753 20 225 528 13 
Mark-to-market adjustments - ServicingMark-to-market adjustments - Servicing2  753 20 (751)(20)
Total revenuesTotal revenues1,111 29 673 21 438 Total revenues599 14 1,111 29 (512)(15)
ExpensesExpensesExpenses
Salaries, wages and benefitsSalaries, wages and benefits159 5 136 23 Salaries, wages and benefits165 4 159 — 
General and administrativeGeneral and administrativeGeneral and administrative
Servicing support feesServicing support fees35 1 43 (8)— Servicing support fees37 1 35 — 
Corporate and other general and administrative expensesCorporate and other general and administrative expenses58 1 60 (2)(1)Corporate and other general and administrative expenses86 2 57 29 — 
Foreclosure and other liquidation related expenses (recoveries), net4  (20)— 24 — 
Foreclosure and other liquidation related expenses, netForeclosure and other liquidation related expenses, net19  — 15 — 
Depreciation and amortizationDepreciation and amortization10  12 — (2)— Depreciation and amortization5  10 — (5)— 
Total general and administrative expensesTotal general and administrative expenses107 2 95 12 (1)Total general and administrative expenses147 3 106 41 — 
Total expensesTotal expenses266 7 231 35 — Total expenses312 7 265 47 — 
Other income (expense)Other income (expense)Other income (expense)
Other interest income54 1 48 — 
Interest incomeInterest income186 4 54 132 
Advance interest expenseAdvance interest expense(14) (18)— — Advance interest expense(28)(1)(14)— (14)(1)
Other interest expenseOther interest expense(101)(3)(118)(4)17 Other interest expense(108)(2)(101)(3)(7)
Interest expenseInterest expense(115)(3)(136)(4)21 Interest expense(136)(3)(115)(3)(21)— 
Total other expenses, net(61)(2)(88)(3)27 
Total other income (expense), netTotal other income (expense), net50 1 (61)(2)111 
Income before income tax expenseIncome before income tax expense$784 20 $354 11 $430 Income before income tax expense$337 8 $785 20 $(448)(12)
Weighted average cost - advance facilities2.8 %3.2 %(0.4)%
Weighted average cost - advance and MSR facilitiesWeighted average cost - advance and MSR facilities7.6 %3.3 %4.3 %
Weighted average cost - excess spread financingWeighted average cost - excess spread financing8.9 %9.0 %(0.1)%Weighted average cost - excess spread financing8.7 %8.9 %(0.2)%

(1)Calculated basis points (“bps”) are as follows: Annualized dollar amount/Total average UPB X 10000.

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Table 4.1 Servicing - Revenues
Six Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change
Amt
bps(1)
Amt
bps(1)
AmtbpsAmt
bps(1)
Amt
bps(1)
Amtbps
MSR Operational RevenueMSR Operational RevenueMSR Operational Revenue
Base servicing feesBase servicing fees$596 16$447 14$149 2Base servicing fees$672 16$596 16$76 
Modification fees(2)
Modification fees(2)
9 13 1(4)(1)
Modification fees(2)
8 (1)
Incentive fees(2)
 (1)
Late payment fees(2)
Late payment fees(2)
30 129 1
Late payment fees(2)
32 130 1
Other ancillary revenues(2)
Other ancillary revenues(2)
57 1352 11(295)(10)
Other ancillary revenues(2)
25 57 1(32)(1)
Total MSR operational revenueTotal MSR operational revenue692 18842 27(150)(9)Total MSR operational revenue737 17692 1845 (1)
Base subservicing fees and other subservicing revenue(2)
137 3130 4(1)
Subservicing-related revenue(2)
Subservicing-related revenue(2)
148 3137 311 
Total servicing fee revenueTotal servicing fee revenue829 21972 31(143)(10)Total servicing fee revenue885 20829 2156 (1)
MSR financing liability costsMSR financing liability costs(10)(13)(1)1MSR financing liability costs(15)(10)(5)
Excess spread payments and portfolio runoffExcess spread payments and portfolio runoff(60)(1)(146)(4)86 3Excess spread payments and portfolio runoff(21)(60)(1)39 1
Total operational revenueTotal operational revenue759 20813 26(54)(6)Total operational revenue849 20759 2090 
Amortization, Net of AccretionAmortization, Net of AccretionAmortization, Net of Accretion
MSR amortizationMSR amortization(461)(12)(511)(16)50 4MSR amortization(273)(6)(461)(12)188 6
Excess spread accretionExcess spread accretion60 1146 4(86)(3)Excess spread accretion21 60 1(39)(1)
Total amortization, net of accretionTotal amortization, net of accretion(401)(11)(365)(12)(36)1Total amortization, net of accretion(252)(6)(401)(11)149 5
Mark-to-Market Adjustments
Mark-to-Market Adjustments - ServicingMark-to-Market Adjustments - Servicing
MSR MTMMSR MTM1,124 29321 10803 19MSR MTM34 11,124 29(1,090)(28)
MTM Adjustments(3)
(240)(6)(94)(3)(146)(3)
Excess spread / financing MTM(131)(3)(2)(129)(3)
Total MTM adjustments753 20225 7528 13
Loss on MSR hedging activitiesLoss on MSR hedging activities(52)(1)(229)(6)177 5
Gain on MSR salesGain on MSR sales32 31 
Reclassifications(3)
Reclassifications(3)
(18)(12)(6)
Excess spread / MSR financing MTMExcess spread / MSR financing MTM6 (131)(3)137 3
Total mark-to-market adjustments - ServicingTotal mark-to-market adjustments - Servicing2 753 20(751)(20)
Total revenues - ServicingTotal revenues - Servicing$1,111 29$673 21$438 8Total revenues - Servicing$599 14$1,111 29$(512)(15)

(1)Calculated basis points (“bps”) are as follows: Annualized dollar amount/Total average UPB X 10000.
(2)Certain ancillary and other non-base fees related to subservicing operations are separately presented as other subservicing revenues.subservicing-related revenue.In addition, other subservicing revenue for the six months ended June 30, 2022 includes revenue related to an interim subserviced portfolio that transferred on April 1, 2022. See further discussions in Note 2, Dispositions, in the Notes to the Condensed Consolidated Financial Statements.
(3)MTM Adjustments includesReclassifications 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. The impact of negative modeled cash flows was $12 and $20 during the six months ended June 30, 2022 and 2021, respectively. In addition, MTM Adjustments included a negative $229 and $74 impact from MSR hedging activities during the six months ended June 30, 2022 and 2021, respectively.

Servicing Segment Revenues
The following provides the changes in revenues for the Servicing segment:

Servicing - Operational revenue decreasedincreased during the six months ended June 30, 20222023 as compared to 20212022 primarily due to an increase in base servicing fees as a result of a larger servicing UPB portfolio in 2023, partially offset by a decrease in other ancillary revenue as a result of greater early payoff and default fees from early-buyout revenues associated with loans bought out of GNMA securitization, modified and redelivered following GNMA guidelines primarily driven by a decrease in mortgage loans remaining in forbearance programacquisitions in 2022, partially offset by an increase in base servicing fees primarily due to a larger servicing UPB portfolioand higher early-buyout and re-delivery volume in 2022.

MSR amortization decreased during the six months ended June 30, 20222023 as compared to 2021,2022, primarily due to lower prepayments driven by higher mortgage rates in 2022,2023, partially offset by a higher average MSR UPB and higher average MSR fair value.UPB.

The change in MSR MTM and excess spread and financing MTMdecreased during the six months ended June 30, 20222023 compared to 2021, was primarily due to an2022, as the increase in mortgage rates was greater in 2022 compared to 2021, which impacted prepayment speeds and increased the fair value of the MSR.
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2023.

Subservicing - There were no material changes for Subservicing fees during the six months ended June 30, 20222023 as compared to 2021.2022.

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Servicing Segment Expenses
Total expenses increased during the six months ended June 30, 20222023 as compared to 2021,2022, primarily driven by an increase in corporate and other general and administrative expenses and foreclosure and other liquidation related expenses, net. The increase in corporate and other general and administrative expenses was primarily due to growth in our servicing portfolio and an increase in allocated cost in 2023 primarily due to a changehigher percentage of total headcount in Servicing following the workforce reduction in the Originations segment in 2022. The increase in foreclosure and other liquidation related expenses, (recoveries), net and an increase in salaries, wages and benefits. We had foreclosure and other liquidation related recoveries, net in 2021 due to the release of loss reserves on servicing advances as a result of loan modification programs related to COVID-19 pandemic compared to foreclosure and other liquidation related expenses, net in 2022, partially offset by lower servicing support fees. The increase in salaries, wages and benefits was primarily due to higher headcount-related costs due to growth of our servicing portfolio.driven by non-operating expense accruals and increases in reserves for advances and settlements.

Servicing Segment Other Income (Expenses), net
Total other expenses,income (expenses), net decreasedchanged during the six months ended June 30, 20222023 as compared to 2021,2022, primarily due to a decrease in otherhigher interest income attributable to higher interest rates, partially offset by higher interest expense due to lower compensating interest expensefrom MSR and bank fees.advance financing.

Table 5. Servicing Portfolio - Unpaid Principal Balances
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20222021202220212023202220232022
Average UPBAverage UPBAverage UPB
MSRsMSRs$389,255 $290,946 $372,628 $286,233 MSRs$441,027 $389,255 $426,680 $372,628 
Subservicing and other(1)Subservicing and other(1)406,484 356,354 400,024 345,792 Subservicing and other(1)406,487 406,484 427,386 400,024 
Total average UPBTotal average UPB$795,739 $647,300 $772,652 $632,025 Total average UPB$847,514 $795,739 $854,066 $772,652 
June 30, 2022June 30, 2021June 30, 2023June 30, 2022
UPBCarrying AmountbpsUPBCarrying AmountbpsUPBCarrying AmountbpsUPBCarrying Amountbps
MSRsMSRsMSRs
AgencyAgency$364,436 $5,806 159$248,799 $2,955 119Agency$431,876 $6,848 159$364,436 $5,806 159
Non-agencyNon-agency32,951 345 10538,656 352 91Non-agency27,600 301 10932,951 345 105
Total MSRsTotal MSRs397,387 6,151 155287,455 3,307 115Total MSRs459,476 7,149 156397,387 6,151 155
Subservicing and other(1)
Subservicing and other(1)
Subservicing and other(1)
AgencyAgency381,101 N/A352,643 N/AAgency371,352 N/A381,101 N/A
Non-agencyNon-agency25,130 N/A14,219 N/ANon-agency51,170 N/A25,130 N/A
Total subservicing and otherTotal subservicing and other406,231 N/A366,862 N/ATotal subservicing and other422,522 N/A406,231 N/A
Total ending balanceTotal ending balance$803,618 $6,151 $654,317 $3,307 Total ending balance$881,998 $7,149 $803,618 $6,151 
MSRs UPB EncumbranceMSRs UPB EncumbranceJune 30, 2022June 30, 2021MSRs UPB EncumbranceJune 30, 2023June 30, 2022
MSRs - unencumberedMSRs - unencumbered$308,295 $143,420 MSRs - unencumbered$380,538 $308,295 
MSRs - encumbered(2)
MSRs - encumbered(2)
89,092 144,035 
MSRs - encumbered(2)
78,938 89,092 
MSRs UPBMSRs UPB$397,387 $287,455 MSRs UPB$459,476 $397,387 

(1)Subservicing and other includes (i) loans we service for others, (ii) residential mortgage loans originated but have yet to be sold, and (iii) agency REO balances for which we own the mortgage servicing rights. Our subservicing and other portfolio UPB increased in 2023 primarily due to acquisitions, where we assumed subservicing contracts, and portfolio growth from our subservicing clients. In particular, the Rushmore Transaction contributed $31 billion non-agency UPB.
(2)The encumberedEncumbered MSRs consist of residential mortgage loans included within our excess spread financing transactions and MSR financing liability.

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The following tables provide a rollforward of our MSR and subservicing and other portfolio UPB:
Table 6. Servicing and Subservicing and Other Portfolio UPB Rollforward
Three Months Ended June 30, 2022Three Months Ended June 30, 2021Three Months Ended June 30, 2023Three Months Ended June 30, 2022
MSRSubservicing and OtherTotalMSRSubservicing and OtherTotalMSRSubservicing and OtherTotalMSRSubservicing and OtherTotal
Balance - beginning of periodBalance - beginning of period$411,840 $383,959 $795,799 $276,028 $352,481 $628,509 Balance - beginning of period$412,438 $440,111 $852,549 $411,840 $383,959 $795,799 
Additions:Additions:Additions:
OriginationsOriginations7,794  7,794 20,907 1,374 22,281 Originations3,796  3,796 7,794 — 7,794 
Acquisitions / Increase in subservicing(1)
Acquisitions / Increase in subservicing(1)
(6,437)77,120 70,683 12,414 49,642 62,056 
Acquisitions / Increase in subservicing(1)
53,558 49,557 103,115 (6,437)77,120 70,683 
Deductions:Deductions:Deductions:
Dispositions(666)(40,585)(41,251)(18)(4,815)(4,833)
Dispositions / Decrease in subservicingDispositions / Decrease in subservicing(30)(58,701)(58,731)(666)(40,585)(41,251)
Principal reductions and otherPrincipal reductions and other(3,819)(3,520)(7,339)(2,688)(3,627)(6,315)Principal reductions and other(4,185)(3,432)(7,617)(3,819)(3,520)(7,339)
Voluntary reductions(2)
Voluntary reductions(2)
(11,118)(10,724)(21,842)(18,989)(28,162)(47,151)
Voluntary reductions(2)
(5,687)(4,773)(10,460)(11,118)(10,724)(21,842)
Involuntary reductions(3)
Involuntary reductions(3)
(112)(19)(131)(123)(31)(154)
Involuntary reductions(3)
(380)(240)(620)(112)(19)(131)
Net changes in loans serviced by othersNet changes in loans serviced by others(95) (95)(76)— (76)Net changes in loans serviced by others(34) (34)(95)— (95)
Balance - end of periodBalance - end of period$397,387 $406,231 $803,618 $287,455 $366,862 $654,317 Balance - end of period$459,476 $422,522 $881,998 $397,387 $406,231 $803,618 

(1)Includes transfers to/from Subservicing and Other.
(2)Voluntary reductions are related to loan payoffs by customers.
(3)Involuntary reductions refer to loan chargeoffs.

During the three months ended June 30, 2022, our MSR UPB decreased primarily due to voluntary reductions and net transfers to our subservicing and other portfolio, partially offset by originations. During the three months ended June 30, 2022, our subservicing and other portfolio UPB increased primarily due to portfolio growth from our subservicing clients, partially offset by dispositions.

Table 6.1 Servicing and Subservicing and Other Portfolio UPB Rollforward
Six Months Ended June 30, 2022Six Months Ended June 30, 2021
MSRSubservicing and OtherTotalMSRSubservicing and OtherTotal
Balance - beginning of period$339,208 $370,520 $709,728 $271,189 $336,513 $607,702 
Additions:
Originations18,404  18,404 44,530 2,878 47,408 
Acquisitions / Increase in subservicing(1)
72,949 113,591 186,540 17,061 102,960 120,021 
Deductions:
Dispositions(685)(45,573)(46,258)(68)(5,945)(6,013)
Principal reductions and other(7,386)(6,888)(14,274)(5,390)(6,858)(12,248)
Voluntary reductions(2)
(24,724)(25,380)(50,104)(39,463)(62,617)(102,080)
Involuntary reductions(3)
(217)(39)(256)(256)(69)(325)
Net changes in loans serviced by others(162) (162)(148)— (148)
Balance - end of period$397,387 $406,231 $803,618 $287,455 $366,862 $654,317 

Six Months Ended June 30, 2023Six Months Ended June 30, 2022
MSRSubservicing and OtherTotalMSRSubservicing and OtherTotal
Balance - beginning of period$411,382 $459,053 $870,435 $339,208 $370,520 $709,728 
Additions:
Originations6,527  6,527 18,404 — 18,404 
Acquisitions / Increase in subservicing(1)
61,603 70,654 132,257 72,949 113,591 186,540 
Deductions:
Dispositions / Decrease in subservicing(1,015)(90,923)(91,938)(685)(45,573)(46,258)
Principal reductions and other(8,271)(7,278)(15,549)(7,386)(6,888)(14,274)
Voluntary reductions(2)
(9,957)(8,575)(18,532)(24,724)(25,380)(50,104)
Involuntary reductions(3)
(718)(409)(1,127)(217)(39)(256)
Net changes in loans serviced by others(75) (75)(162)— (162)
Balance - end of period$459,476 $422,522 $881,998 $397,387 $406,231 $803,618 

(1)Includes transfers to/from Subservicing and Other.
(2)Voluntary reductions are related to loan payoffs by customers.
(3)Involuntary reductions refer to loan chargeoffs.

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During the six months ended June 30, 2022, our MSR UPB increased primarily due to acquisitions, partially offset by voluntary reductions and principal reductions. During the six months ended June 30, 2022, our subservicing and other portfolio UPB increased primarily due to portfolio growth from our subservicing clients, partially offset by dispositions and voluntary reductions.

The table below summarizes the overall performance of the servicing and subservicing portfolio:
Table 7. Key Performance Metrics - Servicing and Subservicing Portfolio(1)
June 30, 2022June 30, 2021June 30, 2023June 30, 2022
Loan count(2)
Loan count(2)
3,926,303 3,461,557 
Loan count(2)
4,279,938 3,926,303 
Average loan amount(3)(2)
Average loan amount(3)(2)
$204,645 $189,026 
Average loan amount(3)(2)
$206,015 $204,645 
Average coupon - agency(4)
Average coupon - agency(4)
3.5 %3.8 %
Average coupon - agency(4)
3.7 %3.5 %
Average coupon - non-agency(4)
Average coupon - non-agency(4)
4.4 %4.4 %
Average coupon - non-agency(4)
4.8 %4.4 %
60+ delinquent (% of loans)(5)(3)
60+ delinquent (% of loans)(5)(3)
2.7 %4.5 %
60+ delinquent (% of loans)(5)(3)
2.0 %2.7 %
90+ delinquent (% of loans)(5)(3)
90+ delinquent (% of loans)(5)(3)
2.4 %4.2 %
90+ delinquent (% of loans)(5)(3)
1.8 %2.4 %
120+ delinquent (% of loans)(5)(3)
120+ delinquent (% of loans)(5)(3)
2.2 %4.0 %
120+ delinquent (% of loans)(5)(3)
1.6 %2.2 %
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20222021202220212023202220232022
Total prepayment speed (12-month constant prepayment rate)Total prepayment speed (12-month constant prepayment rate)11.0 %26.0 %12.9 %28.4 %Total prepayment speed (12-month constant prepayment rate)5.5 %11.0 %4.8 %12.9 %

(1)Characteristics and key performance metrics of our servicing portfolio exclude UPB, and loan counts acquired but not yet boarded and currently serviced by others.
(2)As of June 30, 2022 and 2021, loan count includes 40,132 and 123,194 loans in forbearance related to the CARES Act, respectively.
(3)Average loan amount is presented in whole dollar amounts.
(4)The weighted average coupon amounts presented in the table above are only reflective of our owned MSR portfolio that is reported at fair value.
(5)(3)Loan delinquency is based on the current contractual due date of the loan. In the case of a completed loan modification, delinquency is based on the modified due date of the loan. Loan delinquency includes loans in forbearance.

Delinquency is an assumption in determining the mark-to-market adjustment and is a key indicator of MSR portfolio performance. Delinquent loans contribute to lower MSR values due to higher costs to service and increased carrying costs of advances. Delinquency rates decreased from 2021 as the COVID-19 pandemic’s effect on the macroeconomic environment declines. Delinquency rates increased slightly when compared with first quarter of 2022 and due to macro-economic uncertainty, delinquency rates may continue to increase during the remainder of 2022; however, we do not anticipate a significant increase in foreclosures in excess of pre-pandemic levels due to the effectiveness of the forbearance programs in place and the historically high levels of equity that borrowers have accrued which provides borrowers with additional options.

Table 8. MSRs Loan Modifications and Workout Units
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20222021Change20222021Change20232022Change20232022Change
Modifications(1)
Modifications(1)
11,899 17,545 (5,646)30,316 33,180 (2,864)
Modifications(1)
5,924 11,899 (5,975)11,188 30,316 (19,128)
Workouts(2)
Workouts(2)
13,822 18,036 (4,214)27,903 36,377 (8,474)
Workouts(2)
10,927 13,822 (2,895)22,016 27,903 (5,887)
Total modifications and workout unitsTotal modifications and workout units25,721 35,581 (9,860)58,219 69,557 (11,338)Total modifications and workout units16,851 25,721 (8,870)33,204 58,219 (25,015)

(1)Modifications consist of agency programs including forbearance options under the CARES Act, designed to adjust the terms of the loan (e.g., reduced interest rates).
(2)Workouts consist of other loss mitigation options designed to assist borrowers and keep them in their homes, but do not adjust the terms of the loan. Workouts exclude loans which did not miss a contractual payment during forbearance related to the CARES Act.

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Total modifications during the three and six months ended June 30, 20222023 decreased compared to 20212022 primarily due to a decrease in modifications related to loans impacted by the COVID-19 pandemic. Total workouts during the three and six months ended June 30, 20222023 decreased compared to 20212022 primarily due to a decrease in customers who were exiting forbearance plans, as there were fewer customers in forbearance.


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Servicing Portfolio and Related Liabilities

The following table sets forth the activities of MSRs:
Table 9. MSRs - Fair Value Rollforward
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20222021202220212023202220232022
Fair value - beginning of periodFair value - beginning of period$6,006 $3,354 $4,223 $2,703 Fair value - beginning of period$6,566 $6,006 $6,654 $4,223 
Additions:Additions:Additions:
Servicing retained from mortgage loans soldServicing retained from mortgage loans sold160 266 360 554 Servicing retained from mortgage loans sold79 160 133 360 
Purchases of servicing rightsPurchases of servicing rights163 151 1,178 218 Purchases of servicing rights768 163 870 1,178 
Dispositions:Dispositions:Dispositions:
Sales of servicing assets(285)(10)(289)(12)
Sales of servicing assets and excess yieldSales of servicing assets and excess yield(265)(285)(280)(289)
Changes in fair value:Changes in fair value:Changes in fair value:
Due to changes in valuation inputs or assumptions used in the valuation model (MSR fair value MTM):
Due to changes in valuation inputs or assumptions used in the valuation model (MSR MTM):Due to changes in valuation inputs or assumptions used in the valuation model (MSR MTM):
AgencyAgency338 (175)1,114 197 Agency141 338 55 1,114 
Non-agencyNon-agency(12)(25)10 124 Non-agency(2)(12)(21)10 
Changes in valuation due to amortization:Changes in valuation due to amortization:Changes in valuation due to amortization:
Scheduled principal paymentsScheduled principal payments(46)(25)(89)(49)Scheduled principal payments(60)(46)(110)(89)
PrepaymentsPrepaymentsPrepayments
Voluntary prepaymentsVoluntary prepaymentsVoluntary prepayments
AgencyAgency(167)(233)(344)(440)Agency(81)(167)(148)(344)
Non-agencyNon-agency(11)(9)(25)(20)Non-agency(2)(11)(5)(25)
Involuntary prepaymentsInvoluntary prepaymentsInvoluntary prepayments
AgencyAgency(2)(1)(3)(2)Agency(5)(2)(10)(3)
Non-agency —  — 
Other changes(1)
Other changes(1)
7 14 16 34 
Other changes(1)
10 11 16 
Fair value - end of periodFair value - end of period$6,151 $3,307 $6,151 $3,307 Fair value - end of period$7,149 $6,151 $7,149 $6,151 

(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.    

See Note 3, Mortgage Servicing Rights and Related Liabilities and Note 13, Fair Value Measurements, in the Notes to the Condensed Consolidated Financial Statements, for additional information regarding the range of assumptions and sensitivities related to the fair value measurement of MSRs as of June 30, 20222023 and December 31, 2021.2022.

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Excess Spread Financing

As further disclosed in Note 3, Mortgage Servicing Rights and Related Liabilities, in the Notes to the Condensed Consolidated Financial Statements, we have entered into sale and assignment agreements treated as financing arrangements whereby the acquirer has the right to receive a specified percentage of the excess cash flow generated from an MSR. In June 2022, the Company entered into an assignment agreement to repurchase excess spread liabilities for a total purchase price of $277.

The servicing fees associated with an MSR can be segregated into (i) a base servicing fee and (ii) an excess servicing fee. The base servicing fee, along with ancillary income and other revenues, is designed to cover costs incurred to service the specified pool plus a reasonable margin. The remaining servicing fee is considered excess. We sell a percentagehave utilized these types of the excess feearrangements historically as a method for efficiently financing acquired MSRs and the purchase of loans. We doloans, however we have not currently utilize these transactions as a primary source of financingdone so in recent years due to the availability of lower cost sources of funding.

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Excess spread financings are recorded at fair value, and the impact of fair value adjustments on future revenues and capital resources varies primarily due to (i) prepayment speeds (ii) recapture rates and (iii) discount rates.option-adjusted spread levels. See Note 3, Mortgage Servicing Rights and Related Liabilities and Note 13, Fair Value Measurements, in the Notes to the Condensed Consolidated Financial Statements, for additional information regarding the range of assumptions and sensitivities related to the measurement of the excess spread financing liability as of June 30, 20222023 and December 31, 2021.2022.

In June 2022, the Company entered into an assignment agreement to repurchase excess spread liabilities for a total purchase price of $277.

The following table sets forth the change in the excess spread financing:
Table 10. Excess Spread Financing - Rollforward
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20222021202220212023202220232022
Fair value - beginning of periodFair value - beginning of period$815 $934 $768 $934 Fair value - beginning of period$491 $815 $509 $768 
Additions:Additions:Additions:
New financingsNew financings —  — New financings —  — 
Deductions:Deductions:Deductions:
RepaymentsRepayments(292)— (292)— Repayments (292)(4)(292)
SettlementsSettlements(29)(40)(61)(81)Settlements(18)(29)(36)(61)
Changes in fair value:Changes in fair value:Changes in fair value:
AgencyAgency32 (29)105 Agency(12)32 (8)105 
Non-agencyNon-agency6 12 Non-agency(2)(2)12 
Fair value - end of periodFair value - end of period$532 $867 $532 $867 Fair value - end of period$459 $532 $459 $532 


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Originations Segment

The strategy of our Originations segment is to originate or acquire new loansMSRs for theour servicing portfolio at a more attractive cost than purchasing MSRs in bulk transactions and to retain our existing customers by providing them with attractive refinance and purchase transaction options. The Originations segment plays a strategically important role because its profitability is typically counter cyclical to that of the Servicing segment. Furthermore, by originating or acquiring loansMSRs at a more attractive cost than would be the case in bulk MSR acquisitions, the Originations segment improves our overall profitabilityprofitability and cash flow. Our Originations segment is one way that we help underserved consumers access the financial markets. In the six months ended June 30, 2022,2023, our total originations included loans for 15,0024,649 customers with low FICOs (<660), 23,0715,519 customers with income below the U.S. median household income, 12,8426,746 first-time homebuyers, and 4,2591,662 veterans. During this time period, we originated a total of 15,9237,071 Ginnie Mae loans, which are designed for first-time homebuyers and low- and moderate-income borrowers, comprising $4$2 billion in total proceeds. Once these loans are originated, thesethe underserved borrowers become our servicing customers.

The Originations segment includes two channels:

Our direct-to-consumer (“DTC”) lending channel relies on our call centers, website and mobile apps, specially trained teams of licensed mortgage originators, predictive analytics and modeling utilizing proprietary data from our servicing portfolio to reach our existing customers who may benefit from a new mortgage. Depending on borrower eligibility, we will refinance existing loans into conventional, government or non-agency products. Through lead campaigns and direct marketing, the direct-to-consumer channel seeks to convert leads into loans and ultimately MSRs in a cost-efficient manner.

Our correspondent lending channel acquiresfacilitates the acquisition of MSRs through purchasing newly originated residential mortgage loans that have been underwritten to investor guidelines. This includes both conventional and government-insured loans that qualify for inclusion in securitizations that are guaranteed by the GSEs. Our correspondent lending channel enables us to replenish servicing portfolio run-off typically at a better rate of return than traditional bulk or flow acquisitions.


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The following tables set forth the results of operations for the Originations segment:
Table 11. Originations Segment Results of Operations
Three Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change20232022Change
RevenuesRevenuesRevenues
Service related, net - Originations(1)
Service related, net - Originations(1)
$24$45$(21)
Service related, net - Originations(1)
$16$24$(8)$27$66$(39)
Net gain on mortgage loans held for saleNet gain on mortgage loans held for saleNet gain on mortgage loans held for sale
Net gain on loans originated and sold(2)
Net gain on loans originated and sold(2)
10139(129)
Net gain on loans originated and sold(2)
610(4)24129(105)
Capitalized servicing rights(3)
Capitalized servicing rights(3)
148246(98)
Capitalized servicing rights(3)
75148(73)126311(185)
Total net gain on mortgage loans held for saleTotal net gain on mortgage loans held for sale158385(227)Total net gain on mortgage loans held for sale81158(77)150440(290)
Total revenuesTotal revenues182430(248)Total revenues97182(85)177506(329)
ExpensesExpensesExpenses
Salaries, wages and benefitsSalaries, wages and benefits86164(78)Salaries, wages and benefits3686(50)70207(137)
General and administrativeGeneral and administrativeGeneral and administrative
Loan origination expensesLoan origination expenses1526(11)Loan origination expenses915(6)1635(19)
Corporate and other general administrative expensesCorporate and other general administrative expenses1517(2)Corporate and other general administrative expenses814(6)1731(14)
Marketing and professional service feesMarketing and professional service fees513(8)Marketing and professional service fees45(1)817(9)
Depreciation and amortizationDepreciation and amortization56(1)Depreciation and amortization25(3)49(5)
Total general and administrativeTotal general and administrative4062(22)Total general and administrative2339(16)4592(47)
Total expensesTotal expenses126226(100)Total expenses59125(66)115299(184)
Other income (expenses)Other income (expenses)Other income (expenses)
Interest incomeInterest income1526(11)Interest income1015(5)1632(16)
Interest expenseInterest expense(10)(23)13Interest expense(10)(10)(17)(22)5
Total other income, net532
Total other (expenses) income, netTotal other (expenses) income, net5(5)(1)10(11)
Income before income tax expenseIncome before income tax expense$61$207$(146)Income before income tax expense$38$62$(24)$61$217$(156)
Weighted average note rate - mortgage loans held for saleWeighted average note rate - mortgage loans held for sale4.6 %3.1 %1.5 %Weighted average note rate - mortgage loans held for sale6.2 %4.6 %1.6 %6.2 %3.8 %2.4 %
Weighted average cost of funds (excluding facility fees)3.1 %2.1 %1.0 %
Weighted average cost of funds - warehouse facilities (excluding facility fees)Weighted average cost of funds - warehouse facilities (excluding facility fees)6.7 %2.8 %3.9 %6.5 %2.3 %4.2 %

(1)Service related, revenues, net - Originations refers to fees collected from customers for originated loans and from other lenders for loans purchased through the correspondent channel, and includes loan application, underwriting and other similar fees.
(2)Net gain on loans originated and sold (excluding capitalized servicing rights) represents the unrealized and realized gains and losses from the origination, purchase, and sale of loans as well as the unrealized and realized gains and losses from related derivative instruments. GainGains from the origination and sale of loans are affected by the volume and margin of our originations activity and impacted by fluctuations inwhich can vary based upon mortgage interest rates.
(3)Capitalized servicing rights represent the fair value attributed to mortgage servicing rights at the time in which they are retained in connection with the sale of loans during the period.

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Table 11.112. Originations - Key Metrics
Three Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change20232022Change
Key MetricsKey MetricsKey Metrics
Consumer direct lock pull through adjusted volume(1)
Consumer direct lock pull through adjusted volume(1)
$3,484$8,634$(5,150)
Consumer direct lock pull through adjusted volume(1)
$1,592$3,484$(1,892)$3,049$10,230$(7,181)
Other locked pull through adjusted volume(1)
Other locked pull through adjusted volume(1)
3,0019,724(6,723)
Other locked pull through adjusted volume(1)
2,2273,001(774)3,8156,587(2,772)
Total pull through adjusted lock volumeTotal pull through adjusted lock volume$6,485$18,358$(11,873)Total pull through adjusted lock volume$3,819$6,485$(2,666)$6,864$16,817$(9,953)
Funded volume(2)Funded volume(2)$7,767$22,227$(14,460)Funded volume(2)$3,822$7,767$(3,945)$6,561$19,340$(12,779)
Volume of loans soldVolume of loans sold$9,400$24,950$(15,550)Volume of loans sold$3,920$9,400$(5,480)$6,792$23,090$(16,298)
Recapture percentage(2)(3)
Recapture percentage(2)(3)
29.2%31.9%(2.7)%
Recapture percentage(2)(3)
23.5%29.2%(5.7)%24.2%34.2%(10.0)%
Refinance recapture percentage(3)(4)
Refinance recapture percentage(3)(4)
59.7%41.5%18.2%
Refinance recapture percentage(3)(4)
79.9%59.7%20.2%76.1%52.9%23.2%
Purchase as a percentage of funded volumePurchase as a percentage of funded volume37.2%23.9%13.3%Purchase as a percentage of funded volume62.7%37.2%25.5%58.4%28.5%29.9%
Value of capitalized servicing on retained settlementsValue of capitalized servicing on retained settlements194 bps128 bps66 bpsValue of capitalized servicing on retained settlements225 bps194 bps31 bps220 bps179 bps41 bps
Originations MarginOriginations MarginOriginations Margin
RevenueRevenue$182$430$(248)Revenue$97$182$(85)$177$506$(329)
Pull through adjusted lock volumePull through adjusted lock volume$6,485$18,358$(11,873)Pull through adjusted lock volume$3,819$6,485$(2,666)$6,864$16,817$(9,953)
Revenue as a percentage of pull through adjusted lock volume(4)(5)
Revenue as a percentage of pull through adjusted lock volume(4)(5)
2.81 %2.34 %0.47 %
Revenue as a percentage of pull through adjusted lock volume(4)(5)
2.54 %2.81 %(0.27)%2.58 %3.01 %(0.43)%
Expenses(5)(6)
Expenses(5)(6)
$121$223$(102)
Expenses(5)(6)
$59$120$(61)$116$289$(173)
Funded volumeFunded volume$7,767$22,227$(14,460)Funded volume$3,822$7,767$(3,945)$6,561$19,340$(12,779)
Expenses as a percentage of funded volume(6)(7)
Expenses as a percentage of funded volume(6)(7)
1.56 %1.00%0.56 %
Expenses as a percentage of funded volume(6)(7)
1.54 %1.54%— %1.77 %1.49%0.28 %
Originations MarginOriginations Margin1.25 %1.34 %(0.09)%Originations Margin1.00 %1.27 %(0.27)%0.81 %1.52 %(0.71)%

(1)Pull through adjusted volume represents the expected funding from locks taken during the period.
(2)Funded volume for the period may include pull through adjusted lock volume from prior periods.
(3)Recapture percentage includes new loan originations for both purchase and refinance transactions where borrower retention and/or property retention occur as a result of a loan payoff from our servicing portfolio. Excludes loans we are contractually unable to solicit.
(3)(4)Refinance recapture percentage includes new loan originations for refinance transactions where borrower retention and property retention occurs as a result of a loan payoff from our servicing portfolio. Excludes loans we are contractually unable to solicit.
(4)(5)Calculated on pull-through adjusted lock volume as revenue is recognized at the time of loan lock.
(5)(6)Expenses include total expenses and total other income (expenses), net.
(6)(7)Calculated on funded volume as expenses are incurred based on closing of the loan.

Income before income tax expenseOriginations Segment Revenues
Total revenues decreased forduring the three and six months ended June 30, 2022 as2023 compared to 20212022 primarily due todriven by lower originations volume in 2023 that resulted in a decrease in total revenues fromcapitalized servicing rights and a decline in net gain on loans originated and sold and a decrease in capitalized servicing rights, partially offset by a decrease in total expenses due to lower salaries, wages, and benefits. The Originations Margin for the three months ended June 30, 2022 decreased as compared to 2021 primarily due to a higher ratio of expenses as a percentage of funded volume driven by a lower funded volume due to higher mortgage rates in 2022, partially offset by higher revenue as a percentage of pull through adjusted lock volume.sold.

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Originations Segment Revenues
Total revenues decreased during the three months ended June 30, 2022 compared to 2021 primarily driven by a decline in net gain on loans originated and sold and a decrease in capitalized servicing rights. Revenues from net gain on loans originated and sold decreased in connection with lower favorable fair value adjustment on loans held for sale and mark-to-market on interest rate locks and loan commitments, partially offset by a lower unfavorable mark-to-market adjustments on loans derivatives and hedges. Additionally, the decrease in capitalized servicing rights was primarily driven by lower origination volumes, partially offset by an increase in value of capitalized servicing retained on settlements due to higher mortgage rates in 2022.

Originations Segment Expenses
Total expenses during the three and six months ended June 30, 20222023 decreased when compared to 20212022 primarily due to a decline in salaries, wages and benefits expense, and loan origination expenses. Salaries, wages and benefits expense declined in 20222023 primarily due to decreased headcount and lower originations volumes in both the direct-to-consumer and correspondent channels as a result of right sizing the organization consistent with lower origination volumes.channels. Loan origination expenses declined in 20222023 primarily due to cost reduction initiatives in connection with decreased origination volumes.

Originations Segment Other (Expenses) Income, (Expenses), Net
Interest income relates primarily to mortgage loans held for sale. Interest expense is associated with the warehouse facilities utilized to finance newly originated loans. TotalDue to decreased originations volume, both interest income and interest expense declined, partially offset by higher interest rates, resulting in immaterial changes for total other (expenses) income, net, during the three months ended June 30, 2022 increased as compared to 2021 primarily due to lower interest expense, partially offset by a decrease in interest income both driven by lower funded volume.

Table 12. Originations Segment Results of Operations
Six Months Ended June 30,
20222021Change
Revenues
Service related, net - Originations(1)
$66$88$(22)
Net gain on mortgage loans held for sale
Net gain on loans originated and sold(2)
129417(288)
Capitalized servicing rights(3)
311520(209)
Total net gain on mortgage loans held for sale440937(497)
Total revenues5061,025(519)
Expenses
Salaries, wages and benefits207331(124)
General and administrative
Loan origination expenses3553(18)
Corporate and other general administrative expenses3237(5)
Marketing and professional service fees1726(9)
Depreciation and amortization910(1)
Total general and administrative93126(33)
Total expenses300457(157)
Other income (expenses)
Interest income3249(17)
Interest expense(22)(48)26
Total other income, net1019
Income before income tax expense$216$569$(353)
Weighted average note rate - mortgage loans held for sale3.8 %3.0 %0.8 %
Weighted average cost of funds (excluding facility fees)2.6 %2.2 %0.4 %

(1)Service related revenues, net - Originations refers to fees collected from customers for originated loans and from other lenders for loans purchased through the correspondent channel, and includes loan application, underwriting and other similar fees.
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(2)Net gain on loans originated and sold represents the gains and losses from the origination, purchase, and sale of loans and related derivative instruments. Gain from the origination and sale of loans are affected by the volume and margin of our originations activity and impacted by fluctuations in mortgage rates.
(3)Capitalized servicing rights represent the fair value attributed to mortgage servicing rights at the time in which they are retained in connection with the sale of loans during the period.

Table 12.1 Originations - Key Metrics
Six Months Ended June 30,
20222021Change
Key Metrics
Consumer direct lock pull through adjusted volume(1)
$10,230$18,956$(8,726)
Other locked pull through adjusted volume(1)
6,58722,669(16,082)
Total pull through adjusted lock volume$16,817$41,625$(24,808)
Funded volume$19,340$47,360$(28,020)
Volume of loans sold$23,090$51,261$(28,171)
Recapture percentage(2)
34.2%31.5%2.7%
Refinance recapture percentage(3)
52.9%38.6%14.3%
Purchase as a percentage of funded volume28.5%17.7%10.8%
Value of capitalized servicing on retained settlements179 bps128 bps51 bps
Originations Margin
Revenue$506$1,025$(519)
Pull through adjusted lock volume$16,817$41,625$(24,808)
Revenue as a percentage of pull through adjusted lock volume(4)
3.01 %2.46 %0.55 %
Expenses(5)
$290$456$(166)
Funded volume$19,340$47,360$(28,020)
Expenses as a percentage of funded volume(6)
1.50 %0.96%0.54 %
Originations Margin1.51 %1.50 %0.01 %

(1)Pull through adjusted volume represents the expected funding from locks taken during the period.
(2)Recapture percentage includes new loan originations for both purchase and refinance transactions where borrower retention and/or property retention occur as a result of a loan payoff from our servicing portfolio. Excludes loans we are contractually unable to solicit.
(3)Refinance recapture percentage includes new loan originations for refinance transactions where borrower retention and property retention occurs as a result of a loan payoff from our servicing portfolio. Excludes loans we are contractually unable to solicit.
(4)Calculated on pull-through adjusted lock volume as revenue is recognized at the time of loan lock.
(5)Expenses include total expenses and total other income (expenses), net.
(6)Calculated on funded volume as expenses are incurred based on closing of the loan.

Income before income tax expense decreased for the six months ended June 30, 20222023 as compared to 2021 primarily due to a decrease in total revenues from net gain on loans originated and sold and a decrease in capitalized servicing rights, 2022.

partially offset by a decrease in total expenses due to lower salaries, wages, and benefits.
Originations Margin
The Originations Margin for the three and six months ended June 30, 2022 increased2023 decreased as compared to 20212022 primarily due to a higher ratio oflower revenue as a percentage of pull through adjusted lock volume driven by higherlower margins from a shift in channel mix from direct-to-consumer to correspondent to direct-to-consumer, partially offsetand decline in total revenues driven by higher expenses as a percentage of fundedlower originations volume. Direct-to-consumer channel mix was 42% and 54% for the three months ended June 30, 2023, and 2022, and 44% and 61% for the six months ended June 30, 2023 and 2022, was 61% compared to 46% in 2021.

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Originations Segment Revenues
Total revenues decreased during the six months ended June 30, 2022 compared to 2021 primarily driven by a decline in net gain on loans originated and sold and a decrease in capitalized servicing rights. Revenues from net gain on loans originated and sold decreased in connection with lower favorable mark-to-market adjustments on loans derivatives and hedges, partially offset by a lower unfavorable mark-to-market on interest rate locks and loan commitments and fair value adjustment on loans held for sale. Additionally, the decrease in capitalized servicing rights was primarily driven by lower origination volumes, partially offset by an increase in value of capitalized servicing retained on settlements due to higher mortgage rates in 2022.

Originations Segment Expenses
Total expenses during the six months ended June 30, 2022 decreased when compared to 2021 primarily due to a decline in salaries, wages and benefits expense, and loan origination expenses. Salaries, wages and benefits expense declined in 2022 primarily due to decreased headcount as we right sized the organization in both the direct-to-consumer and correspondent channels as a result of lower origination volumes. Loan origination expenses declined in 2022 primarily due to cost reduction initiatives in connection with decreased origination volumes.

Originations Segment Other Income (Expenses), Net
Interest income relates primarily to mortgage loans held for sale. Interest expense is associated with the warehouse facilities utilized to finance newly originated loans. Total other income, net, during the six months ended June 30, 2022 increased as compared to 2021 primarily due to lower interest expense, partially offset by a decrease in interest income both driven by lower funded volume.respectively.

Corporate/Other

Corporate/Other representsincludes the results of Xome’s operations, the Company’s unallocated overhead expenses including(which include the costs of executive management and other corporate functions that are not directly attributable to our operating segments,segments), changes in equity investments and interest expense on our unsecured senior notes. In the third quarter of 2021, we began presenting the Xome financial results underaddition, Corporate/Other dueincludes eliminations related to the sale of our Title, Valuation and Field Services businesses. Prior periods amounts have been updated to reflect the change in segment presentation. Xome continues to operate its REO exchange business, which facilitates the sale of foreclosed properties. See Note 16, Segment Information, for further details on the change in reportable segments.intersegment hedge fair value changes.

The following table set forth the selected financial results for Corporate/Other:
Table 13. Corporate/Other Selected Financial Results
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20222021Change20222021Change20232022Change20232022Change
Corporate/Other - OperationsCorporate/Other - OperationsCorporate/Other - Operations
Total revenuesTotal revenues$22 $39 $(17)$34 $135 $(101)Total revenues$21 $22 $(1)$40 $34 $
Total expensesTotal expenses59 78 (19)100 191 (91)Total expenses60 60 — 112 102 10 
Interest expenseInterest expense40 31 80 61 19 Interest expense39 40 (1)79 80 (1)
Other (expense) income, netOther (expense) income, net(5)486 (491)217 486 (269)Other (expense) income, net(5)(5)— (14)217 (231)
Key MetricsKey MetricsKey Metrics
Average exchange inventory under managementAverage exchange inventory under management19,454 14,196 5,258 16,812 14,203 2,609 Average exchange inventory under management26,958 19,454 7,504 26,294 16,812 9,482 

Total revenues, and total expenses, decreasedinterest expense and other (expense) income, net remained consistent during the three andmonths ended June 30, 2023 as compared to 2022.

Total revenues increased during the six months ended June 30, 20222023 as compared to 20212022 primarily due to sale of our Title businessincreased revenue from Xome driven by greater sales volume in 2021.

Interest expenseconnection with exchange inventory growth. Total expenses increased induring the three and six months ended June 30, 2022 as compared to 20212023 primarily due to an increase in allocated costs in 2023, driven by higher percentage of total headcount in Corporate/Other in 2023 following the issuance of the unsecured senior notes due 2031workforce reduction in the fourth quarter of 2021.

The changeOriginations segment in other (expense) income, net, in2022. Interest expense remained consistent during the threesix months ended June 30, 20222023 as compared to 2021 was primarily due to a2022.

gain of $487 that was recorded in the second quarter of 2021 upon completion of the sale of our Title business.
The change in other (expense) income, net, in the six months ended June 30, 20222023 as compared to 20212022 was primarily due to a gain of $223 that was recorded in the first quarter of 2022 upon completion of the Sagent Transaction as compared to a Transaction.
gain of $487 that was recorded in the second quarter of 2021 upon completion of the sale of our Title business.
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Liquidity and Capital Resources

We measure liquidity by unrestricted cash and availability of borrowingscollateralized borrowing capacity on our MSR facilities and other debt facilities. We held cash and cash equivalents on hand of $514$517 as of June 30, 20222023 compared to $895$527 as of December 31, 2021.2022. During the six months ended June 30, 2022,2023, we generated net cash of $149 from operating activities and bought back 3.03.3 million shares of our outstanding common stock for a total cost of $135$146 as part of our stock repurchase program. We have sufficient borrowing capacity to support our operations. As of June 30, 2023, total available borrowing capacity for advance, warehouse, and MSR facilities was $10,750, of which $1,779 was collateralized and immediately available to draw. During the threesix months ended June 30, 2022,2023, we increased capacity on our MSR facilities by $600, including a new multi-year $400 facility and an additional $200 upsize to an existing facility. As of June 30, 2022, total borrowing capacity was $16,000, of which $12,588 was unused.$2,050.

As of June 30, 2022,There have been no significant changes to our total advance facility capacity was $1,175, of which $652 remained unused. For more information on our advance facilities, see Note 9, Indebtedness in the Notes to the Condensed Consolidated Financial Statements.

Sourcessources and Uses of Cash
Our primary sources of funds for liquidity include: (i) servicing fees and ancillary revenues; (ii) advance and warehouse facilities, other secured borrowings and the unsecured senior notes; and (iii) payments received in connection with the sale of excess spread.

Our primary uses of funds for liquidity include: (i) funding of servicing advances; (ii) originations of loans; (iii) payment of interest expenses; (iv) payment of operating expenses; (v) repayment of borrowings and repurchases or redemptions of outstanding indebtedness; (vi) payments for acquisitions of MSRs; and (vii) payment ofcash as disclosed in our technology expenses.

We believe that our cash flows from operating activities, as well as capacity through existing facilities, provide adequate resources to fund our anticipated ongoing cash requirements. We relyAnnual Reports on these facilities to fund operating activities. As the facilities mature, we anticipate renewal of these facilities will be achieved. Future debt maturities will be funded with cash and cash equivalents, cash flow from operating activities and, if necessary, future access to capital markets. We continue to optimize the use of balance sheet cash to avoid unnecessary interest carrying costs.

In addition, derivative instruments are used as part of the overall strategy to manage exposure to market risks primarily associated with fluctuations in interest rates related to originations. See Note 8, Derivative Financial Instruments, in the Notes to the Condensed Consolidated Financial Statements in Item 1, Financial Statements and Supplementary Data, which is incorporated herein for a summary of our derivative transactions.

In the normal course of business, we enter into various types of on- and off-balance sheet transactions with special purpose entities (“SPEs”) determined to be variable interest entities (“VIEs”), which primarily consist of securitization trusts established for a limited purpose. Generally, these SPEs are formedForm 10-K for the purpose of securitization transactions in which we transfer assets to an SPE, which then issues to investors various forms of debt obligations supported by those assets. In these securitization transactions, we typically receive cash and/or other interests in the SPE as proceeds for the transferred assets. See Note 10, Securitizations and Financings, in the Notes to the Condensed Consolidated Financial Statements in Item 1, Financial Statements and Supplementary Data, which is incorporated herein for a summary of our transactions with VIEs and unconsolidated balances, and details of their impact on our condensed consolidated financial statements.year ended December 31, 2022.

Cash Flows
The table below presents cash flows information:
Table 14. Cash Flows
Six Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change
Net cash attributable to:Net cash attributable to:Net cash attributable to:
Operating activitiesOperating activities$2,582 $(114)$2,696 Operating activities$149 $2,582 $(2,433)
Investing activitiesInvesting activities(885)(247)(638)Investing activities(576)(885)309 
Financing activitiesFinancing activities(2,109)354 (2,463)Financing activities412 (2,109)2,521 
Net (decrease) in cash, cash equivalents, and restricted cash$(412)$(7)$(405)
Net decrease in cash, cash equivalents, and restricted cashNet decrease in cash, cash equivalents, and restricted cash$(15)$(412)$397 

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Operating activities
OurCash generated from operating activities generated cash of $2,582decreased to $149 during the six months ended June 30, 2022 compared to cash used of $1142023 from $2,582 in 2021.2022. The change in cash attributable to operating activitiesdecrease was primarily relateddue to continuing operations, driven by $2,454a decline of $4,437 in cash generated from originations net sales activities driven by higher mortgage rates, partially offset by a decrease of $2,139 in 2022 compared to $449 of cash used in 2021, as a resultfor the repurchase of sales proceeds and loan payment proceeds exceeding loan purchases.assets out of Ginnie Mae securitizations.

Investing activities
OurCash used in investing activities used cash of $885decreased to $576 during the six months ended June 30, 2022 compared to cash used of $2472023 from $885 in 2021.2022. The increase in cash used in investing activitiesdecrease was primarily relateddue to continuing operations, driven by an increasea decline of $934$310 in cash used for the purchase of mortgage servicing rights in 2022, partially offset by an increase of $262 in cash generated by proceeds on sales of mortgage servicing rights.2023.

Financing activities
Our financing activities usedgenerated cash of $2,109$412 during the six months ended June 30, 20222023 compared to cash generatedused of $354$2,109 in 2021.2022. The change in cash attributable to financing activities was primarily relateddue to continuing operations, driven by a net borrowing of $630 in 2023 compared to net repayment of $1,597 in 2022 compared to net borrowing of $1,047 in 2021 on our advance, warehouse and warehouseMSR facilities.

Capital Resources

Capital Structure and Debt
We require access to external financing resources from time to time depending on our cash requirements, assessments of current and anticipated market conditions and after-tax cost of capital. If needed, we believe additional capital could be raised through a combination of issuances of equity, corporate indebtedness, asset-backed acquisition financing and/or cash from operations. Our access to capital markets can be impacted by factors outside our control, including economic conditions.

Financial Covenants
Our credit facilities contain various financial covenants, which primarily relate to required tangible net worth amounts, liquidity reserves, leverage requirements, and profitability requirements. These covenantsrequirements, which are measured at our operating subsidiary, Nationstar Mortgage LLC. As of June 30, 2022,2023, we were in compliance with our required financial covenants.

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Seller/Servicer Financial Requirements
We are also subject to net worth, liquidity and capital ratio requirements established by the Federal Housing Finance Agency (“FHFA”) for Fannie Mae and Freddie Mac (“Enterprises”) Seller/Servicers, and Ginnie Mae for single family issuers, as summarized below. These requirements apply to our operating subsidiary, Nationstar Mortgage, LLC.

Minimum Net Worth
FHFA - a net worth base of $2.5 plus 25 basis points of outstanding UPB for total loans serviced.
Ginnie Mae - a net worth equal to the sum of base of $2.5 plus 35 basis points of the issuer’s total single-family effective outstanding obligations.

Minimum Liquidity
FHFA - 3.5 basis points of total Agency Mortgage Servicing UPB plus incremental 200 basis points of total nonperforming Agency, measured at 90+ delinquencies, servicing in excess of 6% total Agency servicing UPB.
Ginnie Mae - the greater of $1 or 10 basis points of our outstanding single-family MBS.

Minimum Capital Ratio
FHFA and Ginnie Mae - a ratio of Tangible Net Worth to Total Assets greater than 6%.

Secured Debt to Gross Tangible Asset Ratio
Ginnie Mae - a secured debt to gross tangible asset ratios no greater than 60%.

As of June 30, 2022,2023, we were in compliance with our seller/servicer financial requirements for FHFA and Ginnie Mae.

Since weIn 2022, the FHFA and Ginnie Mae revised its Seller/Servicers and single-family issuers minimum financial eligibility requirements. All revisions are effective in 2023 or 2024, as summarized below. The Company is currently evaluating the impact of the revised requirements and does not anticipate the revised requirements to have significant impact on its ability to meet financial eligibility requirements.

Minimum Net Worth (effective September 30, 2023)
FHFA – a net worth base of $2.5 plus a dollar amount equal to or exceeding the sum of (i) 25 basis points of the sellers/servicer’s residential first lien mortgage servicing UPB, serviced for the Enterprises, plus (ii) 25 basis points of non-agency serviced UPB, plus (iii) 35 basis points of the sellers/servicer’s residential first lien mortgage servicing UPB serviced for Ginnie Mae.
Ginnie Mae – a net worth equal to the sum of $2.5, plus (i) 35 basis points of the issuer’s total effective Ginnie Mae single-family outstanding obligations, plus (ii) 25 basis points of the issuer’s total Enterprises single family outstanding servicing portfolio balance, plus (iii) 25 basis points of the issuer’s total non-agency single family servicing portfolio.

Minimum Liquidity Requirements (effective September 30, 2023)
FHFA - a base Liquidity of eligible assets equal to or exceeding:
7 basis points of sellers/servicer’s residential first lien mortgage servicing UPB serviced for the Enterprises, if the seller/servicer remits (or an Enterprise draws) interest or principal, or both, as scheduled, regardless of whether principal or interest has been collected from the borrower, plus
3.5 basis points of the sellers/servicer’s residential first lien mortgage servicing UPB serviced for the Enterprises, if the seller/servicer remits (or an Enterprise draws) the interest and principal only as actually collected from the borrower, plus
3.5 basis points of the seller/servicer’s non-agency servicing UPB, plus
10 basis points of the seller/servicer’s residential first lien mortgage servicing UPB serviced for Ginnie Mae.
In addition, an origination liquidity equal to or exceeding 50 basis points of the sum of the following (effective December 31, 2023):
i.Residential first lien mortgages held for sale, at lower of cost or market
ii.Residential first lien mortgages held for sale, at fair value, plus
iii.UPB of interest rate lock commitments after fallout adjustments
Supplemental liquidity at all time equal to or exceeding the sum of (effective December 31, 2023):
i.2 basis points of the sellers/servicer’s residential mortgage servicing UPB serviced for the Enterprises, plus
ii.5 basis points of the sellers/servicer’s residential mortgage servicing UPB serviced for Ginnie Mae
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Ginnie Mae – the greater of $1 or the sum of:
10 basis points of the issuer’s outstanding Ginnie Mae single-family servicing UPB, plus
3.5 basis points of the issuer’s outstanding Enterprises single family servicing UPB, if the issuer remits (or the Enterprise draws) the principal and interest only as actually collected from the borrower, plus
7 basis points of the Issuer’s outstanding Enterprises single-family servicing UPB, if the issuer remits (or the Enterprise draws) the principal or interest, or both, as scheduled, regardless of whether principal or interest has been collected from the borrower, plus
3.5 basis points of the issuer’s outstanding non-agency single-family servicing UPB.
Ginnie Mae - issuers that originated more than $1 billion in UPB of any residential first mortgage in the recent four-quarter period must have liquid assets equal to the greater of at least $1 or the sum of the points listed immediately above, plus (effective December 31, 2023):
50 basis points of loans held for sale, plus
50 basis points of the issuer’s UPB of IRLCs after fallout adjustments

Capital Requirements (effective December 31, 2024)
Ginnie Mae – a Risk-based Capital Ratio (“RBCR”) of at least 6%. RBCR is adjusted net worth less excess MSRs divided by total risked-based assets.

Financial Reporting Requirements (effective December 31, 2023)
FHFA – must obtain an assessment of the seller/servicer’s performance and creditworthiness by a qualified, independent third party on an annual basis and meet the following criteria:
One primary servicer rating or master servicer rating, as applicable for large non-depository institutions that have greater than or equal to $50 billion in servicing UPB, and
One primary servicer rating or master servicer rating, as applicable, and one third party long-term senior unsecured debt rating or long-term corporate family rating, for large non-depository institutions that have greater than $100 billion in servicing UPB, and
One primary servicer rating or master servicer rating, as applicable, and issued by two rating agencies, each of which must issue either a third party long-term unsecured debt rating or long-term corporate family rating for large non-depository institutions that have greater than or equal to $150 billion in servicing UPB.

Since our Ginnie Mae single-family servicing portfolio that exceeds $75 billion in UPB, we are also required to obtain an external primary servicer rating and issuer credit ratings from two different rating agencies and receive a minimum rating of a B or its equivalent. We are permitted to satisfy minimum liquidity requirements using a combination of AAA rated government securities that are marked to market in addition to cash and certain cash equivalents.met this requirement for all financial periods presented.

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In addition, Fannie Mae or Freddie Mac may require capital ratios in excess of stated requirements. Refer to Note 14, Capital Requirements, in the Notes to the Condensed Consolidated Financial Statements for additional information.

Table 15. Debt
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
Advance facilities principal amountAdvance facilities principal amount$523 $614 Advance facilities principal amount$610 $669 
Warehouse facilities principal amountWarehouse facilities principal amount1,939 4,125 Warehouse facilities principal amount1,107 817 
MSR facilities principal amountMSR facilities principal amount950 270 MSR facilities principal amount1,809 1,410 
Unsecured senior notes principal amountUnsecured senior notes principal amount2,700 2,700 Unsecured senior notes principal amount2,700 2,700 

Advance Facilities
As part of our normal course of business, we borrow money to fund servicing advances. Our servicing agreements require that we advance our own funds to meet contractual principal and interest payments for certain investors, and to pay taxes, insurance, foreclosure costs and various other items that are required to preserve the assets being serviced. Delinquency rates and prepayment speeds affect the size of servicing advance balances, and we exercise our ability to stop advancing principal and interest where the pooling and servicing agreements permit, where the advance is deemed to be non-recoverable from future proceeds. These servicing requirements affect our liquidity. We rely upon several counterparties to provide us with financing facilities to fund a portion of our servicing advances. As of June 30, 2022,2023, we had a total borrowing capacity of $1,175,$975, of which we could borrow an additional $652.$365.

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Warehouse and MSR Facilities
Loan origination activities generally require short-term liquidity in excess of amounts generated by our operations. The loans we originate are financed through several warehouse lines on a short-term basis. We typically hold the loans for approximately 30 days and then sell or place the loans in government securitizations in order to repay the borrowings under the warehouse lines. Our ability to fund current operations depends upon our ability to secure these types of short-term financings on acceptable terms and to renew or replace the financings as they expire. Our MSR facilities provide financing for our servicing portfolio and investments. As of June 30, 20222023, we had a total borrowing capacity of $14,825$5,025 and $4,750 for warehouse and MSR facilities, of which we could borrow an additional $11,936.$3,918 and $2,941, respectively.

Unsecured Senior Notes
In 2020 and 2021, we completed an offeringofferings of an unsecured senior notenotes with a maturity date ofdates ranging from 2027 to 2031. We pay interest semi-annually to the holders of these notes at interest rates ranging from 5.125% to 6.000%. For more information regarding our indebtedness, see Note 9, Indebtedness, in the Notes to the Condensed Consolidated Financial Statements.

Contractual Obligations
As of June 30, 2022,2023, no material changes to our outstanding contractual obligations were made from the amounts previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.


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Critical Accounting Policies and Estimates

Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. In particular, we have identified the following policies that, due to the judgment, estimates and assumptions inherent in those policies, are critical to an understanding of our condensed consolidated financial statements. These policies relate to fair value measurements, particularly those determined to be Level 3 as discussed in Note 13, Fair Value Measurements, in the Notes to the Condensed Consolidated Financial Statements and valuation and realization of deferred tax assets. We believe that the judgment, estimates and assumptions used in the preparation of our condensed consolidated financial statements are appropriate given the factual circumstances at the time. However, given the sensitivity of these critical accounting policies on our condensed consolidated financial statements, the use of other judgments, estimates and assumptions could result in material differences in our results of operations or financial condition. Fair value measurements considered to be Level 3 representing estimated values based on significant unobservable inputs primarily include (i) the valuation of MSRs, and (ii) the valuation of excess spread financing, and (iii) the valuation of IRLCs.financing. For further information on our critical accounting policies and estimates, please refer to the Company’s Annual Reports on Form 10-K for the year ended December 31, 2021.2022. There have been no material changes to our critical accounting policies and estimates since December 31, 2021.2022.


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Other Matters

Recent Accounting Developments

Below lists recently issued accounting pronouncements applicable to us but not yet adopted.

Accounting Standards Update 2020-04, 2021-01 and 2021-01,2022-06, collectively implemented as Accounting Standards Codification Topic 848 (“ASC 848”), Reference Rate Reform provide provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contract modifications, hedge accounting and other transactions affected by the transitioning away from reference rates that are expected to be discontinued, such as interbank offered rates and LIBOR.the London Inter-Bank Offered Rate (“LIBOR”). If LIBOR ceases to exist or if the methods of calculating LIBOR change from current methods for any reasons, interest rates on our floating rate loans, obligation derivatives, and other financial instruments tied to LIBOR rates, may be affected and need renegotiation with its lenders. In January 2021, ASU 2021-01 was issued to clarify that all derivativesderivative instruments affected by changes to the interests’interest rates used for discounting, margining alignment due to reference rate reform are in scope of ASC 848. In December 2022, ASU 2020-042022-06 was issued to defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The guidance was effective upon issuance and ASU 2021-01 were effective March 2020 and January 2021, respectively, formay be applied prospectively to contract modifications, existing hedging relationships and other impacted transactions through December 31, 2022.2024. The guidance in ASU 2020-04 and ASU 2021-01 is optional and may be elected over time as reference rate reform activities occur. We have not electedAt present, the Company has limited exposure to apply anyLIBOR based index rates. Due to the short-term maturities of the amendments through June 30,Company’s advance, warehouse and MSR facilities, substantially all the Company’s facilities have matured and transitioned away from LIBOR to alternative reference rates in 2022 andwhen renewed. In addition, our derivative financial instruments are currently assessing the impact ofnot tied to LIBOR rates. The Company does not expect ASU 2020-04 and ASU 2021-01 to have a material impact on our condensed consolidated financial statements.





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GLOSSARY OF TERMS

This Glossary of Terms defines some of the terms that are used throughout this report and does not represent a complete list of all defined terms used.

Advance Facility. A secured financing facility to fund advance receivables which is backed by a pool of mortgage servicing advance receivables made by a servicer to a certain pool of mortgage loans.

Agency. Government entities guaranteeing the mortgage investors that the principal amount of the loan will be repaid; the Federal Housing Administration, the Department of Veterans Affairs, the US Department of Agriculture and Ginnie Mae (and collectively, the “Agencies”)

Agency Conforming Loan.  A mortgage loan that meets all requirements (loan type, maximum amount, LTV ratio and credit quality) for purchase by Fannie Mae, Freddie Mac, or insured by the FHA, USDA or guaranteed by the VA or sold into Ginnie Mae.

Asset-Backed Securities (“ABS”). A financial security whose income payments and value is derived from and collateralized (or “backed”) by a specified pool of underlying receivables or other financial assets.

Bulk acquisitions or purchases. MSR portfolio acquired on non-retained basis through an open market bidding process.

Base Servicing Fee.  The servicing fee retained by the servicer, expressed in basis points, in an excess MSR arrangement in exchange for the provision of servicing functions on a portfolio of mortgage loans, after which the servicer and the co-investment partner share the excess fees on a pro rata basis.

Client. Owner of the underlying mortgage servicing rights on behalf of whom we service loans.

Conventional Mortgage Loans.  A mortgage loan that is not guaranteed or insured by the FHA, the VA or any other government agency. Although a conventional loan is not insured or guaranteed by the government, it can still follow the guidelines of GSEs and be sold to the GSEs.

Correspondent lender, lending channel or relationship.  A correspondent lender is a lender that funds loans in their own name and then sells them off to larger mortgage lenders. A correspondent lender underwrites the loans to the standards of an investor and provides the funds at close.

Customer. Residential mortgage borrower.

Delinquent Loan. A mortgage loan that is 30 or more days past due from its contractual due date.

Department of Veterans Affairs (“VA”).  The VA is a cabinet-level department of the U.S. federal government, which guarantees certain home loans for qualified borrowers eligible for securitization with GNMA.

Direct-to-consumer originations (“DTC”).  A type of mortgage loan origination pursuant to which a lender markets refinancing and purchase money mortgage loans directly to selected consumers through telephone call centers, the Internet or other means.

Excess Servicing Fees.  In an excess MSR arrangement, the servicing fee cash flows on a portfolio of mortgage loans after payment of the base servicing fee.

Excess Spread.  MSRs with a third-party co-investment partner where the servicer receives a base servicing fee and the servicer and co-investment partner share the excess servicing fees. This co-investment strategy reduces the required upfront capital from the servicer when purchasing or investing in MSRs.

Excess Yield. The remaining servicing fees above the minimum servicing fee (“GSE Base Servicing Fee”), as defined by the agencies, whereby the rights to the excess fees are separated, securitized by the GSE’s and sold, while we retain the obligation to service the loan and therefore continue to receive the GSE Base Servicing Fee.

Exchange inventory. Consists of Xome’s residential real estate inventory ranging from pre-foreclosure to bank-owned properties.
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Federal National Mortgage Association (“Fannie Mae” or “FNMA”). FNMA was federally chartered by the U.S. Congress in 1938 to support liquidity, stability, and affordability in the secondary mortgage market, where existing mortgage-related assets are purchased and sold. Fannie Mae buys mortgage loans from lenders and resells them as mortgage-backed securities in the secondary mortgage market.

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Federal Housing Administration (“FHA”).  The FHA is a U.S. federal government agency within the Department of Housing and Urban Development (HUD). It provides mortgage insurance on loans made by FHA-approved lenders in compliance with FHA guidelines throughout the United States.

Federal Housing Finance Agency (“FHFA”).  A U.S. federal government agency that is the regulator and conservator of Fannie Mae and Freddie Mac and the regulator of the 12 Federal Home Loan Banks.

Federal Home Loan Mortgage Corporation (“Freddie Mac” or “FHLMC”).  Freddie Mac was chartered by Congress in 1970 to stabilize the nation’s residential mortgage markets and expand opportunities for homeownership and affordable rental housing. Freddie Mac participates in the secondary mortgage market by purchasing mortgage loans and mortgage-related securities for investment and by issuing guaranteed mortgage-related securities.

Forbearance. An agreement between the mortgage servicer or lender and borrower for a temporary postponement of mortgage payments. It is a form of repayment relief granted by the lender or creditor in lieu of forcing a property into foreclosure.

Government National Mortgage Association (“Ginnie Mae” or “GNMA”). GNMA is a self-financing, wholly owned U.S. Government corporation within HUD. Ginnie Mae guarantees the timely payment of principal and interest on MBS backed by federally insured or guaranteed loans - mainly loans insured by the FHA or guaranteed by the VA. Ginnie Mae securities are the only MBS to carry the full faith and credit guarantee of the U.S. federal government.

Government-Sponsored Enterprise (“GSE”).  Certain entities established by the U.S. Congress to provide liquidity, stability and affordability in residential housing. These agencies are Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks.

Interest Rate Lock Commitments (“IRLC”). Agreements under which the interest rate and the maximum amount of the mortgage loan are set prior to funding the mortgage loan.

Investors. Our investors include agency investors and non-agency investors. Agency investors primarily 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.

Loan Modification.  Temporary or permanent modifications to loan terms with the borrower, including the interest rate, amortization period and term of the borrower’s original mortgage loan. Loan modifications are usually made to loans that are in default, or in imminent danger of defaulting.

Loan-to-Value Ratio (“LTV”). The unpaid principal balance of a mortgage loan as a percentage of the total appraised or market value of the property that secures the loan. An LTV over 100% indicates that the UPB of the mortgage loan exceeds the value of the property.

Lock period. A set of periods of time that a lender will guarantee a specific rate is set prior to funding the mortgage loan.

Loss Mitigation.  The range of servicing activities provided by a servicer in an attempt to minimize the losses suffered by the owner of a defaulted mortgage loan. Loss mitigation techniques include short-sales, deed-in-lieu of foreclosures and loan modifications, among other options.

Mortgage-Backed Securities (“MBS”). A type of asset-backed security that is secured by a group of mortgage loans.

Mortgage Servicing Right (“MSRs”).  The right and obligation to service a loan or pool of loans and to receive a servicing fee as well as certain ancillary income. MSRs may be bought and sold, resulting in the transfer of loan servicing obligations. MSRs are designated as such when the benefits of servicing the loans are expected to adequately compensate the servicer for performing the servicing.

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MSR Facility.  A line of credit backed by mortgage servicing rights that is used for financing purposes. In certain cases, these lines may be a sub-limit of another warehouse facility or alternatively exist on a stand-alone basis. These facilities allow for same or next day draws at the request of the borrower.

Non-Conforming Loan.  A mortgage loan that does not meet the standards of eligibility for purchase or securitization by Fannie Mae, Freddie Mac or Ginnie Mae.

Option adjusted spread (“OAS”). The incremental spread added to the risk-free rate to reflect embedded (prepayment) optionality and other risk inherent in the MSRs or excess spread financing used to discount future cash flows for fair value purposes.

Originations.  The process through which a lender provides a mortgage loan to a borrower.

Pull through adjusted lock volume. Represents the expected funding from locks taken during the period.

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Prepayment Speed. The rate at which voluntary mortgage prepayments occur or are projected to occur. The statistic is calculated on an annualized basis and expressed as a percentage of the outstanding principal balance.

Primary Servicer.  The servicer that owns the right to service a mortgage loan or pool of mortgage loans. This differs from a subservicer, which has a contractual agreement with the primary servicer to service a mortgage loan or pool of mortgage loans in exchange for a subservicing fee based upon portfolio volume and characteristics.

Prime Mortgage Loan.  Generally, a high-quality mortgage loan that meets the underwriting standards set by Fannie Mae or Freddie Mac and is eligible for purchase or securitization in the secondary mortgage market. Prime Mortgage loans generally have lower default risk and are made to borrowers with excellent credit records and a monthly income at least three to four times greater than their monthly housing expenses (mortgage payments plus taxes and other debt payments) as well as significant other assets. Mortgages not classified as prime mortgage loans are generally called either sub-prime or Alt-A.

Private Label Securitizations. Securitizations that do not meet the criteria set by Fannie Mae, Freddie Mac or Ginnie Mae.

Pull through adjusted lock volume. Represents the expected funding from locks taken during the period.

         
Real Estate Owned (”REO”). Property acquired by the servicer on behalf of the owner of a mortgage loan or pool of mortgage loans, usually through foreclosure or a deed-in-lieu of foreclosure on a defaulted loan. The servicer or a third-party real estate management firm is responsible for selling the REO. Net proceeds of the sale are returned to the owner of the related loan or loans. In most cases, the sale of REO does not generate enough to pay off the balance of the loan underlying the REO, causing a loss to the owner of the related mortgage loan.

Recapture. Voluntarily prepaid loans that are expected to be refinanced by the related servicer.

Refinancing.  The process of working with existing borrowers to refinance their mortgage loans. By refinancing loans for borrowers we currently service, we retain the servicing rights, thereby extending the longevity of the servicing cash flows.

Reverse Mortgage Loan. A reverse mortgage loan, most commonly a Home Equity Conversion Mortgage, enables seniors to borrow against the value of their home, and no payment of principal or interest is required until the death of the borrower or the sale of the home. These loans are designed to go through the foreclosure and claim process to recover loan balance.

Servicing. The performance of contractually specified administrative functions with respect to a mortgage loan or pool of mortgage loans. Duties of a servicer typically include, among other things, collecting monthly payments, maintaining escrow accounts, providing periodic monthly statements to the borrower and monthly reports to the loan owners or their agents, managing insurance, monitoring delinquencies, executing foreclosures (as necessary), and remitting fees to guarantors, trustees and service providers. A servicer is generally compensated with a specific fee outlined in the contract established prior to the commencement of the servicing activities.

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Servicing Advances.  In the course of servicing loans, servicers are required to make advances that are reimbursable from collections on the related mortgage loan or pool of loans. There are typically three types of servicing advances: P&I Advances, T&I Advances and Corporate Advances.

(i) P&I Advances cover scheduled payments of principal and interest that have not been timely paid by borrowers. P&I Advances serve to facilitate the cash flows paid to holders of securities issued by the residential MBS trust. The servicer is not the insurer or guarantor of the MBS and thus has the right to cease the advancing of P&I, when the servicer deems the next advance nonrecoverable. 

(ii) T&I Advances pay specified expenses associated with the preservation of a mortgaged property or the liquidation of defaulted mortgage loans, including but not limited to property taxes, insurance premiums or other property-related expenses that have not been timely paid by borrowers in order for the lien holder to maintain its interest in the property. 

(iii) Corporate Advances pay costs, fees and expenses incurred in foreclosing upon, preserving defaulted loans and selling REO, including attorneys’ and other professional fees and expenses incurred in connection with foreclosure and liquidation or other legal proceedings arising in the course of servicing the defaulted mortgage loans. 

Servicing Advances are reimbursed to the servicer if and when the borrower makes a payment on the underlying mortgage loan at the time the loan is modified or upon liquidation of the underlying mortgage loan but are primarily the responsibility of the investor/owner of the loan. The types of servicing advances that a servicer must make are set forth in its servicing agreement with the owner of the mortgage loan or pool of mortgage loans. In some instances, a servicer is allowed to cease Servicing Advances, if those advances will not be recoverable from the property securing the loan.

Subservicing.  Subservicing is the process of outsourcing the duties of the primary servicer to a third-party servicer. The third-party servicer performs the servicing responsibilities for a fee and is typically not responsible for making servicing advances, which are subsequently reimbursed by the primary servicer. The primary servicer is contractually liable to the owner of the loans for the activities of the subservicer.

Unpaid Principal Balance (“UPB”).  The amount of principal outstanding on a mortgage loan or a pool of mortgage loans. UPB is used together with the servicing fees and ancillary incomes as a means of estimating the future revenue stream for a servicer.

U.S. Department of Agriculture (“USDA”). The USDA is a cabinet-level department of the U.S. federal government, which guarantees certain home loans for qualified borrowers.

Warehouse Facility.  A type of line of credit facility used to temporarily finance mortgage loan originations to be sold in the secondary market. Pursuant to a warehouse facility, a loan originator typically agrees to transfer to a counterparty certain mortgage loans against the transfer of funds by the counterpart, with a simultaneous agreement by the counterpart to transfer the loans back to the originator at a date certain, or on demand, against the transfer of funds from the originator.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Refer to the discussion included in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2021.2022. There have been no material changes in the types of market risks faced by us since December 31, 2021. Our market risks include2022, except that we have increased the broad effectstarget hedge ratio on our MSR hedge position from 25% of the COVID-19 pandemic. Whilenet duration risk in our MSR portfolio at year-end 2022 to a target of 75% as of June 30, 2023, with the pandemic’s effect ongoal of mitigating the macroeconomic environment has yetrisk to be fully determinedcapital and could continue for months or years, the pandemic and governmental programs created astangible book value in a response to the pandemic, has affected and will continue to affect our business, financial conditions and results of operations.declining interest rate environment.

Sensitivity Analysis
We assess our market risk based on changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential impact on fair values based on hypothetical changes (increases and decreases) in interest rates.

We use a duration-based model in determining the impact of interest rate shifts on our loan portfolio, certain other interest-bearing liabilities measured at fair value and interest rate derivatives portfolios. The primary assumption used in these models is that an increase or decrease in the benchmark interest rate produces a parallel shift in the yield curve across all maturities.

We utilize a discounted cash flow analysis to determine the fair value of MSRs and the impact of parallel interest rate shifts on MSRs. The discounted cash flow model incorporates prepayment speeds, discount rate,OAS, costs to service, delinquencies, ancillary revenues, recapture rates and other assumptions that management believes are consistent with the assumptions that other similar market participants use in valuing the MSRs. The key assumptions to determine fair value include prepayment speed, discount rateOAS and cost to service. However, this analysis ignores the impact of interest rate changes on certain material variables, such as the benefit or detriment on the value of future loan originations, non-parallel shifts in the spread relationships between MBS, swaps and U.S. Treasury rates and changes in primary and secondary mortgage market spreads. For mortgage loans, IRLCs, and forward delivery commitments on MBS and treasury futures, we rely on a model in determining the impact of interest rate shifts. In addition, the primary assumption used for IRLCs, is the borrower’s propensity to close their mortgage loans under the commitment.

Our total market risk is influenced by a wide variety of factors including market volatility and the liquidity of the markets. There are certain limitations inherent in the sensitivity analysis presented, including the necessity to conduct the analysis based on a single point in time and the inability to include the complex market reactions that normally would arise from the market shifts modeled.

We used June 30, 20222023 market rates on our instruments to perform the sensitivity analysis. The estimates are based on the market risk sensitive portfolios described in the preceding paragraphs and assume instantaneous, parallel shifts in interest rate yield curves. These sensitivities are hypothetical and presented for illustrative purposes only. Changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in fair value may not be linear.

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The following table summarizes the estimated change in the fair value of our assets and liabilities sensitive to interest rates as of June 30, 20222023 given hypothetical instantaneous parallel shifts in the yield curve. Actual results could differ materially.

Table 16. Change in Fair Value
June 30, 2022June 30, 2023
Down 25 bpsUp 25 bpsDown 25 bpsUp 25 bps
Increase (decrease) in assetsIncrease (decrease) in assetsIncrease (decrease) in assets
Mortgage servicing rights at fair valueMortgage servicing rights at fair value$(162)$150 Mortgage servicing rights at fair value$(71)$64 
Mortgage loans held for sale at fair valueMortgage loans held for sale at fair value9 (10)Mortgage loans held for sale at fair value4 (5)
Derivative financial instruments:Derivative financial instruments:Derivative financial instruments:
Interest rate lock commitmentsInterest rate lock commitments15 (18)Interest rate lock commitments6 (7)
Forward MBS tradesForward MBS trades(11)13 Forward MBS trades(11)12 
Treasury futures1 (1)
Total change in assetsTotal change in assets(148)134 Total change in assets(72)64 
Increase (decrease) in liabilitiesIncrease (decrease) in liabilitiesIncrease (decrease) in liabilities
Mortgage servicing rights financing at fair valueMortgage servicing rights financing at fair value(2)2 Mortgage servicing rights financing at fair value(2)2 
Excess spread financing at fair valueExcess spread financing at fair value(6)5 Excess spread financing at fair value(3)3 
Derivative financial instruments:Derivative financial instruments:Derivative financial instruments:
Interest rate lock commitmentsInterest rate lock commitments(2)3 Interest rate lock commitments(2)2 
Forward MBS tradesForward MBS trades7 (8)Forward MBS trades(13)13 
Treasury futuresTreasury futures(24)24 Treasury futures(49)48 
Total change in liabilitiesTotal change in liabilities(27)26 Total change in liabilities(69)68 
Total, net changeTotal, net change$(121)$108 Total, net change$(3)$(4)


Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of June 30, 2022.2023.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2022,2023, our disclosure controls and procedures are effective. Disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting
During the three months ended June 30, 2022,2023, no changes in our internal control over financial reporting occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.


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PART II – OTHER INFORMATION
Item 1. Legal Proceedings

ForThe Company and its subsidiaries are routinely and currently involved in a descriptionnumber of our material legal proceedings, seeincluding, but not limited to, judicial, arbitration, regulatory and governmental proceedings related to matters that arise in connection with the conduct of the Company’s business. While it is not possible to predict the outcome of any of these matters, based on the Company’s assessment of the facts and circumstances, it does not believe any of these matters, individually or in the aggregate, will have a material adverse effect on the financial position, results of operations or cash flows of the Company. See Note 15, Commitments and Contingencies, of the Notes to the Condensed Consolidated Financial Statements within Part I, Item 1. Financial Statements, of this Form 10-Q.

Item 1A. Risk Factors

There have been no material changes or additions to the risk factors previously disclosed under “Risk Factors” included in our Annual Report on Form 10-K filed for the year ended December 31, 2021.2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In 2021,October 2022, our Board of Directors authorized a stocknew repurchase plan that allows the repurchase of up to $500$200 million of our outstanding common stock, of which $67 million remained as of June 30, 2023. In July 2023, our Board of Directors authorized an additional $200 million of our outstanding common stock. During the three months ended June 30, 2022,2023, we repurchased shares of our common stock at a total cost of $100$57 million under our share repurchase program. The number and average price of shares purchased are set forth in the table below:

Period(a) Total Number of Shares (or Units) Purchased(b) Average Price Paid per Share (or Unit)(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(d) Maximum Number (or Appropriate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Program
April 2022 $  $217 
May 20221,929 $44.35 1,929 $131 
June 2022332 $43.66 332 $117 
Total2,261 2,261 
Period(a) Total Number of Shares (or Units) Purchased
(in thousands)
(b) Average Price Paid per Share (or Unit)(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
(in thousands)
(d) Maximum Number (or Appropriate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Program (in millions)
April 2023 $  $124 
May 2023616 $45.46 616 $96 
June 2023596 $48.54 596 $67 
Total1,212 1,212 


Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.On June 14, 2023, Jay Bray, Chairman and Chief Executive Officer, entered into a pre-arranged stock trading plan (the “10b5-1 Plan”) with a brokerage firm to sell up to a maximum of 300,000 shares of the Company’s common stock between September 29, 2023 and September 30, 2024. The 10b5-1 Plan was designed to comply with the guidelines specified in Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, as amended, and is intended to satisfy the affirmative defense of Rule 10b5–1(c).


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Item 6. Exhibits

Incorporated by Reference
Exhibit 
Number
DescriptionFormFile No.ExhibitFiling DateFiled or Furnished Herewith
10.1X
10.2X
10.3X
10.4X
10.5X
10.6X
10.7X
31.1X
31.2X
32.1X
32.2X
Incorporated by Reference
Exhibit 
Number
DescriptionFormFile No.ExhibitFiling DateFiled or Furnished Herewith
2.18-K001-146672.105/11/2023
10.1X
10.2X
10.3X
10.4X
10.5X
10.6X
10.7X
31.1X
31.2X
32.1X
32.2X
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Incorporated by Reference
Exhibit 
Number
DescriptionFormFile No.ExhibitFiling DateFiled or Furnished Herewith
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.X
101.SCHInline XBRL Taxonomy Extension Schema DocumentX
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentX
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentX
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101.)X

+     The schedules and other attachments referenced in this exhibit have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or attachment will be furnished supplementary to the Securities and Exchange Commission upon request.
**    Management, contract, compensatory plan or arrangement.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MR. COOPER GROUP INC.
July 27, 202226, 2023/s/ Jay Bray
DateJay Bray
Chief Executive Officer
(Principal Executive Officer)
July 27, 202226, 2023/s/ Jaime GowKurt Johnson
DateJaime GowKurt Johnson
Executive Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)

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