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 ~~September~~June 30, ~~2022~~2023


☐ 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

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 class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value per share	COOP	The 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 Filer	x	Accelerated 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 ~~October 21, 2022~~July 20, 2023 was ~~70,564,728.~~66,848,546.

Table of Contents

MR. COOPER GROUP INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022	3
	Condensed Consolidated Statements of Operations (unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	4
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	56
	Condensed Consolidated Statements of Cash Flows (unaudited) for the ~~Nine~~Six Months Ended ~~September 30,~~June, 2023 and 2022 ~~and 2021~~	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	98
	1. Nature of Business and Basis of Presentation	98
	2. Dispositions	109
	3. Mortgage Servicing Rights and Related Liabilities	119
	4. Advances and Other Receivables	13
	5. Mortgage Loans Held for Sale	1514
	6. Loans Subject to Repurchase from Ginnie Mae	1615
	7. Goodwill and Intangible Assets	1615
	8. Derivative Financial Instruments	1615
	9. Indebtedness	1817
	10. Securitizations and Financings	1918
	11. Earnings Per Share	2019
	12. Income Taxes	2220
	13. Fair Value Measurements	2220
	14. Capital Requirements	25
	15. Commitments and Contingencies	2526
	16. Segment Information	2726
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3130
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5354
Item 4.	Controls and Procedures	5455

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	5556
Item 1A.	Risk Factors	5556
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5556
Item 3.	Defaults Upon Senior Securities	5556
Item 4.	Mine Safety Disclosures	5556
Item 5.	Other Information	5556
Item 6.	Exhibits	5657

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)


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(unaudited)					(unaudited)
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	530	$	895	Cash and cash equivalents	$	517	$	527
Restricted cash	Restricted cash	148		146		Restricted cash	170		175
Mortgage servicing rights at fair value	Mortgage servicing rights at fair value	6,408		4,223		Mortgage servicing rights at fair value	7,149		6,654
Advances and other receivables, net of reserves of $143 and $167, respectively		831		1,228
Advances and other receivables, net of reserves of $156 and $137, respectively						Advances and other receivables, net of reserves of $156 and $137, respectively	802		1,019
Mortgage loans held for sale at fair value	Mortgage loans held for sale at fair value	1,581		4,381		Mortgage loans held for sale at fair value	1,187		893
Property and equipment, net of accumulated depreciation of $116 and $122, respectively		69		98
Property and equipment, net of accumulated depreciation of $141 and $122, respectively						Property and equipment, net of accumulated depreciation of $141 and $122, respectively	61		65
Deferred tax assets, net	Deferred tax assets, net	711		991		Deferred tax assets, net	657		703
Other assets	Other assets	2,537		2,242		Other assets	2,601		2,740

Total assets	Total assets	$	12,815	$	14,204	Total assets	$	13,144	$	12,776

Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Unsecured senior notes, net	Unsecured senior notes, net	$	2,673	$	2,670	Unsecured senior notes, net	$	2,676	$	2,673
Advance and warehouse facilities, net		3,070		4,997
Advance, warehouse and MSR facilities, net						Advance, warehouse and MSR facilities, net	3,512		2,885
Payables and other liabilities	Payables and other liabilities	2,428		2,392		Payables and other liabilities	2,395		2,633
MSR related liabilities - nonrecourse at fair value	MSR related liabilities - nonrecourse at fair value	539		778		MSR related liabilities - nonrecourse at fair value	482		528
Total liabilities	Total liabilities	8,710		10,837		Total liabilities	9,065		8,719
Commitments and contingencies (Note 15)	Commitments and contingencies (Note 15)					Commitments 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 issued	Common stock at $0.01 par value - 300 million shares authorized, 93.2 million shares issued	1		1		Common stock at $0.01 par value - 300 million shares authorized, 93.2 million shares issued	1		1
Additional paid-in-capital	Additional paid-in-capital	1,099		1,116		Additional paid-in-capital	1,074		1,104
Retained earnings	Retained earnings	3,801		2,879		Retained earnings	3,981		3,802
Treasury shares at cost - 22.7 million and 19.4 million shares, respectively		(796)		(630)
Total Mr. Cooper stockholders’ equity		4,105		3,366
Non-controlling interests		—		1
Treasury shares at cost - 26.4 million and 24.0 million shares, respectively						Treasury shares at cost - 26.4 million and 24.0 million shares, respectively	(977)		(850)
Total stockholders’ equity	Total stockholders’ equity	4,105		3,367		Total stockholders’ equity	4,079		4,057
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	12,815	$	14,204	Total liabilities and stockholders’ equity	$	13,144	$	12,776

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

Table of Contents

MR. COOPER GROUP INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(millions of dollars, except for earnings per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenues:	Revenues:									Revenues:
Service related, net	Service related, net	$	395	$	288	$	1,610	$	860	Service related, net	$	402	$	460	$	663	$	1,215
Net gain on mortgage loans held for sale	Net gain on mortgage loans held for sale	115		572		551		1,833		Net gain on mortgage loans held for sale	84		139		153		436
Total revenues	Total revenues	510		860		2,161		2,693		Total revenues	486		599		816		1,651
Expenses:	Expenses:									Expenses:
Salaries, wages and benefits	Salaries, wages and benefits	183		251		614		805		Salaries, wages and benefits	156		203		304		431
General and administrative	General and administrative	133		151		368		476		General and administrative	122		125		235		235
Total expenses	Total expenses	316		402		982		1,281		Total expenses	278		328		539		666

Interest income	Interest income	83		66		169		163		Interest income	117		50		202		86
Interest expense	Interest expense	(104)		(118)		(321)		(363)		Interest expense	(122)		(111)		(232)		(217)
Other (expense) income, net	Other (expense) income, net	(20)		8		197		494		Other (expense) income, net	(5)		(5)		(14)		217
Total other (expense) income, net	Total other (expense) income, net	(41)		(44)		45		294		Total other (expense) income, net	(10)		(66)		(44)		86
Income from continuing operations before income tax expense		153		414		1,224		1,706
Income before income tax expense										Income before income tax expense	198		205		233		1,071
Less: Income tax expense	Less: Income tax expense	40		104		302		410		Less: Income tax expense	56		54		54		262
Net income from continuing operations		113		310		922		1,296
Net (loss) income from discontinued operations		—		(11)		—		3
Net income	Net income	113		299		922		1,299		Net income	$	142	$	151	$	179	$	809
Less: Undistributed earnings attributable to participating stockholders		—		1		—		9
Less: Premium on retirement of preferred stock		—		28		—		28
Net income attributable to common stockholders		$	113	$	270	$	922	$	1,262

Earnings from continuing operations per common share attributable to Mr. Cooper:
Earnings per share										Earnings per share
Basic	Basic	$	1.59	$	3.56	$	12.71	$	14.85	Basic	$	2.10	$	2.08	$	2.62	$	11.04
Diluted	Diluted	$	1.55	$	3.42	$	12.37	$	14.20	Diluted	$	2.07	$	2.03	$	2.57	$	10.74

Earnings from discontinued operations per common share attributable to Mr. Cooper:
Basic		$	—	$	(0.14)	$	—	$	0.04
Diluted		$	—	$	(0.13)	$	—	$	0.03

Earnings per common share attributable to Mr. Cooper:
Basic		$	1.59	$	3.42	$	12.71	$	14.89
Diluted		$	1.55	$	3.29	$	12.37	$	14.23

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

Table of Contents

MR. COOPER GROUP INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(millions of dollars, except share data)


		Preferred Stock			Common Stock																Common Stock
		Shares (in thousands)	Amount		Shares (in thousands)	Amount		Additional Paid-in Capital		Retained Earnings		Treasury Share Amount		Total Mr. Cooper Stockholders’ Equity		Non-controlling Interests		Total Stockholders’ Equity				Shares (in thousands)	Amount		Additional Paid-in Capital		Retained Earnings		Treasury Share Amount		Total Mr. Cooper Stockholders’ Equity		Non-controlling Interests		Total Stockholders’ Equity
Balance at June 30, 2021		1,000	$	—	86,149	$	1	$	1,120	$	2,434	$	(206)	$	3,349	$	1	$	3,350
Balance at March 31, 2022																				Balance at March 31, 2022		73,906	$	1	$	1,085	$	3,537	$	(647)	$	3,976	$	1	$	3,977
Shares issued / (surrendered) under incentive compensation plan	Shares issued / (surrendered) under incentive compensation plan	—	—		45	—		—		—		—		—		—		—		Shares issued / (surrendered) under incentive compensation plan		6	—		—		—		—		—		—		—
Share-based compensation	Share-based compensation	—	—		—	—		7		—		—		7		—		7		Share-based compensation		—	—		9		—		—		9		—		9
Repurchase of common stock	Repurchase of common stock	—	—		(11,073)	—		—		—		(368)		(368)		—		(368)		Repurchase of common stock		(2,261)	—		—		—		(100)		(100)		—		(100)
Retirement of preferred stock		(1,000)	—		—	—		(19)		(9)		—		(28)		—		(28)

Net income	Net income	—	—		—	—		—		299		—		299		—		299		Net income		—	—		—		151		—		151		—		151
Balance at September 30, 2021		—	$	—	75,121	$	1	$	1,108	$	2,724	$	(574)	$	3,259	$	1	$	3,260
Balance at June 30, 2022																				Balance at June 30, 2022		71,651	$	1	$	1,094	$	3,688	$	(747)	$	4,036	$	1	$	4,037

Balance at June 30, 2022		—	$	—	71,651	$	1	$	1,094	$	3,688	$	(747)	$	4,036	$	1	$	4,037
Balance at March 31, 2023																				Balance at March 31, 2023		68,053	$	1	$	1,066	$	3,839	$	(920)	$	3,986	$	—	$	3,986
Shares issued / (surrendered) under incentive compensation plan	Shares issued / (surrendered) under incentive compensation plan	—	—		42	—		(2)		—		1		(1)		—		(1)		Shares issued / (surrendered) under incentive compensation plan		7	—		—		—		—		—		—		—
Share-based compensation	Share-based compensation	—	—		—	—		7		—		—		7		—		7		Share-based compensation		—	—		8		—		—		8		—		8
Dividends paid to noncontrolling interests		—	—		—	—		—		—		—		—		(1)		(1)

Repurchase of common stock	Repurchase of common stock	—	—		(1,136)	—		—		—		(50)		(50)		—		(50)		Repurchase of common stock		(1,212)	—		—		—		(57)		(57)		—		(57)

Net income	Net income	—	—		—	—		—		113		—		113		—		113		Net income		—	—		—		142		—		142		—		142
Balance at September 30, 2022		—	$	—	70,557	$	1	$	1,099	$	3,801	$	(796)	$	4,105	$	—	$	4,105
Balance at June 30, 2023																				Balance at June 30, 2023		66,848	$	1	$	1,074	$	3,981	$	(977)	$	4,079	$	—	$	4,079

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

Table of Contents

MR. COOPER GROUP INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(millions of dollars, except share data)


		Preferred Stock			Common Stock																Common Stock
		Shares (in thousands)	Amount		Shares (in thousands)	Amount		Additional Paid-in Capital		Retained Earnings		Treasury Share Amount		Total Mr. Cooper Stockholders’ Equity		Non-controlling Interests		Total Stockholders’ Equity				Shares (in thousands)	Amount		Additional Paid-in Capital		Retained Earnings		Treasury Share Amount		Total Mr. Cooper Stockholders’ Equity		Non-controlling Interests		Total Stockholders’ Equity
Balance at January 1, 2021		1,000	$	—	89,457	$	1	$	1,126	$	1,434	$	(58)	$	2,503	$	1	$	2,504
Balance at January 1, 2022																				Balance at January 1, 2022		73,777	$	1	$	1,116	$	2,879	$	(630)	$	3,366	$	1	$	3,367
Shares issued / (surrendered) under incentive compensation plan	Shares issued / (surrendered) under incentive compensation plan	—	—		1,242	—		(20)		—		—		(20)		—		(20)		Shares issued / (surrendered) under incentive compensation plan		856	—		(39)		—		18		(21)		—		(21)
Share-based compensation	Share-based compensation	—	—		—	—		21		—		—		21		—		21		Share-based compensation		—	—		17		—		—		17		—		17

Repurchase of common stock	Repurchase of common stock	—	—		(15,578)	—		—		—		(516)		(516)		—		(516)		Repurchase of common stock		(2,982)	—		—		—		(135)		(135)		—		(135)
Retirement of preferred stock		(1,000)	—		—	—		(19)		(9)		—		(28)		—		(28)

Net income	Net income	—	—		—	—		—		1,299		—		1,299		—		1,299		Net income		—	—		—		809		—		809		—		809
Balance at September 30, 2021		—	$	—	75,121	$	1	$	1,108	$	2,724	$	(574)	$	3,259	$	1	$	3,260
Balance at June 30, 2022																				Balance at June 30, 2022		71,651	$	1	$	1,094	$	3,688	$	(747)	$	4,036	$	1	$	4,037

Balance at January 1, 2022		—	$	—	73,777	$	1	$	1,116	$	2,879	$	(630)	$	3,366	$	1	$	3,367
Balance at January 1, 2023																				Balance at January 1, 2023		69,266	$	1	$	1,104	$	3,802	$	(850)	$	4,057	$	—	$	4,057
Shares issued / (surrendered) under incentive compensation plan	Shares issued / (surrendered) under incentive compensation plan	—	—		898	—		(41)		—		19		(22)		—		(22)		Shares issued / (surrendered) under incentive compensation plan		877	—		(43)		—		19		(24)		—		(24)
Share-based compensation	Share-based compensation	—	—		—	—		24		—		—		24		—		24		Share-based compensation		—	—		13		—		—		13		—		13
Dividends paid to noncontrolling interests		—	—		—	—		—		—		—		—		(1)		(1)
Repurchase of common stock	Repurchase of common stock	—	—		(4,118)	—		—		—		(185)		(185)		—		(185)		Repurchase of common stock		(3,295)	—		—		—		(146)		(146)		—		(146)

Net income	Net income	—	—		—	—		—		922		—		922		—		922		Net income		—	—		—		179		—		179		—		179
Balance at September 30, 2022		—	$	—	70,557	$	1	$	1,099	$	3,801	$	(796)	$	4,105	$	—	$	4,105
Balance at June 30, 2023																				Balance at June 30, 2023		66,848	$	1	$	1,074	$	3,981	$	(977)	$	4,079	$	—	$	4,079

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

Table of Contents

MR. COOPER GROUP INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions of dollars)

Nine Months Ended September 30,
2022 2021
Operating Activities
Net income $ 922 $ 1,299
Less: Net income from discontinued operations — 3
Net income from continuing operations 922 1,296
Adjustments to reconcile net income from continuing operations to net cash attributable to operating activities:
Deferred tax expense 280 326
Net gain on mortgage loans held for sale (551) (1,833)
Provision for servicing and non-servicing reserves 22 28
Fair value changes in mortgage servicing rights (719) 296
Fair value changes in MSR related liabilities 134 (7)
Depreciation and amortization for property and equipment and intangible assets 29 45
Gain on sale of business — (494)
Gain on disposition of assets (223) —
Loss on MSR hedging activities 329 82
Other operating activities 75 40
Repurchases of loan assets out of Ginnie Mae securitizations (2,904) (8,530)
Mortgage loans originated and purchased for sale, net of fees (25,120) (67,507)
Sales proceeds and loan payment proceeds for mortgage loans held for sale 30,440 74,968
Changes in assets and liabilities:
Advances and other receivables 355 (41)
Other assets 287 236
Payables and other liabilities (212) (289)
Net cash attributable to operating activities - continuing operations 3,144 (1,384)
Net cash attributable to operating activities - discontinued operations — 614
Net cash attributable to operating activities 3,144 (770)
Investing Activities
Sale of business, net of cash divested — 432
Property and equipment additions, net of disposals (14) (33)
Purchase of mortgage servicing rights (1,257) (431)
Proceeds on sale of mortgage servicing rights 284 13
Other investing activities — 1
Net cash attributable to investing activities - continuing operations (987) (18)
Net cash attributable to investing activities - discontinued operations — 1,029
Net cash attributable to investing activities (987) 1,011
Financing Activities
(Decrease) increase in advance and warehouse facilities (1,933) 1,950
Repayments of excess spread financing (293) —
Settlements of excess spread financing (80) (118)
Repurchase of common stock (185) (516)
Retirement of preferred stock — (28)
Other financing activities (29) (33)
Net cash attributable to financing activities - continuing operations (2,520) 1,255
Net cash attributable to financing activities - discontinued operations — (1,495)
Net cash attributable to financing activities (2,520) (240)
Net (decrease) increase in cash, cash equivalents, and restricted cash (363) 1
Cash, cash equivalents, and restricted cash - beginning of period 1,041 913
Cash, cash equivalents, and restricted cash - end of period(1)
$ 678 $ 914

~~Table of Contents~~


							Six Months Ended June 30,
							2023		2022
Operating Activities						Operating Activities
Net income						Net income	$	179	$	809
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 expense						Deferred tax expense	46		241
Net gain on mortgage loans held for sale						Net gain on mortgage loans held for sale	(153)		(436)
Provision for servicing and non-servicing reserves						Provision for servicing and non-servicing reserves	18		11
Fair value changes in mortgage servicing rights						Fair value changes in mortgage servicing rights	239		(663)
Fair value changes in MSR related liabilities						Fair value changes in MSR related liabilities	(6)		131
Depreciation and amortization for property and equipment and intangible assets						Depreciation and amortization for property and equipment and intangible assets	18		20
Gain on disposition of assets						Gain on disposition of assets	—		(223)
Loss on MSR hedging activities						Loss on MSR hedging activities	52		229
Gain on MSR sales						Gain on MSR sales	(32)		(1)
Other operating activities						Other operating activities	34		39
Repurchases of loan assets out of Ginnie Mae securitizations						Repurchases of loan assets out of Ginnie Mae securitizations	(547)		(2,686)
Mortgage loans originated and purchased for sale, net of fees						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 sale						Sales proceeds and loan payment proceeds for mortgage loans held for sale	6,842		24,056
Changes in assets and liabilities:						Changes in assets and liabilities:
Advances and other receivables						Advances and other receivables	197		311
Other assets						Other assets	(39)		256
Payables and other liabilities						Payables and other liabilities	(106)		(142)
Net cash attributable to operating activities						Net cash attributable to operating activities	149		2,582

Investing Activities						Investing Activities
Acquisition of assets						Acquisition of assets	(34)		—
Property and equipment additions, net of disposals						Property and equipment additions, net of disposals	(10)		(9)
Purchase of mortgage servicing rights						Purchase of mortgage servicing rights	(841)		(1,151)
Proceeds on sale of mortgage servicing rights and excess yield						Proceeds on sale of mortgage servicing rights and excess yield	312		275
Other investing activities						Other investing activities	(3)		—
Net cash attributable to investing activities						Net cash attributable to investing activities	(576)		(885)

Financing Activities						Financing Activities
Increase (decrease) in advance, warehouse and MSR facilities						Increase (decrease) in advance, warehouse and MSR facilities	630		(1,597)
Settlements and repayment of excess spread financing						Settlements and repayment of excess spread financing	(40)		(353)
Repurchase of common stock						Repurchase of common stock	(146)		(135)
Other financing activities						Other financing activities	(32)		(24)
Net cash attributable to financing activities						Net cash attributable to financing activities	412		(2,109)
Net decrease in cash, cash equivalents, and restricted cash						Net decrease in cash, cash equivalents, and restricted cash	(15)		(412)
Cash, cash equivalents, and restricted cash - beginning of period						Cash, cash equivalents, and restricted cash - beginning of period	702		1,041
Cash, cash equivalents, and restricted cash - end of period(1)						Cash, cash equivalents, and restricted cash - end of period(1)	$	687	$	629

Supplemental Disclosures of Non-cash Investing Activities	Supplemental Disclosures of Non-cash Investing Activities					Supplemental Disclosures of Non-cash Investing Activities
Equity consideration received from disposition of assets	Equity consideration received from disposition of assets	$	250	$	—	Equity consideration received from disposition of assets	$	—	$	250
Purchase of mortgage servicing rights	Purchase of mortgage servicing rights	$	7	$	12	Purchase of mortgage servicing rights	$	57	$	45
Forward mortgage servicing rights sales price holdback		$	15	$	2
Equity consideration received from sale of business		$	—	$	53
Mortgage servicing rights sales price holdback						Mortgage servicing rights sales price holdback	$	—	$	15

(1)The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the condensed consolidated balance sheets.


		September 30, 2022		September 30, 2021			June 30, 2023		June 30, 2022
Cash and cash equivalents	Cash and cash equivalents	$	530	$	731	Cash and cash equivalents	$	517	$	514
Restricted cash	Restricted cash	148		118		Restricted cash	170		115
Restricted cash within assets of discontinued operations		—		65
Total cash, cash equivalents, and restricted cash	Total cash, cash equivalents, and restricted cash	$	678	$	914	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 ~~originators~~servicers and ~~servicers~~originators 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 ~~2021~~2022 condensed consolidated statement of cash flows to conform to ~~2022~~2023 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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 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 (expense) income, net” within the condensed consolidated statements of operations, and recorded $4 transaction costs during the ~~nine~~six months ended ~~September~~June 30, 2022. No transaction costs were recorded in the three months ended ~~September~~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 ~~accounted~~accounts 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. The Company recorded a $5 loss of $4 and $11 during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, respectively, related to the Company's proportionate share of net loss of Sagent. The Company’s investment in Sagent was ~~$245~~$226 as of ~~September~~June 30, ~~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 costs of $5 during the nine months ended September 30, 2021. There were no transaction costs recorded for the three months ended September 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, primarily related to previously liquidated loans. As of September 30, 2022, the retained total assets and total liabilities were $38 and $27, 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.

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~~The following table sets forth the condensed consolidated statements of operations data for discontinued operations for the three and nine months ended September 30, 2021:~~

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
Revenue - service related, net $ 4 $ 13
Salaries, wages and benefits expense (7) (23)
General and administrative expense (14) 50
Interest income 31 118
Interest expense (26) (90)
Loss on classification as discontinued operations (3) (64)
(Loss) income from discontinued operations before income tax (benefit) expense (15) 4
Less: Income tax (benefit) expense (4) 1
Net (loss) income from discontinued operations $ (11) $ 3
2023.

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 Liabilities	MSRs and Related Liabilities	September 30, 2022		December 31, 2021		MSRs and Related Liabilities	June 30, 2023		December 31, 2022
MSRs - fair value	MSRs - fair value	$	6,408	$	4,223	MSRs - fair value	$	7,149	$	6,654

Excess spread financing - fair value		$	519	$	768
Mortgage servicing rights financing - fair value		20		10
Excess spread financing at fair value						Excess spread financing at fair value	$	459	$	509
Mortgage servicing rights financing at fair value						Mortgage servicing rights financing at fair value	23		19
MSR related liabilities - nonrecourse at fair value	MSR related liabilities - nonrecourse at fair value	$	539	$	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:


		Nine Months Ended September 30,					Six Months Ended June 30,
MSRs - Fair Value	MSRs - Fair Value	2022		2021		MSRs - Fair Value	2023		2022
Fair value - beginning of period	Fair 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 sold	Servicing retained from mortgage loans sold	481		790		Servicing retained from mortgage loans sold	133		360
Purchases of servicing rights	Purchases of servicing rights	1,256		438		Purchases of servicing rights	870		1,178
Dispositions:	Dispositions:					Dispositions:
Sales of servicing assets		(293)		(13)
Sales of servicing assets and excess yield						Sales 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)	1,363		476		Changes in valuation inputs or assumptions used in the valuation model (MSR MTM)	34		1,124
Changes in valuation due to amortization	Changes in valuation due to amortization	(644)		(772)		Changes in valuation due to amortization	(273)		(461)
Other changes(1)	Other changes(1)	22		44		Other changes(1)	11		16
Fair value - end of period	Fair value - end of period	$	6,408	$	3,666	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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company sold ~~$20,723~~$1,605 and ~~$1,266~~$20,052 in unpaid principal balance (“UPB”) of MSRs, of which ~~$19,692~~$590 and ~~$1,144~~$19,367 were retained by the Company as subservicer, respectively.

11During 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.

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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:


		September 30, 2022				December 31, 2021					June 30, 2023				December 31, 2022
MSRs - UPB and Fair Value Breakdown by Investor Pools	MSRs - UPB and Fair Value Breakdown by Investor Pools	UPB		Fair Value		UPB		Fair Value		MSRs - UPB and Fair Value Breakdown by Investor Pools	UPB		Fair Value		UPB		Fair Value
Agency	Agency	$	363,637	$	6,068	$	302,851	$	3,859	Agency	$	431,876	$	6,848	$	380,502	$	6,322
Non-agency	Non-agency	31,769		340		36,357		364		Non-agency	27,600		301		30,880		332
Total	Total	$	395,406	$	6,408	$	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 Rate				Total Prepayment Speeds				Cost to Service per Loan					Option Adjusted Spread(1)				Total Prepayment Speeds				Cost to Service per Loan
MSRs - Hypothetical Sensitivities	MSRs - 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
September 30, 2022
June 30, 2023														June 30, 2023
Mortgage servicing rights	Mortgage servicing rights	$	(266)	$	(512)	$	(142)	$	(276)	$	(66)	$	(132)	Mortgage servicing rights	$	(286)	$	(549)	$	(157)	$	(305)	$	(69)	$	(139)

December 31, 2021
															Discount Rate				Total Prepayment Speeds				Cost to Service per Loan
MSRs - Hypothetical Sensitivities														MSRs - Hypothetical Sensitivities	100 bps Adverse Change		200 bps Adverse Change		10% Adverse Change		20% Adverse Change		10% Adverse Change		20% Adverse Change
December 31, 2022														December 31, 2022
Mortgage servicing rights	Mortgage 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.

Excess Spread Financing - Fair Value

The Company had excess spread financing liability of ~~$519~~$459 and ~~$768~~$509, with UPB of $78,838 and $83,706 as of ~~September~~June 30, ~~2022~~2023 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 Rate				Prepayment Speeds					Option Adjusted Spread(1)				Prepayment Speeds
Excess Spread Financing - Hypothetical Sensitivities	Excess 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
September 30, 2022
June 30, 2023										June 30, 2023
Excess spread financing	Excess spread financing	$	20	$	41	$	12	$	24	Excess spread financing	$	16	$	34	$	6	$	18

December 31, 2021
											Discount Rate				Prepayment Speeds
Excess Spread Financing - Hypothetical Sensitivities										Excess Spread Financing - Hypothetical Sensitivities	100 bps Adverse Change		200 bps Adverse Change		10% Adverse Change		20% Adverse Change
December 31, 2022										December 31, 2022
Excess spread financing	Excess 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 ~~$20~~$23 and ~~$10~~$19 as of ~~September~~June 30, ~~2022~~2023 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.

~~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 September 30, Nine Months Ended September 30,
Total Revenues - Servicing 2022 2021 2022 2021
Contractually specified servicing fees(1)
$ 371 $ 280 $ 1,076 $ 831
Other service-related income(1)
— 158 68 517
Incentive and modification income(1)
5 10 23 38
Late fees(1)
19 19 57 53
Mark-to-market adjustments(2)
124 151 877 376
Amortization, net of accretion(3)
(169) (202) (570) (567)
Other(4)
(18) (65) (88) (224)
Total revenues - Servicing $ 332 $ 351 $ 1,443 $ 1,024


	Three Months Ended June 30,				Six Months Ended June 30,
Revenues - Service Related, net	2023		2022		2023		2022
Contractually specified servicing fees(1)	$	407	$	378	$	791	$	705
Other service-related income(1)	19		39		33		72
Incentive and modification income(1)	8		9		14		18
Servicing late fees(1)	23		19		44		38
Mark-to-market adjustments - Servicing
MSR MTM	139		326		34		1,124
Loss on MSR hedging activities	(111)		(89)		(52)		(229)
Gain on MSR sales	32		1		32		1
Reclassifications(2)	(9)		(6)		(18)		(12)
Excess spread /MSR financing MTM	12		(32)		6		(131)
Total mark-to-market adjustments - Servicing	63		200		2		753
Amortization, net of accretion
MSR amortization	(148)		(226)		(273)		(461)
Excess spread accretion	11		27		21		60
Total amortization, net of accretion	(137)		(199)		(252)		(401)
Originations service fees(3)	16		24		27		66
Corporate/Xome related service fees	21		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 ~~$172~~$176 and ~~$488~~$170 for the three ~~and nine~~ months ended ~~September~~June 30, 2023 and 2022, ~~and $128~~respectively, and $353 and $316 for ~~three and nine~~the six months ended ~~September~~June 30, ~~2021,~~2023 and 2022, respectively.

(2)~~Mark-to-market (“MTM”) adjustments~~Reclassifications 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 $10 and $8 for the three months ended September 30, 2022 and 2021 and $22 and $28 for the nine months ended September 30, 2022 and 2021, respectively.~~

(3)~~Amortization is net of excess spread accretion of $14~~Amounts include fees collected from customers for originated loans and ~~$59 during~~from other lenders for loans purchased through the ~~three months ended September 30, 2022~~correspondent channel, and ~~2021, respectively. For the nine months ended September 30, 2022~~include loan application, underwriting, and ~~2021, amortization is net of excess spread accretion of $74 and $205, 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, Net	Advances and Other Receivables, Net	September 30, 2022		December 31, 2021		Advances and Other Receivables, Net	June 30, 2023		December 31, 2022
Servicing advances, net of $12 and $19 purchase discount, respectively		$	854	$	1,263
Receivables from agencies, investors and prior servicers, net of $7 and $12 purchase discount, respectively		120		132
Servicing advances, net of $9 and $12 purchase discount, respectively						Servicing advances, net of $9 and $12 purchase discount, respectively	$	849	$	1,053
Receivables from agencies, investors and prior servicers, net of $7 purchase discount						Receivables from agencies, investors and prior servicers, net of $7 purchase discount	109		103
Reserves	Reserves	(143)		(167)		Reserves	(156)		(137)
Total advances and other receivables, net	Total advances and other receivables, net	$	831	$	1,228	Total advances and other receivables, net	$	802	$	1,019

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The following table sets forth the activities of the servicing reserves for advances and other receivables:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
Reserves for Advances and Other Receivables	Reserves for Advances and Other Receivables	2022		2021		2022		2021		Reserves for Advances and Other Receivables	2023		2022		2023		2022
Balance - beginning of period	Balance - beginning of period	$	150	$	191	$	167	$	208	Balance - beginning of period	$	148	$	152	$	137	$	167
Provision and other additions(1)		19		18		53		59
Provision										Provision	9		6		18		12
Reclassifications(1)										Reclassifications(1)	9		12		16		22
Write-offs	Write-offs	(26)		(37)		(77)		(95)		Write-offs	(10)		(20)		(15)		(51)
Balance - end of period	Balance - end of period	$	143	$	172	$	143	$	172	Balance - end of period	$	156	$	150	$	156	$	150

(1)~~The Company recorded a~~ provision of $10 and $8 through the MTM adjustments in “revenues - service related, net”, in the condensed consolidated statements of operations during the three months ended September 30, 2022 and 2021, respectively, and $22 and $28 ~~during the~~ ~~nine months ended September 30, 2022 and 2021,~~ ~~respectively, for inactive and liquidated loans that are no longer part of the MSR portfolio. Other additions~~Reclassifications represent ~~reclassifications of~~ required reserves provisioned within other balance sheet accounts as associated serviced loans become inactive or liquidate.

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 September 30,									Three Months Ended June 30,
		2022				2021					2023				2022
Purchase Discount for Advances and Other Receivables	Purchase Discount for Advances and Other Receivables	Servicing Advances		Receivables from Agencies, Investors and Prior Servicers		Servicing Advances		Receivables from Agencies, Investors and Prior Servicers		Purchase Discount for Advances and Other Receivables	Servicing Advances		Receivables from Agencies, Investors and Prior Servicers		Servicing Advances		Receivables from Agencies, Investors and Prior Servicers
Balance - beginning of period	Balance - beginning of period	$	14	$	8	$	31	$	20	Balance - beginning of period	$	9	$	7	$	16	$	8
Utilization of purchase discounts	Utilization of purchase discounts	(2)		(1)		(1)		(7)		Utilization of purchase discounts	—		—		(2)		—

Balance - end of period	Balance - end of period	$	12	$	7	$	30	$	13	Balance - end of period	$	9	$	7	$	14	$	8


		Nine Months Ended September 30,									Six Months Ended June 30,
		2022				2021					2023				2022
Purchase Discount for Advances and Other Receivables	Purchase Discount for Advances and Other Receivables	Servicing Advances		Receivables from Agencies, Investors and Prior Servicers		Servicing Advances		Receivables from Agencies, Investors and Prior Servicers		Purchase Discount for Advances and Other Receivables	Servicing Advances		Receivables from Agencies, Investors and Prior Servicers		Servicing Advances		Receivables from Agencies, Investors and Prior Servicers
Balance - beginning of period	Balance - beginning of period	$	19	$	12	$	72	$	21	Balance - beginning of period	$	12	$	7	$	19	$	12
Utilization of purchase discounts	Utilization of purchase discounts	(7)		(5)		(42)		(8)		Utilization of purchase discounts	(3)		—		(5)		(4)

Balance - end of period	Balance - end of period	$	12	$	7	$	30	$	13	Balance - end of period	$	9	$	7	$	14	$	8

Credit Loss for Advances and Other Receivables

~~As of September~~During the three and six months ended June 30, ~~2022,~~2023, the ~~total~~Company decreased and increased the current expected credit loss (“CECL”) reserve by $1, respectively. During the three and six months ended June 30, 2022, the Company increased the CECL reserve by $3 and $7, respectively. As of June 30, 2023, the total CECL reserve was ~~$34,~~$37, of which ~~$27~~$30 and $7 were recorded in reserves and purchase discount for advances and other receivables, respectively. ~~There were no material changes to CECL reserves in 2022.~~ As of ~~September~~June 30, ~~2021~~2022, the total CECL reserve was ~~$29,~~$33, of which ~~$19~~$25 and ~~$10~~$8 were recorded in reserves and purchase discount for advances and other receivables, respectively. ~~There were no material changes to CECL reserves in 2021 except for a write-off of~~ ~~$16 in the three and nine months ended September 30, 2021.~~

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

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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 Sale	Mortgage Loans Held for Sale	September 30, 2022		December 31, 2021		Mortgage Loans Held for Sale	June 30, 2023		December 31, 2022
Mortgage loans held for sale – UPB	Mortgage loans held for sale – UPB	$	1,670	$	4,257	Mortgage loans held for sale – UPB	$	1,211	$	921
Mark-to-market adjustment(1)	Mark-to-market adjustment(1)	(89)		124		Mark-to-market adjustment(1)	(24)		(28)
Total mortgage loans held for sale	Total mortgage loans held for sale	$	1,581	$	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 ~~“net~~“revenues - net gain on mortgage loans held for sale” in the condensed consolidated statements of operations.

The following table sets forth the activities of mortgage loans held for sale:


		Nine Months Ended September 30,					Six Months Ended June 30,
Mortgage Loans Held for Sale	Mortgage Loans Held for Sale	2022		2021		Mortgage Loans Held for Sale	2023		2022
Balance - beginning of period	Balance - beginning of period	$	4,381	$	5,720	Balance - beginning of period	$	893	$	4,381
Loans sold		(30,648)		(73,822)
Loans sold and loan payments received						Loans sold and loan payments received	(6,845)		(24,251)
Mortgage loans originated and purchased, net of fees	Mortgage loans originated and purchased, net of fees	25,120		67,507		Mortgage loans originated and purchased, net of fees	6,593		19,370
Repurchase of loans out of Ginnie Mae securitizations(1)	Repurchase of loans out of Ginnie Mae securitizations(1)	2,904		8,530		Repurchase of loans out of Ginnie Mae securitizations(1)	547		2,686
Net change in unrealized (loss) gain on retained loans held for sale		(177)		1
Net change in unrealized gain (loss) on retained loans held for sale						Net change in unrealized gain (loss) on retained loans held for sale	5		(115)
Net transfers of mortgage loans held for sale~~(1)~~(2)	Net transfers of mortgage loans held for sale~~(1)~~(2)	1		3		Net transfers of mortgage loans held for sale~~(1)~~(2)	(6)		1
Balance - end of period	Balance - end of period	$	1,581	$	7,939	Balance - end of period	$	1,187	$	2,072

(1)~~Amount reflects~~The Company has the optional right to repurchase any individual loan in a Ginnie Mae securitization pool if that loan meets certain criteria, including being delinquent greater than 90 days. The majority of Ginnie Mae repurchased loans are repurchased in connection with loan modifications and loan resolution activity, with the intent to re-pool into new Ginnie Mae securitizations upon re-performance of the loan or to otherwise sell to third-party investors. Therefore, these loans are classified as held for sale.

(2)Amounts reflect transfers to other assets for loans transitioning into REO status and transfers to advances and other receivables, net, for claims made on certain government insurance mortgage loans. Transfers out are net of transfers in upon receipt of proceeds from an REO sale or claim filing.

~~During~~For the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~the Company received~~total realized loss was $3 and $195 from total sales proceeds of ~~$30,440~~$6,722 and $23,863, respectively, on the sale of mortgage loans held for ~~sale, resulting in a loss of $562. During the nine months ended September 30, 2021, the Company received proceeds of $74,968 on the sale of mortgage loans held for sale, resulting in a gain of $1,146.~~sale.

The total UPB and fair value of mortgage loans held for sale on non-accrual status was as follows:


		September 30, 2022				December 31, 2021					June 30, 2023				December 31, 2022
Mortgage Loans Held for Sale	Mortgage Loans Held for Sale	UPB		Fair Value		UPB		Fair Value		Mortgage Loans Held for Sale	UPB		Fair Value		UPB		Fair Value
Non-accrual(1)	Non-accrual(1)	$	108	$	93	$	104	$	94	Non-accrual(1)	$	80	$	68	$	102	$	87

(1)Non-accrual UPB includes ~~$97~~$67 and ~~$94~~$90 of UPB related to Ginnie Mae repurchased loans as of ~~September~~June 30, ~~2022~~2023 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 $5248 and ~~$16~~$65 as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

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6. Loans Subject to Repurchase from Ginnie Mae

~~Forward loans~~Loans are sold to Ginnie Mae in conjunction with the issuance of ~~mortgage backed~~mortgage-backed securities. The Company, as the issuer of the ~~mortgage backed~~mortgage-backed securities, has the unilateral right to repurchase any individual loan in a Ginnie Mae securitization pool if that loan meets certain criteria, including payments not being received from borrowers for greater than 90 days. Once the Company has the unilateral right to repurchase a delinquent loan, it has effectively regained control over the loan and recognizes these rights to the loan on its condensed consolidated balance sheets and establishes a corresponding repurchase liability regardless of the Company’s intention to repurchase the loan. The Company had loans subject to repurchase from Ginnie Mae of $~~1,575~~1,650 and ~~$1,496~~$1,865 as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, which are included in both “other assets” and “payables and other liabilities” in the condensed consolidated balance sheets. ~~Loans subject to repurchase from Ginnie Mae as of September 30, 2022 and December 31, 2021 include $1,403~~ ~~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 ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, and intangible assets of $9$28 and $148 as of ~~September~~June 30, ~~2022~~2023 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” within the condensed consolidated balance sheets.

8. Derivative Financial Instruments

Derivative instruments are used as part of the overall strategy to manage exposure to ~~market~~interest rate risks ~~primarily associated with fluctuations in interest rates~~ related to mortgage loans held for sale and IRLCs (“the ~~Originations~~pipeline”) and ~~Servicing segments. Derivative~~the MSR portfolio. The Company economically hedges the pipeline separately from the MSR portfolio primarily using third-party derivative instruments. Such derivative instruments utilized by the Company ~~primarily~~ include ~~interest rate lock commitments (“IRLCs”), loan purchase commitments (“LPCs”),~~IRLCs, LPCs, forward ~~Mortgage Backed Securities (“MBS”) purchase commitments, Eurodollar~~MBS 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 ~~“net~~“revenues - net gain on mortgage loans held for sale” on the condensed consolidated statements of operations and condensed consolidated statement of cash flows, while changes in the value of derivative instruments associated with the MSR portfolio fair value are recorded in ~~“service~~“revenues - service related, net” on the condensed consolidated statements of operations and in ~~“loss~~“(gain) loss on MSR hedging activities” on the condensed consolidated statements of cash flows.

1615

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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) include both realized and unrealized gains/(losses) of each derivative financial instrument.


			September 30, 2022				Nine Months Ended September 30, 2022				June 30, 2023				Six Months Ended June 30, 2023
Derivative Financial Instruments	Derivative Financial Instruments	Expiration Dates	Outstanding Notional		Fair Value		Gains/(Losses)		Derivative Financial Instruments	Expiration Dates	Outstanding Notional		Fair Value		Gains/(Losses)
Assets	Assets								Assets
Mortgage loans held for sale	Mortgage loans held for sale								Mortgage loans held for sale
Loan sale commitments	Loan sale commitments	2022	$	439	$	(3)	$	(28)	Loan sale commitments	2023	$	556	$	8	$	(1)
Derivative financial instruments	Derivative financial instruments								Derivative financial instruments
IRLCs	IRLCs	2022	$	1,118	$	21	$	(113)	IRLCs	2023	$	1,041	$	30	$	8
LPCs	LPCs	2022	53		1		(2)		LPCs	2023	200		1		—
Forward MBS trades	Forward MBS trades	2022	2,296		74		542		Forward MBS trades	2023	1,712		10		43
Treasury futures	Treasury futures	2022	—		—		4		Treasury futures	2023	72		—		—

Total derivative financial instruments - assets	Total derivative financial instruments - assets		$	3,467	$	96	$	431	Total derivative financial instruments - assets		$	3,025	$	41	$	51
Liabilities	Liabilities								Liabilities
Derivative financial instruments	Derivative financial instruments								Derivative financial instruments
IRLCs	IRLCs	2022	$	551	$	8	$	(8)	IRLCs	2023	$	18	$	—	$	—
LPCs	LPCs	2022	223		5		(2)		LPCs	2023	234		1		—
Forward MBS trades	Forward MBS trades	2022	458		19		(72)		Forward MBS trades	2023	1,175		3		(50)
Treasury futures	Treasury futures	2022	806		62		(262)		Treasury futures	2023	2,510		20		(44)

Total derivative financial instruments - liabilities	Total derivative financial instruments - liabilities		$	2,038	$	94	$	(344)	Total derivative financial instruments - liabilities		$	3,937	$	24	$	(94)


			September 30, 2021				Nine Months Ended September 30, 2021				June 30, 2022				Six Months Ended June 30, 2022
Derivative Financial Instruments	Derivative Financial Instruments	Expiration Dates	Outstanding Notional		Fair Value		Gains/(Losses)		Derivative Financial Instruments	Expiration Dates	Outstanding Notional		Fair Value		Gains/(Losses)
Assets	Assets								Assets
Mortgage loans held for sale	Mortgage loans held for sale								Mortgage loans held for sale
Loan sale commitments	Loan sale commitments	2021	$	1,435	$	29	$	(73)	Loan sale commitments	2022	$	246	$	8	$	(17)
Derivative financial instruments	Derivative financial instruments								Derivative financial instruments
IRLCs	IRLCs	2021	$	6,167	$	167	$	(247)	IRLCs	2022	$	2,103	$	62	$	(72)
LPCs	LPCs	2021	887		6		(33)		LPCs	2022	325		3		—
Forward MBS trades	Forward MBS trades	2021	12,770		61		240		Forward MBS trades	2022	1,798		12		429
Swap futures		2021	—		—		1
Treasury futures									Treasury futures	2022	30		—		3
Total derivative financial instruments - assets	Total derivative financial instruments - assets		$	19,824	$	234	$	(39)	Total derivative financial instruments - assets		$	4,256	$	77	$	360
Liabilities	Liabilities								Liabilities
Derivative financial instruments	Derivative financial instruments								Derivative financial instruments
IRLCs	IRLCs	2021	$	25	$	—	$	—	IRLCs	2022	$	56	$	1	$	(1)
LPCs	LPCs	2021	2,208		13		(12)		LPCs	2022	186		1		1
Forward MBS trades	Forward MBS trades	2021	6,553		23		(122)		Forward MBS trades	2022	1,716		13		(31)
Swap futures		2021	700		12		(18)
Treasury futures									Treasury futures	2022	902		18		(185)

Total derivative financial instruments - liabilities	Total derivative financial instruments - liabilities		$	9,486	$	48	$	(152)	Total derivative financial instruments - liabilities		$	2,860	$	33	$	(216)

~~The~~

Table of Contents

As of June 30, 2023, the Company held ~~$23~~$93 and ~~$27~~$9 in collateral deposits asand collateral obligations on derivative instruments, respectively. As of ~~September 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 liabilities”, respectively, in the Company’s condensed consolidated balance sheets. The Company does not offset fair value amounts recognized for derivative instruments with amounts collected or deposited on derivative instruments in the condensed consolidated balance sheets.

~~Table of Contents~~

9. Indebtedness

Advance, Warehouse and ~~Warehouse~~MSR Facilities


						September 30, 2022				December 31, 2021										June 30, 2023				December 31, 2022
		Maturity Date	Collateral	Capacity Amount		Outstanding		Collateral Pledged		Outstanding			Collateral Pledged			Maturity Date	Collateral	Capacity Amount		Outstanding		Collateral Pledged		Outstanding		Collateral Pledged
Advance Facilities	Advance Facilities														Advance Facilities
$350 advance facility	$350 advance facility	October 2024	Servicing advance receivables	$	350	$	150	$	182	$	160		$	197	$350 advance facility	October 2024	Servicing advance receivables	$	350	$	134	$	169	$	150	$	189
$350 advance facility		January 2023	Servicing advance receivables	350		130		154		162			190
$300 advance facility(1)	$300 advance facility(1)	November 2024	Servicing advance receivables	300		206		290		234			318		$300 advance facility(1)	November 2024	Servicing advance receivables	300		259		354		308		410
$250 advance facility															$250 advance facility	January 2024	Servicing advance receivables	250		183		210		171		209
$75 advance facility	$75 advance facility	December 2022	Servicing advance receivables	75		46		48		58			89		$75 advance facility	December 2023	Servicing advance receivables	75		34		65		40		45
Advance facilities principal amount	Advance facilities principal amount			532		674		614		794		Advance facilities principal amount						610		798		669		853

Warehouse Facilities	Warehouse Facilities														Warehouse Facilities
$1,500 warehouse facility		February 2023	Mortgage loans or MBS	1,500		427		531		1,224			1,341
$1,500 warehouse facility		June 2023	Mortgage loans or MBS	1,500		328		341		356			345
$1,000 warehouse facility		October 2023	Mortgage loans or MBS	1,000		235		244		991			1,024
$750 warehouse facility(2)		October 2022	Mortgage loans or MBS	750		258		274		256			270
$500 warehouse facility(3)		September 2024	Mortgage loans or MBS	500		144		157		409			425
$500 warehouse facility		June 2023	Mortgage loans or MBS	500		24		30		39			39
$500 warehouse facility		August 2023	Mortgage loans or MBS	500		12		13		38			39
$450 warehouse facility		April 2023	Mortgage loans or MBS	450		—		—		87			89
$300 warehouse facility		August 2023	Mortgage loans or MBS	300		55		58		419			430
$250 warehouse facility		April 2023	Mortgage loans or MBS	250		—		—		5			6
$200 warehouse facility		June 2023	Mortgage loans or MBS	200		5		8		188			194
$200 warehouse facility		April 2023	Mortgage loans or MBS	200		13		17		46			58
$125 warehouse facility		December 2022	Mortgage loans or MBS	125		3		3		67			67
$30 warehouse facility(4)		January 2022	Mortgage loans or MBS	—		—		—		—			—
$1500 Warehouse Facility															$1500 Warehouse Facility	June 2024	Mortgage loans or MBS	1,500		251		252		206		272
$750 Warehouse Facility															$750 Warehouse Facility	June 2024	Mortgage loans or MBS	750		186		239		135		133
$750 Warehouse Facility															$750 Warehouse Facility	October 2023	Mortgage loans or MBS	750		155		161		202		209
$500 Warehouse Facility															$500 Warehouse Facility	June 2024	Mortgage loans or MBS	500		78		84		76		80
$500 Warehouse Facility															$500 Warehouse Facility	August 2023	Mortgage loans or MBS	500		101		103		31		32
$300 Warehouse Facility															$300 Warehouse Facility	August 2023	Mortgage loans or MBS	300		183		188		115		117
$250 Warehouse Facility(2)															$250 Warehouse Facility(2)	September 2024	Mortgage loans or MBS	250		47		52		14		17
$200 Warehouse Facility															$200 Warehouse Facility	December 2024	Mortgage loans or MBS	200		59		61		18		21
$100 Warehouse Facility															$100 Warehouse Facility	April 2024	Mortgage loans or MBS	100		29		39		19		28
$100 Warehouse Facility															$100 Warehouse Facility	April 2024	Mortgage loans or MBS	100		—		—		—		—
$75 Warehouse Facility															$75 Warehouse Facility	December 2023	Mortgage loans or MBS	75		18		18		1		1
Warehouse facilities principal amount	Warehouse facilities principal amount			1,504		1,676		4,125		4,327		Warehouse facilities principal amount						1,107		1,197		817		910

MSR Facilities	MSR Facilities														MSR Facilities
$900 warehouse facility(1)		November 2024	MSR	900		260		2,028		260			1,107
$600 warehouse facility		April 2023	MSR	600		325		911		—			838
$500 warehouse facility(3)		September 2024	MSR	500		180		1,435		—			745
$400 warehouse facility(5)		June 2024	MSR	400		250		705		—			—
$1,450 warehouse facility(1)															$1,450 warehouse facility(1)	November 2024	MSR	1,450		250		2,185		260		2,284
$1,000 warehouse facility															$1,000 warehouse facility	April 2025	MSR	1,000		550		1,235		380		927
$750 warehouse facility(2)															$750 warehouse facility(2)	September 2024	MSR	750		320		1,141		380		1,482
$500 warehouse facility															$500 warehouse facility	June 2024	MSR	500		265		713		365		732
$500 warehouse facility															$500 warehouse facility	April 2025	MSR	500		199		383		—		—
$500 warehouse facility															$500 warehouse facility	June 2025	MSR	500		200		424		—		—
$50 warehouse facility	$50 warehouse facility	November 2023	MSR	50		25		75		10			124		$50 warehouse facility	November 2023	MSR	50		25		66		25		74
MSR facilities principal amount	MSR facilities principal amount			1,040		5,154		270		2,814		MSR facilities principal amount						1,809		6,147		1,410		5,499

Advance, warehouse and MSR facilities principal amount	Advance, warehouse and MSR facilities principal amount			3,076		$	7,504	5,009		$	7,935	Advance, warehouse and MSR facilities principal amount						3,526		8,142		2,896		7,262
Unamortized debt issuance costs	Unamortized debt issuance costs			(6)				(12)				Unamortized debt issuance costs						(14)				(11)
Advance and warehouse facilities, net				$	3,070			$	4,997
Advance, warehouse and MSR facilities, net															Advance, warehouse and MSR facilities, net					$	3,512			$	2,885

(1)Total capacity for this facility is ~~$1,200,~~$1,750, of which $300 is internally allocated for advance financing and ~~$900~~$1,450 is internally allocated for MSR financing; capacity is fully fungible and is not restricted by these allocations. ~~The capacity was increased in October 2022 to $1,400, with $300 internally allocated for advance financing and $1,100 internally allocated for MSR financing.~~

(2)~~This facility was terminated in October 2022.~~

~~(3)~~The capacity amount for this facility is $1,000, of which ~~$500~~$750 is a sublimit for MSR financing.

~~(4)This facility was terminated in January 2022.~~

~~(5)The capacity was increased in October 2022 to $500.~~

The weighted average interest rate for advance facilities was ~~4.5%~~7.5% and ~~2.7%~~3.1% for the three months ended ~~September~~June 30, 2023 and 2022, respectively, and ~~2021,~~7.4% and ~~3.4% and 2.9%~~2.8% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The weighted average interest rate for warehouse and MSR facilities was ~~4.6%~~7.4% and ~~1.9%~~3.1% for the three months ended ~~September~~June 30, 2023 and 2022, respectively, and ~~2021,~~7.2% and ~~3.3% and 2.0%~~2.6% for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively.

1817

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Unsecured Senior Notes

Unsecured senior notes consist of the following:


Unsecured Senior Notes	Unsecured Senior Notes	September 30, 2022		December 31, 2021		Unsecured Senior Notes	June 30, 2023		December 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 2030	650		650		$650 face value, 5.125% interest rate payable semi-annually, due December 2030	650		650
$600 face value, 6.000% interest rate payable semi-annually, due January 2027	$600 face value, 6.000% interest rate payable semi-annually, due January 2027	600		600		$600 face value, 6.000% interest rate payable semi-annually, due January 2027	600		600
$600 face value, 5.750% interest rate payable semi-annually, due November 2031	$600 face value, 5.750% interest rate payable semi-annually, due November 2031	600		600		$600 face value, 5.750% interest rate payable semi-annually, due November 2031	600		600
Unsecured senior notes principal amount	Unsecured senior notes principal amount	2,700		2,700		Unsecured senior notes principal amount	2,700		2,700
Unamortized debt issuance costs	Unamortized debt issuance costs	(27)		(30)		Unamortized debt issuance costs	(24)		(27)
Unsecured senior notes, net	Unsecured senior notes, net	$	2,673	$	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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

As of ~~September~~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~~	$	—
~~Thereafter~~	~~2,700~~
~~Total unsecured senior notes principal amount~~	$	~~2,700~~


Year Ending December 31,	Amount
2023 through 2026	$	—
2027	600
Thereafter	2,100
Total unsecured senior notes principal amount	$	2,700

Interest Expense

Interest expense primarily includes interest incurred on advance, warehouse and ~~warehouse~~MSR 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 ~~warehouse~~MSR facilities, unsecured senior notes and excess spread financing of ~~$90~~$112 and ~~$266~~$211 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, and ~~$95~~$90 and ~~$278~~ for$176 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, 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 ~~September~~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.

1918

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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:


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Consolidated Transactions with VIEs	Consolidated Transactions with VIEs	Transfers Accounted for as Secured Borrowings		Transfers Accounted for as Secured Borrowings		Consolidated Transactions with VIEs	Transfers Accounted for as Secured Borrowings		Transfers Accounted for as Secured Borrowings
Assets	Assets					Assets
Restricted cash	Restricted cash	$	62	$	50	Restricted cash	$	86	$	78
Advances and other receivables, net	Advances and other receivables, net	336		387		Advances and other receivables, net	379		398
Total assets	Total assets	$	398	$	437	Total assets	$	465	$	476

Liabilities	Liabilities					Liabilities
Advance facilities, net(1)	Advance facilities, net(1)	$	280	$	322	Advance facilities, net(1)	$	317	$	321
Payables and other liabilities	Payables and other liabilities	1		1		Payables and other liabilities	1		1
Total liabilities	Total liabilities	$	281	$	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 Trusts	Unconsolidated Securitization Trusts	September 30, 2022		December 31, 2021		Unconsolidated Securitization Trusts	June 30, 2023		December 31, 2022
Total collateral balances - UPB	Total collateral balances - UPB	$	1,002	$	1,122	Total collateral balances - UPB	$	925	$	976
Total certificate balances	Total certificate balances	$	975	$	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 ~~September~~June 30, ~~2022~~2023 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 Due	Principal Amount of Transferred Loans 60 Days or More Past Due	September 30, 2022		December 31, 2021		Principal Amount of Transferred Loans 60 Days or More Past Due	June 30, 2023		December 31, 2022
Unconsolidated securitization trusts	Unconsolidated securitization trusts	$	120	$	138	Unconsolidated securitization trusts	$	99	$	119

11. Earnings Per Share

~~The Company computes~~Basic earnings per share ~~using~~of common stock is computed by dividing net income by the ~~two-class method, which is an earnings allocation formula that determines~~weighted average number of common stock outstanding during the period. Diluted earnings per share ~~for~~of common stock is computed by dividing net income by the sum of the weighted average number of shares of common stock and any ~~participating~~dilutive securities ~~according~~outstanding 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. I~~n 2021,~~December 31, 2022, the Company ~~repurchased a total~~had 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.

2019

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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 September 30, Nine Months Ended September 30,
Computation of Earnings Per Share 2022 2021 2022 2021
Net income from continuing operations $ 113 $ 310 $ 922 $ 1,296
Less: Undistributed earnings from continuing operations attributable to participating stockholders — 1 — 9
Net income from continuing operations attributable to Mr. Cooper common stockholders $ 113 $ 281 $ 922 $ 1,259
Net (loss) income from discontinued operations $ — $ (11) $ — $ 3
Less: Undistributed earnings from discontinued operations attributable to participating stockholders — — — —
Net (loss) income from discontinued operations attributable to Mr. Cooper common stockholders $ — $ (11) $ — $ 3
Net income $ 113 $ 299 $ 922 $ 1,299
Less: Undistributed earnings attributable to participating stockholders — 1 — 9
Less: Premium on retirement of preferred stock — 28 — 28
Net income attributable to common stockholders $ 113 $ 270 $ 922 $ 1,262
Earnings from continuing operations per common share attributable to Mr. Cooper:
Basic $ 1.59 $ 3.56 $ 12.71 $ 14.85
Diluted $ 1.55 $ 3.42 $ 12.37 $ 14.20
Earnings from discontinued operations per common share attributable to Mr. Cooper:
Basic $ — $ (0.14) $ — $ 0.04
Diluted $ — $ (0.13) $ — $ 0.03
Earnings per common share attributable to Mr. Cooper:
Basic $ 1.59 $ 3.42 $ 12.71 $ 14.89
Diluted $ 1.55 $ 3.29 $ 12.37 $ 14.23
Weighted average shares of common stock outstanding (in thousands):
Basic 71,175 78,944 72,569 84,809
Dilutive effect of stock awards 1,703 2,826 1,988 3,176
Dilutive effect of participating securities — 301 — 658
Diluted 72,878 82,071 74,557 88,643


	Three Months Ended June 30,				Six Months Ended June 30,
Computation of Earnings Per Share	2023		2022		2023		2022
Net income	$	142	$	151	$	179	$	809

Weighted average shares of common stock outstanding (in thousands):
Basic	67,649		72,709		68,325		73,278
Dilutive effect of stock awards	957		1,618		1,316		2,052
Diluted	68,606		74,327		69,641		75,330

Earnings per common share
Basic	$	2.10	$	2.08	$	2.62	$	11.04
Diluted	$	2.07	$	2.03	$	2.57	$	10.74

~~Table of Contents~~

12. Income Taxes

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the effective tax rate for ~~continuing~~ operations was ~~26.4%~~28.4% and ~~24.7%~~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 nine months ended September 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.

~~For the three and nine months ended September 30, 2021, the effective tax rate for continuing operations was 25.0% and 24.0%~~ which differed from the statutory federal rate of 21% primarily due to state income taxes and nondeductible executive compensation.

For the three and six months ended June 30, 2022, the effective tax rate for operations was 26.0% and 24.4% respectively, which differed from the statutory federal rate of 21% primarily due to state income taxes and 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:

Table of Contents

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:


		September 30, 2022									June 30, 2023
				Recurring Fair Value Measurements									Recurring Fair Value Measurements
Fair Value - Recurring Basis	Fair Value - Recurring Basis	Total Fair Value		Level 1		Level 2		Level 3		Fair Value - Recurring Basis	Total Fair Value		Level 1		Level 2		Level 3
Assets	Assets									Assets
Mortgage loans held for sale	Mortgage loans held for sale	$	1,581	$	—	$	1,581	$	—	Mortgage loans held for sale	$	1,187	$	—	$	1,120	$	67
Mortgage servicing rights	Mortgage servicing rights	6,408		—		—		6,408		Mortgage servicing rights	7,149		—		—		7,149
Equity investments	Equity investments	48		3		—		45		Equity investments	43		1		—		42
Derivative financial instruments	Derivative financial instruments									Derivative financial instruments
IRLCs	IRLCs	21		—		—		21		IRLCs	30		—		—		30
LPCs	LPCs	1		—		—		1		LPCs	1		—		—		1
Forward MBS trades	Forward MBS trades	74		—		74		—		Forward MBS trades	10		—		10		—

Liabilities	Liabilities									Liabilities
Derivative financial instruments	Derivative financial instruments									Derivative financial instruments
IRLCs		8		—		—		8
LPCs	LPCs	5		—		—		5		LPCs	1		—		—		1
Forward MBS trades	Forward MBS trades	19		—		19		—		Forward MBS trades	3		—		3		—
Treasury futures	Treasury futures	62		—		62		—		Treasury futures	20		—		20		—
Mortgage servicing rights financing	Mortgage servicing rights financing	20		—		—		20		Mortgage servicing rights financing	23		—		—		23
Excess spread financing	Excess spread financing	519		—		—		519		Excess spread financing	459		—		—		459

2221

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		December 31, 2021									December 31, 2022
				Recurring Fair Value Measurements									Recurring Fair Value Measurements
Fair Value - Recurring Basis	Fair Value - Recurring Basis	Total Fair Value		Level 1		Level 2		Level 3		Fair Value - Recurring Basis	Total Fair Value		Level 1		Level 2		Level 3
Assets	Assets									Assets
Mortgage loans held for sale	Mortgage loans held for sale	$	4,381	$	—	$	4,381	$	—	Mortgage loans held for sale	$	893	$	—	$	819	$	74
Mortgage servicing rights	Mortgage servicing rights	4,223		—		—		4,223		Mortgage servicing rights	6,654		—		—		6,654
Equity investments	Equity investments	63		9		—		54		Equity investments	47		2		—		45
Derivative financial instruments	Derivative financial instruments									Derivative financial instruments
IRLCs	IRLCs	134		—		—		134		IRLCs	22		—		—		22
Forward MBS trades	Forward MBS trades	7		—		7		—		Forward MBS trades	8		—		8		—
LPCs	LPCs	3		—		—		3		LPCs	1		—		—		1

Liabilities	Liabilities									Liabilities
Derivative financial instruments	Derivative financial instruments									Derivative financial instruments
Forward MBS trades	Forward MBS trades	8		—		8		—		Forward MBS trades	9		—		9		—
LPCs	LPCs	2		—		—		2		LPCs	1		—		—		1
Swap futures		6		—		6		—
Treasury futures										Treasury futures	14		—		14		—
Mortgage servicing rights financing	Mortgage servicing rights financing	10		—		—		10		Mortgage servicing rights financing	19		—		—		19
Excess spread financing	Excess spread financing	768		—		—		768		Excess spread financing	509		—		—		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:

Nine Months Ended September 30, 2022
Assets Liabilities
Fair Value - Level 3 Assets and Liabilities Mortgage servicing rights Equity investments IRLCs Excess spread financing Mortgage servicing rights financing
Balance - beginning of period $ 4,223 $ 54 $ 134 $ 768 $ 10
Changes in fair value included in earnings 719 (9) (113) 124 10
Purchases 1,256 — — — —
Issuances 481 — — — —
Sales (293) — — — —
Repayments — — — (293) —
Settlements — — — (80) —
Other changes 22 — — — —
Balance - end of period $ 6,408 $ 45 $ 21 $ 519 $ 20

Nine Months Ended September 30, 2021
Assets Liabilities
Fair Value - Level 3 Assets and Liabilities Mortgage servicing rights Equity investments IRLCs Excess spread financing Mortgage servicing rights financing
Balance - beginning of period $ 2,703 $ — $ 414 $ 934 $ 33
Changes in fair value included in earnings (296) — (247) 6 (13)
Purchases 438 50 — — —
Issuances 790 — — — —
Sales (13) — — — —
Settlements — — — (118) —
Other changes 44 — — — —
Balance - end of period $ 3,666 $ 50 $ 167 $ 822 $ 20


	Six Months Ended June 30, 2023
	Assets								Liabilities
Fair Value - Level 3 Assets and Liabilities	Mortgage servicing rights		Mortgage loans held for sale		Equity investments		IRLCs		Excess spread financing		Mortgage 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		—		—		—		—
Issuances	133		—		—		—		—		—
Sales/dispositions (2)	(280)		(54)		—		—		—		—
Repayments	—		(2)		—		—		(4)		—
Settlements	—		—		—		—		(36)		—
Other changes	11		—		—		—		—		—
Balance - end of period	$	7,149	$	67	$	42	$	30	$	459	$	23

2322

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	Six Months Ended June 30, 2022
	Assets						Liabilities
Fair Value - Level 3 Assets and Liabilities	Mortgage servicing rights		Equity investments		IRLCs		Excess spread financing		Mortgage servicing rights financing
Balance - beginning of period	$	4,223	$	54	$	134	$	768	$	10
Changes in fair value included in earnings	663		—		(72)		117		14
Purchases	1,178		—		—		—		—
Issuances	360		—		—		—		—
Sales	(289)		—		—		—		—

Repayments	—		—		—		(292)		—
Settlements	—		—		—		(61)		—
Other changes	16		—		—		—		—
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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

Table of Contents

The table below presents the quantitative information for significant unobservable inputs used in the fair value measurement of Level 3 assets and liabilities.


		September 30, 2022										December 31, 2021													June 30, 2023										December 31, 2022
		Range						Weighted Average				Range									Weighted Average				Range							Weighted Average			Range						Weighted Average
Level 3 Inputs	Level 3 Inputs	Min			Max						Min				Max				Level 3 Inputs	Min						Max					Min				Max
MSR(1)
MSRs(1)																								MSRs(1)
Option adjusted spread(2)																								Option adjusted spread(2)	6.8		%	12.0		%		8.0		%	N/A			N/A			N/A
Discount rate	Discount rate	10.4		%	13.7		%	11.4		%		9.5		%		13.7		%			10.9		%	Discount rate	N/A			N/A				N/A			10.4		%	13.7		%	11.4		%
Prepayment speed	Prepayment speed	6.6		%	13.3		%	7.4		%		11.7		%		16.4		%			13.0		%	Prepayment speed	6.5		%	12.7		%		7.6		%	6.3		%	12.2		%	7.2		%
Cost to service per loan(2)		$	59		$	128		$	78			$	59			$	168				$	77
Average life(3)								8.0 years													5.8 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 years									8.1 years

Mortgage loans held for sale																								Mortgage loans held for sale
Market pricing																								Market pricing	45.0		%	102.1		%		77.5		%	37.3		%	114.7		%	77.4		%

IRLCs	IRLCs																							IRLCs
Value of servicing (reflected as a percentage of loan commitment)	Value of servicing (reflected as a percentage of loan commitment)	(0.3)		%	4.4		%	2.1		%		(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/A			N/A			N/A
Discount rate	Discount rate	10.0		%	13.8		%	11.3		%		9.5		%		13.8		%			11.2		%	Discount rate	N/A			N/A				N/A			10.0		%	13.8		%	11.3		%
Prepayment speed	Prepayment speed	6.6		%	13.5		%	9.5		%		12.8		%		15.2		%			13.4		%	Prepayment speed	7.3		%	13.7		%		9.7		%	6.9		%	13.3		%	9.2		%
Average life(3)								6.6 years													5.4 years
Average life(4)																								Average life(4)								6.4 years									6.6 years

Mortgage servicing rights financing	Mortgage servicing rights financing																							Mortgage servicing rights financing
Advance financing and counterparty fee rates	Advance financing and counterparty fee rates	5.0		%	8.7		%	7.3		%		4.5		%		7.9		%			6.5		%	Advance financing and counterparty fee rates	5.6		%	8.8		%		7.0		%	5.2		%	8.6		%	7.1		%
Annual advance recovery rates	Annual advance recovery rates	16.9		%	22.9		%	18.5		%		19.2		%		23.0		%			21.3		%	Annual advance recovery rates	14.0		%	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.

Table of Contents

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:


		September 30, 2022									June 30, 2023
		Carrying Amount		Fair Value							Carrying Amount		Fair Value
Financial Instruments	Financial Instruments			Level 1		Level 2		Level 3		Financial Instruments			Level 1		Level 2		Level 3
Financial assets	Financial assets									Financial assets
Cash and cash equivalents	Cash and cash equivalents	$	530	$	530	$	—	$	—	Cash and cash equivalents	$	517	$	517	$	—	$	—
Restricted cash	Restricted cash	148		148		—		—		Restricted cash	170		170		—		—
Advances and other receivables, net	Advances and other receivables, net	831		—		—		831		Advances and other receivables, net	802		—		—		802

Loans subject to repurchase from Ginnie Mae	Loans subject to repurchase from Ginnie Mae	1,575		—		1,575		—		Loans subject to repurchase from Ginnie Mae	1,650		—		1,650		—
Financial liabilities	Financial liabilities									Financial liabilities
Unsecured senior notes, net	Unsecured senior notes, net	2,673		2,085		—		—		Unsecured senior notes, net	2,676		—		2,322		—
Advance and warehouse facilities, net		3,070		—		3,076		—
Advance, warehouse and MSR facilities, net										Advance, warehouse and MSR facilities, net	3,512		—		3,526		—
Liability for loans subject to repurchase from Ginnie Mae	Liability for loans subject to repurchase from Ginnie Mae	1,575		—		1,575		—		Liability for loans subject to repurchase from Ginnie Mae	1,650		—		1,650		—

~~Table of Contents~~


		December 31, 2021									December 31, 2022
		Carrying Amount		Fair Value							Carrying Amount		Fair Value
Financial Instruments	Financial Instruments			Level 1		Level 2		Level 3		Financial Instruments			Level 1		Level 2		Level 3
Financial assets	Financial assets									Financial assets
Cash and cash equivalents	Cash and cash equivalents	$	895	$	895	$	—	$	—	Cash and cash equivalents	$	527	$	527	$	—	$	—
Restricted cash	Restricted cash	146		146		—		—		Restricted cash	175		175		—		—
Advances and other receivables, net	Advances and other receivables, net	1,228		—		—		1,228		Advances and other receivables, net	1,019		—		—		1,019
Loans subject to repurchase from Ginnie Mae	Loans subject to repurchase from Ginnie Mae	1,496		—		1,496		—		Loans subject to repurchase from Ginnie Mae	1,865		—		1,865		—
Financial liabilities	Financial liabilities									Financial liabilities
Unsecured senior notes, net	Unsecured senior notes, net	2,670		2,737		—		—		Unsecured senior notes, net	2,673		—		2,209		—
Advance and warehouse facilities, net		4,997		—		5,009		—
Advance, warehouse and MSR facilities, net										Advance, warehouse and MSR facilities, net	2,885		—		2,896		—
Liability for loans subject to repurchase from Ginnie Mae	Liability for loans subject to repurchase from Ginnie Mae	1,496		—		1,496		—		Liability for loans subject to repurchase from Ginnie Mae	1,865		—		1,865		—

14. Capital Requirements

~~Certain of~~Fannie Mae, Freddie Mac, Ginnie Mae and certain private label mortgage investors require the ~~Company’s secondary market investors require~~Company 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 ~~September~~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 stages~~While 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 increase~~based on the Company’s ~~operating expenses~~assessment of the facts and ~~reduce its revenues, require~~circumstances, 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 and~~position, 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 matter~~legal 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 $7$12 and ~~$15 for~~$21 during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, and $10 and ~~$31~~$8 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, which are included in ~~“general~~“expenses - general and ~~administrative expenses”~~administrative” 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 $2 to $9$4 in excess of the accrued liability (if any) related to those matters as of ~~September~~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, net” 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 ~~September~~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. ~~The Servicing~~A 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. ~~The~~

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. ~~Corporate functional~~

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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 headcount~~headcount. The Company recast segment information for ~~specific facilities utilized. Group insurance costs are allocated~~the historical periods presented herein to ~~individual~~reflect the allocation method change and to conform to the current presentation. The change affects total expenses for Servicing and Originations segments ~~based~~and 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 Segment	Servicing		Originations		Corporate/Other		Consolidated
Revenues
Service related, net	$	365	$	16	$	21	$	402
Net gain on mortgage loans held for sale	3		81		—		84
Total revenues	368		97		21		486
Total expenses	159		59		60		278
Interest income	107		10		—		117
Interest expense	(73)		(10)		(39)		(122)
Other expense, net	—		—		(5)		(5)
Total other income (expenses), net	34		—		(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 Segment	Servicing		Originations		Corporate/Other		Consolidated
Revenues
Service related, net	$	414	$	24	$	22	$	460
Net (loss) gain on mortgage loans held for sale	(19)		158		—		139
Total revenues	395		182		22		599
Total expenses	143		125		60		328
Interest income	35		15		—		50
Interest expense	(61)		(10)		(40)		(111)
Other expense, net	—		—		(5)		(5)
Total other (expenses) income, net	(26)		5		(45)		(66)
Income (loss) before income tax expense (benefit)	$	226	$	62	$	(83)	$	205
Depreciation and amortization for property and equipment and intangible assets	$	5	$	5	$	(1)	$	9
Total assets	$	9,645	$	1,381	$	1,869	$	12,895

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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.


	Six Months Ended June 30, 2023
Financial Information by Segment	Servicing		Originations		Corporate/Other		Consolidated
Revenues
Service related, net	$	596	$	27	$	40	$	663
Net gain on mortgage loans held for sale	3		150		—		153
Total revenues	599		177		40		816
Total expenses	312		115		112		539
Interest income	186		16		—		202
Interest expense	(136)		(17)		(79)		(232)
Other expense, net	—		—		(14)		(14)
Total other income (expenses), net	50		(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 March 31, 2022, the Company c~~ompleted 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 September 30, 2022
Financial Information by Segment Servicing Originations Corporate/Other Consolidated
Revenues
Service related, net $ 353 $ 20 $ 22 $ 395
Net (loss) gain on mortgage loans held for sale (21) 136 — 115
Total revenues 332 156 22 510
Total expenses 147 112 57 316
Interest income 71 12 — 83
Interest expense (53) (11) (40) (104)
Other expense, net — — (20) (20)
Total other (expenses) income, net 18 1 (60) (41)
Income (loss) from continuing operations before income tax expense (benefit) $ 203 $ 45 $ (95) $ 153
Depreciation and amortization for property and equipment and intangible assets from continuing operations $ 6 $ 5 $ (2) $ 9
Total assets $ 9,703 $ 1,252 $ 1,860 $ 12,815

Three Months Ended September 30, 2021
Financial Information by Segment Servicing Originations Corporate/Other Consolidated
Revenues
Service related, net $ 209 $ 44 $ 35 $ 288
Net gain on mortgage loans held for sale 142 430 — 572
Total revenues 351 474 35 860
Total expenses 128 208 66 402
Interest income 39 27 — 66
Interest expense (65) (22) (31) (118)
Other income, net — — 8 8
Total other (expenses) income, net (26) 5 (23) (44)
Income (loss) from continuing operations before income tax expense (benefit) $ 197 $ 271 $ (54) $ 414
Depreciation and amortization for property and equipment and intangible assets from continuing operations $ 11 $ 8 $ (5) $ 14
Total assets $ 14,560 $ 4,949 $ 2,152 $ 21,661


	Six Months Ended June 30, 2022
Financial Information by Segment	Servicing		Originations		Corporate/Other		Consolidated
Revenues
Service related, net	$	1,115	$	66	$	34	$	1,215
Net (loss) gain on mortgage loans held for sale	(4)		440		—		436
Total revenues	1,111		506		34		1,651
Total expenses	265		299		102		666
Interest income	54		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	$	9	$	1	$	20
Total assets	$	9,645	$	1,381	$	1,869	$	12,895

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Nine Months Ended September 30, 2022
Financial Information by Segment Servicing Originations Corporate/Other Consolidated
Revenues
Service related, net $ 1,468 $ 86 $ 56 $ 1,610
Net (loss) gain on mortgage loans held for sale (25) 576 — 551
Total revenues 1,443 662 56 2,161
Total expenses 413 412 157 982
Interest income 125 44 — 169
Interest expense (168) (33) (120) (321)
Other income, net — — 197 197
Total other (expenses) income, net (43) 11 77 45
Income (loss) from continuing operations before income tax expense $ 987 $ 261 $ (24) $ 1,224
Depreciation and amortization for property and equipment and intangible assets from continuing operations $ 16 $ 14 $ (1) $ 29
Total assets $ 9,703 $ 1,252 $ 1,860 $ 12,815

Nine Months Ended September 30, 2021
Financial Information by Segment Servicing Originations Corporate/Other Consolidated
Revenues
Service related, net $ 558 $ 132 $ 170 $ 860
Net gain on mortgage loans held for sale 466 1,367 — 1,833
Total revenues 1,024 1,499 170 2,693
Total expenses 359 665 257 1,281
Interest income 87 76 — 163
Interest expense (201) (70) (92) (363)
Other income, net — — 494 494
Total other (expenses) income, net (114) 6 402 294
Income from continuing operations before income tax expense $ 551 $ 840 $ 315 $ 1,706
Depreciation and amortization for property and equipment and intangible assets from continuing operations $ 23 $ 18 $ 4 $ 45
Total assets $ 14,560 $ 4,949 $ 2,152 $ 21,661

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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. 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:

•macroeconomic and 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;

•~~changes~~disruptions 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, ~~2021~~2022 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 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 ~~$854~~$882 billion as of ~~September~~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.

Anticipated Trends

In ~~2022,~~the second quarter of 2023, our servicing portfolio grew ~~$144~~to $882 billion and our Servicing segment generated income before income tax expense of $243. We successfully entered into an agreement to ~~$854~~acquire Home Point Capital Inc. with $84 billion ~~with a majority~~UPB. The transaction is expected to close in the third quarter and the UPB portfolio is expected to board in the fourth quarter of ~~the growth in our subservicing portfolio from both new~~2023 and ~~existing clients.~~first quarter of 2024. We ~~expect our UPB growth to flatten for a couple quarters due to deboarding of loans from an existing client, which will begin servicing its own portfolio. 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 lower prepayment speeds, decreased amortization and higher interest income.~~ continue to generate strong earnings with servicing portfolio growth during the second half of 2023.

In the ~~third~~second quarter of 2023, our Originations segment generated ~~pretax~~ income before income tax expense of ~~$45~~$38 on funded volume of ~~$5,741. We~~$3,822. Mortgage rates rose to approximately 7% at the end of the second quarter of 2023 and considering the seasonality of Originations volume in the second quarter is traditionally the highest, we expect ~~profitability for~~the Originations segment to ~~reduce significantly for the fourth quarter due to continued interest rate pressure~~operate at lower levels of profitability in the ~~mortgage industry.~~second half of the year compared to the second quarter.

~~In 2022,~~

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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.

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Results of Operations


Table 1. Consolidated Operations


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2022		2021		Change		2022		2021		Change			2023		2022		Change		2023		2022		Change
Revenues - operational(1)	Revenues - operational(1)	$	386	$	709	$	(323)	$	1,284	$	2,317	$	(1,033)	Revenues - operational(1)	$	423	$	399	$	24	$	814	$	898	$	(84)
Revenues - mark-to-market	Revenues - mark-to-market	124		151		(27)		877		376		501		Revenues - mark-to-market	63		200		(137)		2		753		(751)
Total revenues	Total revenues	510		860		(350)		2,161		2,693		(532)		Total revenues	486		599		(113)		816		1,651		(835)
Total expenses	Total expenses	316		402		(86)		982		1,281		(299)		Total expenses	278		328		(50)		539		666		(127)
Total other (expenses) income, net	Total other (expenses) income, net	(41)		(44)		3		45		294		(249)		Total other (expenses) income, net	(10)		(66)		56		(44)		86		(130)
Income from continuing operations before income tax expense		153		414		(261)		1,224		1,706		(482)
Income before income tax expense														Income before income tax expense	198		205		(7)		233		1,071		(838)
Less: Income tax expense	Less: Income tax expense	40		104		(64)		302		410		(108)		Less: Income tax expense	56		54		2		54		262		(208)
Net income from continuing operations		$	113	$	310	$	(197)	$	922	$	1,296	$	(374)
Net income														Net income	$	142	$	151	$	(9)	$	179	$	809	$	(630)

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

Income ~~from continuing operations~~ before income tax expense decreased during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~2021~~2022 primarily due to a decrease in total revenues, partially offset by lower total expenses. The decrease in ~~total revenues~~revenue in 2023 was primarily ~~due~~attributable to ~~a decline~~lower MTM adjustment as the increase in ~~revenues from~~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 lower ~~origination volumes driven by higher mortgage rates~~originations volume, partially offset with an increase in ~~2022.~~operational revenue in our Servicing segment due to a larger servicing UPB portfolio in 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 consistent~~reducing headcount commensurate with lower origination ~~volumes.~~volumes in 2022. The change in total other (expenses) income, net during the ~~nine~~three months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~2021~~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 ~~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.~~Transaction. See further discussions in Note 2, Dispositions, in the Notes to the Condensed Consolidated Financial ~~Statements and in the Segment Results section of the MD&A.~~Statements.

The effective tax rate ~~for continuing operations~~ during the three months ended ~~September~~June 30, ~~2022~~2023 was ~~26.4%~~28.4% as compared to ~~25.0%~~26.0% in ~~2021. The change in~~2022, 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.

The effective tax rate for continuing operations during the nine months ended September 30, 2022 was 24.7% as compared to 24.0% 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.

Table of Contents

Refer to Note 16, Segment Information, in the Notes to the Condensed Consolidated Financial Statements for a summary of segment results.

~~Table of Contents~~

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 regulatory~~industry 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 date

August 2022

~~April 2022~~March 2023

June 2022

Residential

RPS2

SQ2-

Above Average

Master Servicer

RMS2+

SQ2+

Above Average

Special Servicer

RSS2

SQ2-

Above Average

Subprime Servicer

RPS2

SQ2-

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 September 30,													Three Months Ended June 30,
		2022				2021				Change					2023				2022				Change
		Amt			bps(1)	Amt			bps(1)	Amt			bps		Amt			bps(1)	Amt			bps(1)	Amt			bps
Revenues	Revenues													Revenues
Operational	Operational	$	377		18	$	402		25	$	(25)		(7)	Operational	$	442		21	$	394		20	$	48		1
Amortization, net of accretion	Amortization, net of accretion	(169)			(8)	(202)			(12)	33			4	Amortization, net of accretion	(137)			(7)	(199)			(10)	62			3
Mark-to-market		124			6	151			9	(27)			(3)
Mark-to-market adjustments - Servicing														Mark-to-market adjustments - Servicing	63			3	200			10	(137)			(7)
Total revenues	Total revenues	332			16	351			22	(19)			(6)	Total revenues	368			17	395			20	(27)			(3)
Expenses	Expenses													Expenses
Salaries, wages and benefits	Salaries, wages and benefits	82			4	69			4	13			—	Salaries, wages and benefits	83			4	84			4	(1)			—
General and administrative	General and administrative													General and administrative
Servicing support fees	Servicing support fees	21			1	19			1	2			—	Servicing support fees	21			1	24			1	(3)			—
Corporate and other general and administrative expenses	Corporate and other general and administrative expenses	29			2	28			2	1			—	Corporate and other general and administrative expenses	44			2	32			2	12			—
Foreclosure and other liquidation related expenses, net		9			—	1			—	8			—
Foreclosure and other liquidation related expenses (recoveries), net														Foreclosure and other liquidation related expenses (recoveries), net	8			—	(2)			—	10			—
Depreciation and amortization	Depreciation and amortization	6			—	11			1	(5)			(1)	Depreciation and amortization	3			—	5			—	(2)			—
Total general and administrative expenses	Total general and administrative expenses	65			3	59			4	6			(1)	Total general and administrative expenses	76			3	59			3	17			—
Total expenses	Total expenses	147			7	128			8	19			(1)	Total expenses	159			7	143			7	16			—
Other income (expense)	Other income (expense)													Other income (expense)
Other interest income		71			3	39			2	32			1
Interest income														Interest income	107			5	35			2	72			3

Advance interest expense	Advance interest expense	(8)			—	(7)			—	(1)			—	Advance interest expense	(14)			—	(8)			(1)	(6)			1
Other interest expense	Other interest expense	(45)			(2)	(58)			(4)	13			2	Other interest expense	(59)			(3)	(53)			(3)	(6)			—
Interest expense	Interest expense	(53)			(2)	(65)			(4)	12			2	Interest expense	(73)			(3)	(61)			(4)	(12)			1
Total other income (expense), net	Total other income (expense), net	18			1	(26)			(2)	44			3	Total other income (expense), net	34			2	(26)			(2)	60			4
Income before income tax expense	Income before income tax expense	$	203		10	$	197		12	$	6		(2)	Income before income tax expense	$	243		12	$	226		11	$	17		1

Weighted average cost - advance facilities (excluding facility fees)		4.5		%		2.7		%		1.8		%
Weighted average cost - advance and MSR facilities														Weighted average cost - advance and MSR facilities	7.9		%		3.7		%		4.2		%
Weighted average cost - excess spread financing	Weighted average cost - excess spread financing	8.7		%		9.0		%		(0.3)		%		Weighted average cost - excess spread financing	8.7		%		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 September 30,
2022 2021 Change
Amt
bps(1)
Amt
bps(1)
Amt bps
MSR Operational Revenue
Base servicing fees $ 311 15 $ 230 14 $ 81 1
Modification fees(2)
2 — 6 — (4) —
Late payment fees(2)
15 1 15 1 — —
Other ancillary revenues(2)
(4) — 155 10 (159) (10)
Total MSR operational revenue 324 16 406 25 (82) (9)
Base subservicing fees and other subservicing revenue(2)
71 3 61 4 10 (1)
Total servicing fee revenue 395 19 467 29 (72) (10)
MSR financing liability costs (4) — (6) — 2 —
Excess spread payments and portfolio runoff (14) (1) (59) (4) 45 3
Total operational revenue 377 18 402 25 (25) (7)
Amortization, Net of Accretion
MSR amortization (183) (9) (261) (16) 78 7
Excess spread accretion 14 1 59 4 (45) (3)
Total amortization, net of accretion (169) (8) (202) (12) 33 4
Mark-to-Market Adjustments
MSR MTM 239 12 155 10 84 2
MTM Adjustments(3)
(112) (6) (13) (1) (99) (5)
Excess spread / financing MTM (3) — 9 — (12) —
Total MTM adjustments 124 6 151 9 (27) (3)
Total revenues - Servicing $ 332 16 $ 351 22 $ (19) (6)


	Three Months Ended June 30,
	2023			2022			Change
	Amt		bps(1)	Amt		bps(1)	Amt		bps
MSR Operational Revenue
Base servicing fees	$	345	16	$	324	16	$	21	—
Modification fees(2)	5		—	4		—	1		—

Late payment fees(2)	16		1	15		1	1		—
Other ancillary revenues(2)	15		1	15		1	—		—
Total MSR operational revenue	381		18	358		18	23		—
Subservicing-related revenue(2)	79		3	68		3	11		—
Total servicing fee revenue	460		21	426		21	34		—
MSR financing liability costs	(7)		—	(5)		—	(2)		—
Excess spread payments and portfolio runoff	(11)		—	(27)		(1)	16		1
Total operational revenue	442		21	394		20	48		1
Amortization, Net of Accretion
MSR amortization	(148)		(7)	(226)		(11)	78		4
Excess spread accretion	11		—	27		1	(16)		(1)
Total amortization, net of accretion	(137)		(7)	(199)		(10)	62		3
Mark-to-Market Adjustments - Servicing
MSR MTM	139		7	326		16	(187)		(9)
Loss on MSR hedging activities	(111)		(5)	(89)		(4)	(22)		(1)
Gain on MSR sales	32		1	1		—	31		1
Reclassifications(3)	(9)		—	(6)		—	(3)		—
Excess spread / MSR financing MTM	12		—	(32)		(2)	44		2
Total mark-to-market adjustments - Servicing	63		3	200		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 includes~~Reclassifications include the impact of negative modeled cash flows which have been transferred to reserves on advances and other receivables. The negative modeled cash flows relate to advances and other receivables associated with inactive and liquidated loans that are no longer part of the MSR portfolio. The impact of negative modeled cash flows was $10 and $8 during the three months ended September 30, 2022 and 2021, respectively. In addition, MTM Adjustments included a negative $100 and negative $8 impact from MSR hedging activities during the three months ended September 30, 2022 and 2021, respectively.

Servicing Segment Revenues

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

Servicing - Operational revenue ~~decreased~~increased during the three months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~2021~~2022 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 negative margin from the higher interest rate environment in 2022. The decrease was partially offset by an increase in base servicing fees ~~primarily due to~~as a result of a larger servicing UPB portfolio in ~~2022.~~2023.

MSR amortization decreased during the three months ended ~~September~~June 30, ~~2022~~2023 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~~ MSR MTM ~~increased~~decreased during the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~2021, primarily due to an~~2022, as the increase in mortgage rates was greater in 2022 compared to ~~2021, which lowered prepayment speeds and increased~~2023.

Subservicing - There were no material changes for Subservicing fees during the ~~fair value of the MSR.~~three months ended June 30, 2023 as compared to 2022.

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~~Subservicing~~ ~~- Subservicing fees increased during the three months ended September 30, 2022 as compared to 2021, primarily due to higher base subservicing fees driven by higher average UPB.~~

Servicing Segment Expenses

Total expenses increased during the three months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~2021,~~2022, primarily driven by an increase in ~~salaries, wages~~corporate and ~~benefits~~other general and ~~an increase~~administrative expenses and change in foreclosure and other liquidation related expenses (recoveries), net. The increase in ~~salaries, wages~~corporate and ~~benefits~~other general and administrative expenses was primarily ~~driven by higher headcount-related costs~~ 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 ~~increase~~change in foreclosure and other liquidation related expenses (recoveries), net was primarily ~~due to higher loss~~driven by non-operating expense accruals and increases in reserves ~~on servicing~~for advances ~~partially offset by lower depreciation~~ and ~~amortization.~~settlements in 2023.

Servicing Segment Other Income (Expenses), net

Total other income (expenses), net changed during the three months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~2021,~~2022, primarily due to higher ~~other~~ interest income ~~driven~~attributable 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


		Nine Months Ended September 30,													Six Months Ended June 30,
		2022				2021				Change					2023				2022				Change
		Amt			bps(1)	Amt			bps(1)	Amt			bps		Amt			bps(1)	Amt			bps(1)	Amt			bps
Revenues	Revenues													Revenues
Operational	Operational	$	1,136		19	$	1,215		26	$	(79)		(7)	Operational	$	849		20	$	759		20	$	90		—
Amortization, net of accretion	Amortization, net of accretion	(570)			(10)	(567)			(12)	(3)			2	Amortization, net of accretion	(252)			(6)	(401)			(11)	149			5
Mark-to-market		877			15	376			7	501			8
Mark-to-market adjustments - Servicing														Mark-to-market adjustments - Servicing	2			—	753			20	(751)			(20)
Total revenues	Total revenues	1,443			24	1,024			21	419			3	Total revenues	599			14	1,111			29	(512)			(15)
Expenses	Expenses													Expenses
Salaries, wages and benefits	Salaries, wages and benefits	241			4	205			4	36			—	Salaries, wages and benefits	165			4	159			4	6			—
General and administrative	General and administrative													General and administrative
Servicing support fees	Servicing support fees	56			1	62			1	(6)			—	Servicing support fees	37			1	35			1	2			—
Corporate and other general and administrative expenses	Corporate and other general and administrative expenses	87			2	88			2	(1)			—	Corporate and other general and administrative expenses	86			2	57			2	29			—
Foreclosure and other liquidation related expenses (recoveries), net		13			—	(19)			—	32			—
Foreclosure and other liquidation related expenses, net														Foreclosure and other liquidation related expenses, net	19			—	4			—	15			—
Depreciation and amortization	Depreciation and amortization	16			—	23			—	(7)			—	Depreciation and amortization	5			—	10			—	(5)			—
Total general and administrative expenses	Total general and administrative expenses	172			3	154			3	18			—	Total general and administrative expenses	147			3	106			3	41			—
Total expenses	Total expenses	413			7	359			7	54			—	Total expenses	312			7	265			7	47			—
Other income (expense)	Other income (expense)													Other income (expense)
Other interest income		125			2	87			2	38			—
Interest income														Interest income	186			4	54			1	132			3

Advance interest expense	Advance interest expense	(22)			—	(24)			—	2			—	Advance interest expense	(28)			(1)	(14)			—	(14)			(1)
Other interest expense	Other interest expense	(146)			(2)	(177)			(4)	31			2	Other interest expense	(108)			(2)	(101)			(3)	(7)			1
Interest expense	Interest expense	(168)			(2)	(201)			(4)	33			2	Interest expense	(136)			(3)	(115)			(3)	(21)			—
Total other expenses, net		(43)			—	(114)			(2)	71			2
Total other income (expense), net														Total other income (expense), net	50			1	(61)			(2)	111			3
Income before income tax expense	Income before income tax expense	$	987		17	$	551		12	$	436		5	Income before income tax expense	$	337		8	$	785		20	$	(448)		(12)

Weighted average cost - advance facilities (excluding facility fees)		3.4		%		2.9		%		0.5		%
Weighted average cost - advance and MSR facilities														Weighted average cost - advance and MSR facilities	7.6		%		3.3		%		4.3		%
Weighted average cost - excess spread financing	Weighted average cost - excess spread financing	8.8		%		9.0		%		(0.2)		%		Weighted average cost - excess spread financing	8.7		%		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


		Nine Months Ended September 30,										Six Months Ended June 30,
		2022			2021			Change				2023			2022			Change
		Amt		bps(1)	Amt		bps(1)	Amt		bps		Amt		bps(1)	Amt		bps(1)	Amt		bps
MSR Operational Revenue	MSR Operational Revenue										MSR Operational Revenue
Base servicing fees	Base servicing fees	$	907	15	$	677	14	$	230	1	Base servicing fees	$	672	16	$	596	16	$	76	—
Modification fees(2)	Modification fees(2)	11		—	19		—	(8)		—	Modification fees(2)	8		—	9		—	(1)		—
Incentive fees(2)		—		—	1		—	(1)		—

Late payment fees(2)	Late payment fees(2)	45		1	44		1	1		—	Late payment fees(2)	32		1	30		1	2		—
Other ancillary revenues(2)	Other ancillary revenues(2)	53		1	507		11	(454)		(10)	Other ancillary revenues(2)	25		—	57		1	(32)		(1)
Total MSR operational revenue	Total MSR operational revenue	1,016		17	1,248		26	(232)		(9)	Total MSR operational revenue	737		17	692		18	45		(1)
Base subservicing fees and other subservicing revenue(2)		208		3	191		4	17		(1)
Subservicing-related revenue(2)											Subservicing-related revenue(2)	148		3	137		3	11		—
Total servicing fee revenue	Total servicing fee revenue	1,224		20	1,439		30	(215)		(10)	Total servicing fee revenue	885		20	829		21	56		(1)
MSR financing liability costs	MSR financing liability costs	(14)		—	(19)		—	5		—	MSR financing liability costs	(15)		—	(10)		—	(5)		—
Excess spread payments and portfolio runoff	Excess spread payments and portfolio runoff	(74)		(1)	(205)		(4)	131		3	Excess spread payments and portfolio runoff	(21)		—	(60)		(1)	39		1
Total operational revenue	Total operational revenue	1,136		19	1,215		26	(79)		(7)	Total operational revenue	849		20	759		20	90		—
Amortization, Net of Accretion	Amortization, Net of Accretion										Amortization, Net of Accretion
MSR amortization	MSR amortization	(644)		(11)	(772)		(16)	128		5	MSR amortization	(273)		(6)	(461)		(12)	188		6
Excess spread accretion	Excess spread accretion	74		1	205		4	(131)		(3)	Excess spread accretion	21		—	60		1	(39)		(1)
Total amortization, net of accretion	Total amortization, net of accretion	(570)		(10)	(567)		(12)	(3)		2	Total amortization, net of accretion	(252)		(6)	(401)		(11)	149		5
Mark-to-Market Adjustments
Mark-to-Market Adjustments - Servicing											Mark-to-Market Adjustments - Servicing
MSR MTM	MSR MTM	1,363		23	476		10	887		13	MSR MTM	34		1	1,124		29	(1,090)		(28)
MTM Adjustments(3)		(352)		(6)	(107)		(3)	(245)		(3)
Excess spread / financing MTM		(134)		(2)	7		—	(141)		(2)
Total MTM adjustments		877		15	376		7	501		8
Loss on MSR hedging activities											Loss on MSR hedging activities	(52)		(1)	(229)		(6)	177		5
Gain on MSR sales											Gain on MSR sales	32		—	1		—	31		—
Reclassifications(3)											Reclassifications(3)	(18)		—	(12)		—	(6)		—
Excess spread / MSR financing MTM											Excess spread / MSR financing MTM	6		—	(131)		(3)	137		3
Total mark-to-market adjustments - Servicing											Total mark-to-market adjustments - Servicing	2		—	753		20	(751)		(20)
Total revenues - Servicing	Total revenues - Servicing	$	1,443	24	$	1,024	21	$	419	3	Total 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 nine months ended September 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 includes~~Reclassifications include the impact of negative modeled cash flows which have been transferred to reserves on advances and other receivables. The negative modeled cash flows relate to advances and other receivables associated with inactive and liquidated loans that are no longer part of the MSR portfolio. The impact of negative modeled cash flows was $22 and $28 during the nine months ended September 30, 2022 and 2021, respectively. In addition, MTM Adjustments included a negative $329 and negative $82 impact from MSR hedging activities during the nine months ended September 30, 2022 and 2021, respectively.

Servicing Segment Revenues

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

Servicing - Operational revenue ~~decreased~~increased during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~2021~~2022 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 acquisitions in 2022, and higher early-buyout ~~revenues associated with loans bought out of GNMA securitization, modified~~ and redelivered following GNMA guidelines primarily driven by negative margin from the higher interest rate environment in 2022. The decrease was partially offset by an increase in base servicing fees primarily due to a larger servicing UPB portfoliore-delivery volume in 2022.

MSR amortization decreased during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 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 MTM~~decreased during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~2021, was primarily due to an~~2022, as the increase in mortgage rates was greater in 2022 compared to ~~2021, which impacted prepayment speeds and increased~~2023.

Subservicing - There were no material changes for Subservicing fees during the ~~fair value of the MSR.~~six months ended June 30, 2023 as compared to 2022.

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~~Subservicing~~ ~~- Subservicing fees increased during the nine months ended September 30, 2022 as compared to 2021, primarily due to higher base subservicing fees driven by higher average UPB.~~

Servicing Segment Expenses

Total expenses increased during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~2021,~~2022, primarily driven by an increase in ~~salaries, wages~~corporate and ~~benefits~~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 ~~change~~higher 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. The increase in salaries, wages and benefits~~net was primarily ~~due to higher headcount-related costs due to growth of our servicing portfolio. The change~~driven by non-operating expense accruals and increases in ~~foreclosure~~reserves for advances and other liquidation related expenses (recoveries), net in 2022 as compared to 2021 was due to lower release of loss reserves on servicing advances as a result of loan modification programs related to COVID-19 pandemic, partially offset by lower depreciation and amortization.settlements.

Servicing Segment Other Income (Expenses), net

Total other ~~expenses,~~income (expenses), net ~~decreased~~changed during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~2021,~~2022, primarily due to higher ~~other~~ interest income ~~driven by higher interest income earned on custodial balances due~~attributable to higher interest rates, ~~and a decrease in other~~partially offset by higher interest expense ~~due to lower compensating interest expense~~from MSR and ~~bank fees.~~advance financing.

Table 5. Servicing Portfolio - Unpaid Principal Balances


						Three Months Ended September 30,				Nine Months Ended September 30,									Three Months Ended June 30,				Six Months Ended June 30,
						2022		2021		2022		2021							2023		2022		2023		2022
Average UPB	Average UPB													Average UPB
MSRs	MSRs					$	394,703	$	302,055	$	376,551	$	291,507	MSRs					$	441,027	$	389,255	$	426,680	$	372,628
Subservicing and other(1)	Subservicing and other(1)					428,423		351,211		412,925		347,598		Subservicing and other(1)					406,487		406,484		427,386		400,024
Total average UPB	Total average UPB					$	823,126	$	653,266	$	789,476	$	639,105	Total average UPB					$	847,514	$	795,739	$	854,066	$	772,652

		September 30, 2022						September 30, 2021							June 30, 2023						June 30, 2022
		UPB		Carrying Amount		bps		UPB		Carrying Amount		bps			UPB		Carrying Amount		bps		UPB		Carrying Amount		bps
MSRs	MSRs													MSRs
Agency	Agency	$	363,637	$	6,068	167		$	266,588	$	3,329	125		Agency	$	431,876	$	6,848	159		$	364,436	$	5,806	159
Non-agency	Non-agency	31,769		340		107		36,503		337		92		Non-agency	27,600		301		109		32,951		345		105
Total MSRs	Total MSRs	395,406		6,408		162		303,091		3,666		121		Total MSRs	459,476		7,149		156		397,387		6,151		155

Subservicing and other(1)	Subservicing and other(1)													Subservicing and other(1)
Agency	Agency	434,396		N/A				347,806		N/A				Agency	371,352		N/A				381,101		N/A
Non-agency	Non-agency	23,884		N/A				17,479		N/A				Non-agency	51,170		N/A				25,130		N/A
Total subservicing and other	Total subservicing and other	458,280		N/A				365,285		N/A				Total subservicing and other	422,522		N/A				406,231		N/A

Total ending balance	Total ending balance	$	853,686	$	6,408			$	668,376	$	3,666			Total ending balance	$	881,998	$	7,149			$	803,618	$	6,151

MSRs UPB Encumbrance	MSRs UPB Encumbrance									September 30, 2022		September 30, 2021		MSRs UPB Encumbrance									June 30, 2023		June 30, 2022
MSRs - unencumbered	MSRs - unencumbered									$	309,301	$	167,993	MSRs - unencumbered									$	380,538	$	308,295
MSRs - encumbered(2)	MSRs - encumbered(2)									86,105		135,098		MSRs - encumbered(2)									78,938		89,092
MSRs UPB	MSRs UPB									$	395,406	$	303,091	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 encumbered~~Encumbered 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 September 30, 2022 Three Months Ended September 30, 2021
MSR Subservicing and Other Total MSR Subservicing and Other Total
Balance - beginning of period $ 397,387 $ 406,231 $ 803,618 $ 287,455 $ 366,862 $ 654,317
Additions:
Originations 5,727 — 5,727 18,821 1,175 19,996
Acquisitions / Increase in subservicing(1)
5,773 65,744 71,517 18,308 28,395 46,703
Deductions:
Dispositions (346) (2,920) (3,266) (14) (1,119) (1,133)
Principal reductions and other (4,374) (3,046) (7,420) (2,974) (3,384) (6,358)
Voluntary reductions(2)
(8,666) (7,723) (16,389) (18,338) (26,620) (44,958)
Involuntary reductions(3)
(100) (6) (106) (87) (24) (111)
Net changes in loans serviced by others 5 — 5 (80) — (80)
Balance - end of period $ 395,406 $ 458,280 $ 853,686 $ 303,091 $ 365,285 $ 668,376


~~Table 6.1 Servicing and Subservicing and Other Portfolio UPB Rollforward~~


		Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021							Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
		MSR		Subservicing and Other		Total		MSR		Subservicing and Other		Total			MSR		Subservicing and Other		Total		MSR		Subservicing and Other		Total
Balance - beginning of period	Balance - beginning of period	$	339,208	$	370,520	$	709,728	$	271,189	$	336,513	$	607,702	Balance - beginning of period	$	412,438	$	440,111	$	852,549	$	411,840	$	383,959	$	795,799
Additions:	Additions:													Additions:
Originations	Originations	24,131		—		24,131		63,351		4,053		67,404		Originations	3,796		—		3,796		7,794		—		7,794
Acquisitions / Increase in subservicing(1)	Acquisitions / Increase in subservicing(1)	78,722		179,335		258,057		35,369		131,355		166,724		Acquisitions / Increase in subservicing(1)	53,558		49,557		103,115		(6,437)		77,120		70,683
Deductions:	Deductions:													Deductions:
Dispositions		(1,031)		(48,493)		(49,524)		(82)		(7,064)		(7,146)
Dispositions / Decrease in subservicing														Dispositions / Decrease in subservicing	(30)		(58,701)		(58,731)		(666)		(40,585)		(41,251)
Principal reductions and other	Principal reductions and other	(11,760)		(9,934)		(21,694)		(8,364)		(10,242)		(18,606)		Principal reductions and other	(4,185)		(3,432)		(7,617)		(3,819)		(3,520)		(7,339)
Voluntary reductions(2)	Voluntary reductions(2)	(33,390)		(33,103)		(66,493)		(57,801)		(89,237)		(147,038)		Voluntary reductions(2)	(5,687)		(4,773)		(10,460)		(11,118)		(10,724)		(21,842)
Involuntary reductions(3)	Involuntary reductions(3)	(317)		(45)		(362)		(343)		(93)		(436)		Involuntary reductions(3)	(380)		(240)		(620)		(112)		(19)		(131)
Net changes in loans serviced by others	Net changes in loans serviced by others	(157)		—		(157)		(228)		—		(228)		Net changes in loans serviced by others	(34)		—		(34)		(95)		—		(95)
Balance - end of period	Balance - end of period	$	395,406	$	458,280	$	853,686	$	303,091	$	365,285	$	668,376	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.


Table 6.1 Servicing and Subservicing and Other Portfolio UPB Rollforward


	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
	MSR		Subservicing and Other		Total		MSR		Subservicing and Other		Total
Balance - beginning of period	$	411,382	$	459,053	$	870,435	$	339,208	$	370,520	$	709,728
Additions:
Originations	6,527		—		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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The table below summarizes the overall performance of the servicing and subservicing portfolio:


Table 7. Key Performance Metrics - Servicing and Subservicing Portfolio(1)


						September 30, 2022			September 30, 2021								June 30, 2023			June 30, 2022
Loan count~~(2)~~	Loan count~~(2)~~					4,086,628			3,488,384			Loan count~~(2)~~					4,279,938			3,926,303
Average loan amount~~(3)~~(2)	Average loan amount~~(3)~~(2)					$	208,815		$	191,602		Average loan amount~~(3)~~(2)					$	206,015		$	204,645
Average coupon - agency~~(4)~~	Average coupon - agency~~(4)~~					3.6		%	3.7		%	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)					2.5		%	4.0		%	60+ delinquent (% of loans)~~(5)~~(3)					2.0		%	2.7		%
90+ delinquent (% of loans)~~(5)~~(3)	90+ delinquent (% of loans)~~(5)~~(3)					2.2		%	3.7		%	90+ delinquent (% of loans)~~(5)~~(3)					1.8		%	2.4		%
120+ delinquent (% of loans)~~(5)~~(3)	120+ delinquent (% of loans)~~(5)~~(3)					2.0		%	3.5		%	120+ delinquent (% of loans)~~(5)~~(3)					1.6		%	2.2		%

		Three Months Ended September 30,				Nine Months Ended September 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022			2021				2023		2022		2023			2022
Total prepayment speed (12-month constant prepayment rate)	Total prepayment speed (12-month constant prepayment rate)	8.3	%	24.6	%	11.3		%	27.1		%	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 September 30, 2022 and 2021, loan count includes 41,061 and 84,939 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. 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 September 30,			Nine Months Ended September 30,				Three Months Ended June 30,			Six Months Ended June 30,
		2022	2021	Change	2022	2021	Change		2023	2022	Change	2023	2022	Change
Modifications(1)	Modifications(1)	6,786	14,540	(7,754)	37,102	47,720	(10,618)	Modifications(1)	5,924	11,899	(5,975)	11,188	30,316	(19,128)
Workouts(2)	Workouts(2)	9,719	14,041	(4,322)	37,622	50,418	(12,796)	Workouts(2)	10,927	13,822	(2,895)	22,016	27,903	(5,887)
Total modifications and workout units	Total modifications and workout units	16,505	28,581	(12,076)	74,724	98,138	(23,414)	Total modifications and workout units	16,851	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.~~

Total modifications during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 decreased compared to ~~2021~~2022 primarily due to a decrease in modifications related to loans impacted by the COVID-19 pandemic. Total workouts during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 decreased compared to ~~2021~~2022 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 September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Fair value - beginning of period	Fair value - beginning of period	$	6,151	$	3,307	$	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 sold	Servicing retained from mortgage loans sold	120		236		481		790			Servicing retained from mortgage loans sold	79		160		133		360
Purchases of servicing rights	Purchases of servicing rights	79		220		1,256		438			Purchases of servicing rights	768		163		870		1,178
Dispositions:	Dispositions:										Dispositions:
Sales of servicing assets		(4)		(1)		(293)		(13)
Sales of servicing assets and excess yield											Sales 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):
Agency	Agency	234		150		1,348		108			Agency	141		338		55		1,114
Non-agency	Non-agency	5		5		15		368			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 payments	Scheduled principal payments	(43)		(33)		(132)		(82)			Scheduled principal payments	(60)		(46)		(110)		(89)
Prepayments	Prepayments										Prepayments
Voluntary prepayments	Voluntary prepayments										Voluntary prepayments
Agency	Agency	(131)		(212)		(475)		(625)			Agency	(81)		(167)		(148)		(344)
Non-agency	Non-agency	(8)		(15)		(33)		(62)			Non-agency	(2)		(11)		(5)		(25)
Involuntary prepayments	Involuntary prepayments										Involuntary prepayments
Agency	Agency	(1)		(1)		(4)		(3)			Agency	(5)		(2)		(10)		(3)
Non-agency		—		—		—		—

Other changes(1)	Other changes(1)	6		10		22		44			Other changes(1)	10		7		11		16
Fair value - end of period	Fair value - end of period	$	6,408	$	3,666	$	6,408	$	3,666		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 ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

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 percentage~~have utilized these types of ~~the excess fee~~arrangements historically as a method for efficiently financing acquired MSRs and the purchase of ~~loans. We do~~loans, however we have not ~~currently utilize these transactions as a primary source of financing~~done 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 ~~September~~June 30, ~~2022~~2023 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 September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Fair value - beginning of period	Fair value - beginning of period	$	532	$	867	$	768	$	934		Fair value - beginning of period	$	491	$	815	$	509	$	768
Additions:	Additions:										Additions:
New financings	New financings	—		—		—		—			New financings	—		—		—		—
Deductions:	Deductions:										Deductions:
Repayments	Repayments	(1)		—		(293)		—			Repayments	—		(292)		(4)		(292)
Settlements	Settlements	(19)		(37)		(80)		(118)			Settlements	(18)		(29)		(36)		(61)
Changes in fair value:	Changes in fair value:										Changes in fair value:
Agency	Agency	4		(12)		109		(3)			Agency	(12)		32		(8)		105
Non-agency	Non-agency	3		4		15		9			Non-agency	(2)		6		(2)		12
Fair value - end of period	Fair value - end of period	$	519	$	822	$	519	$	822		Fair value - end of period	$	459	$	532	$	459	$	532

Originations Segment

The strategy of our Originations segment is to originate or acquire new ~~loans~~MSRs for ~~the~~our 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 ~~loans~~MSRs at a more attractive cost than would be the case in bulk MSR acquisitions, the Originations segment improves our overall profitability and cash flow. Our Originations segment is one way that we help underserved consumers access the financial markets. In the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, our total originations included loans for ~~20,756~~4,649 customers with low FICOs (<660), ~~29,002~~5,519 customers with income below the U.S. median household income, ~~16,917~~6,746 first-time homebuyers, and ~~6,447~~1,662 veterans. During this time period, we originated a total of ~~23,108~~7,071 Ginnie Mae loans, which are designed for first-time homebuyers and low- and moderate-income borrowers, comprising $6$2 billion in total proceeds. Once these loans are originated, the 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 ~~acquires~~facilitates 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 September 30,									Nine Months Ended September 30,										Three Months Ended June 30,									Six Months Ended June 30,
		2022			2021			Change			2022			2021			Change				2023			2022			Change			2023			2022			Change
Revenues	Revenues																			Revenues
Service related, net - Originations(1)	Service related, net - Originations(1)	$	20		$	44		$	(24)		$	86		$	132		$	(46)		Service related, net - Originations(1)	$	16		$	24		$	(8)		$	27		$	66		$	(39)
Net gain on mortgage loans held for sale	Net gain on mortgage loans held for sale																			Net gain on mortgage loans held for sale
Net gain on loans originated and sold(2)	Net gain on loans originated and sold(2)	22			209			(187)			151			626			(475)			Net gain on loans originated and sold(2)	6			10			(4)			24			129			(105)
Capitalized servicing rights(3)	Capitalized servicing rights(3)	114			221			(107)			425			741			(316)			Capitalized servicing rights(3)	75			148			(73)			126			311			(185)
Total net gain on mortgage loans held for sale	Total net gain on mortgage loans held for sale	136			430			(294)			576			1,367			(791)			Total net gain on mortgage loans held for sale	81			158			(77)			150			440			(290)
Total revenues	Total revenues	156			474			(318)			662			1,499			(837)			Total revenues	97			182			(85)			177			506			(329)
Expenses	Expenses																			Expenses
Salaries, wages and benefits	Salaries, wages and benefits	69			147			(78)			276			478			(202)			Salaries, wages and benefits	36			86			(50)			70			207			(137)
General and administrative	General and administrative																			General and administrative
Loan origination expenses	Loan origination expenses	15			25			(10)			50			78			(28)			Loan origination expenses	9			15			(6)			16			35			(19)
Corporate and other general administrative expenses	Corporate and other general administrative expenses	12			15			(3)			44			52			(8)			Corporate and other general administrative expenses	8			14			(6)			17			31			(14)
Marketing and professional service fees	Marketing and professional service fees	11			13			(2)			28			39			(11)			Marketing and professional service fees	4			5			(1)			8			17			(9)
Depreciation and amortization	Depreciation and amortization	5			8			(3)			14			18			(4)			Depreciation and amortization	2			5			(3)			4			9			(5)
Total general and administrative	Total general and administrative	43			61			(18)			136			187			(51)			Total general and administrative	23			39			(16)			45			92			(47)
Total expenses	Total expenses	112			208			(96)			412			665			(253)			Total expenses	59			125			(66)			115			299			(184)
Other income (expenses)	Other income (expenses)																			Other income (expenses)
Interest income	Interest income	12			27			(15)			44			76			(32)			Interest income	10			15			(5)			16			32			(16)
Interest expense	Interest expense	(11)			(22)			11			(33)			(70)			37			Interest expense	(10)			(10)			—			(17)			(22)			5

Total other income, net		1			5			(4)			11			6			5
Total other (expenses) income, net																				Total other (expenses) income, net	—			5			(5)			(1)			10			(11)
Income before income tax expense	Income before income tax expense	$	45		$	271		$	(226)		$	261		$	840		$	(579)		Income before income tax expense	$	38		$	62		$	(24)		$	61		$	217		$	(156)

Weighted average note rate - mortgage loans held for sale	Weighted average note rate - mortgage loans held for sale	5.1		%	3.0		%	2.1		%	4.0		%	3.0		%	1.0		%	Weighted average note rate - mortgage loans held for sale	6.2		%	4.6		%	1.6		%	6.2		%	3.8		%	2.4		%
Weighted average cost of funds (excluding facility fees)		4.6		%	1.9		%	2.7		%	3.3		%	2.0		%	1.3		%
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 ~~and unrealized~~ gains and losses from related derivative instruments. ~~Gain~~Gains from the origination and sale of loans are affected by the volume and margin of our originations activity ~~and impacted by fluctuations in~~which 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 12. Originations - Key Metrics


		Three Months Ended September 30,									Nine Months Ended September 30,										Three Months Ended June 30,									Six Months Ended June 30,
		2022			2021			Change			2022			2021			Change				2023			2022			Change			2023			2022			Change
Key Metrics	Key Metrics																			Key Metrics
Consumer direct lock pull through adjusted volume(1)	Consumer direct lock pull through adjusted volume(1)	$	3,179		$	9,419		$	(6,240)		$	13,409		$	28,375		$	(14,966)		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)	2,097			10,654			(8,557)			8,684			33,323			(24,639)			Other locked pull through adjusted volume(1)	2,227			3,001			(774)			3,815			6,587			(2,772)
Total pull through adjusted lock volume	Total pull through adjusted lock volume	$	5,276		$	20,073		$	(14,797)		$	22,093		$	61,698		$	(39,605)		Total pull through adjusted lock volume	$	3,819		$	6,485		$	(2,666)		$	6,864		$	16,817		$	(9,953)
Funded volume(2)	Funded volume(2)	$	5,741		$	19,938		$	(14,197)		$	25,081		$	67,298		$	(42,217)		Funded volume(2)	$	3,822		$	7,767		$	(3,945)		$	6,561		$	19,340		$	(12,779)
Volume of loans sold	Volume of loans sold	$	6,387		$	21,463		$	(15,076)		$	29,477		$	72,724		$	(43,247)		Volume of loans sold	$	3,920		$	9,400		$	(5,480)		$	6,792		$	23,090		$	(16,298)
Recapture percentage~~(2)~~(3)	Recapture percentage~~(2)~~(3)	28.4%			29.9%			(1.5)%			32.9%			31.1%			1.8%			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)	79.6%			40.3%			39.3%			56.2%			39.2%			17.0%			Refinance recapture percentage~~(3)~~(4)	79.9%			59.7%			20.2%			76.1%			52.9%			23.2%
Purchase as a percentage of funded volume	Purchase as a percentage of funded volume	42.3%			30.9%			11.4%			31.6%			21.7%			9.9%			Purchase as a percentage of funded volume	62.7%			37.2%			25.5%			58.4%			28.5%			29.9%
Value of capitalized servicing on retained settlements	Value of capitalized servicing on retained settlements	221 bps			138 bps			83 bps			188 bps			131 bps			57 bps			Value of capitalized servicing on retained settlements	225 bps			194 bps			31 bps			220 bps			179 bps			41 bps

Originations Margin	Originations Margin																			Originations Margin
Revenue	Revenue	$	156		$	474		$	(318)		$	662		$	1,499		$	(837)		Revenue	$	97		$	182		$	(85)		$	177		$	506		$	(329)
Pull through adjusted lock volume	Pull through adjusted lock volume	$	5,276		$	20,073		$	(14,797)		$	22,093		$	61,698		$	(39,605)		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)	2.96		%	2.36		%	0.60		%	3.00		%	2.43		%	0.57		%	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)	$	111		$	203		$	(92)		$	401		$	659		$	(258)		Expenses~~(5)~~(6)	$	59		$	120		$	(61)		$	116		$	289		$	(173)
Funded volume	Funded volume	$	5,741		$	19,938		$	(14,197)		$	25,081		$	67,298		$	(42,217)		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)	1.93		%	1.02%			0.91		%	1.60		%	0.98%			0.62		%	Expenses as a percentage of funded volume~~(6)~~(7)	1.54		%	1.54%			—		%	1.77		%	1.49%			0.28		%

Originations Margin	Originations Margin	1.03		%	1.34		%	(0.31)		%	1.40		%	1.45		%	(0.05)		%	Originations Margin	1.00		%	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.

Originations Segment Revenues

Total revenues decreased during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~2021~~2022 primarily driven by lower originations volume in 2023 that resulted in a decrease in capitalized servicing rights and a decline in net gain on loans originated and sold and a decrease in capitalized servicing rights. During the three and nine months ended September 30, 2022, revenues from net gain on loans originated and sold decreased in connection with lower funded volume and total pull through adjusted lock volume. 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. During the three months ended September 30, 2022, revenues also decreased due to unfavorable fair value adjustments on loans held for sale, partially offset by higher favorable mark-to-market adjustments on loan derivatives and hedges. During the nine months ended September 30, 2022, revenues also decreased due to lower favorable mark-to-market adjustments on loan 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.sold.

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Originations Segment Expenses

Total expenses during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 decreased when compared to ~~2021~~2022 primarily due to a decline in salaries, wages and benefits expense, and loan origination expenses. Salaries, wages and benefits expense declined in ~~2022~~2023 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 ~~2022~~2023 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. ~~There were no material~~Due to decreased originations volume, both interest income and interest expense declined, partially offset by higher interest rates, resulting in immaterial changes infor total other (expenses) income, net, during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~2021.~~2022.

Originations Margin

The Originations Margin for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 decreased as compared to ~~2021~~2022 primarily due to ~~a higher ratio of expenses as a percentage of funded volume driven by~~ lower ~~funded volume due to higher mortgage rates in 2022, partially offset by higher~~ revenue as a percentage of pull through adjusted lock volume driven by ~~higher~~lower margins from a shift in channel mix from direct-to-consumer to correspondent ~~to direct-to-consumer.~~and decline in total revenues driven by lower originations volume. Direct-to-consumer channel mix was ~~60%~~42% and ~~47%~~54% for the three months ended ~~September~~June 30, 2023, and 2022, and ~~2021~~44% and 61% ~~and 46%~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Corporate/Other

Corporate/Other ~~represents~~includes the results of Xome’s operations, ~~and~~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 addition, Corporate/Other includes eliminations related to 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 September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2022		2021		Change		2022		2021		Change			2023		2022		Change		2023		2022		Change
Corporate/Other - Operations	Corporate/Other - Operations													Corporate/Other - Operations
Total revenues	Total revenues	$	22	$	35	$	(13)	$	56	$	170	$	(114)	Total revenues	$	21	$	22	$	(1)	$	40	$	34	$	6
Total expenses	Total expenses	57		66		(9)		157		257		(100)		Total expenses	60		60		—		112		102		10
Interest expense	Interest expense	40		31		9		120		92		28		Interest expense	39		40		(1)		79		80		(1)
Other (expense) income, net	Other (expense) income, net	(20)		8		(28)		197		494		(297)		Other (expense) income, net	(5)		(5)		—		(14)		217		(231)

Key Metrics	Key Metrics													Key Metrics
Average exchange inventory under management	Average exchange inventory under management	21,680		14,907		6,773		18,435		14,438		3,997		Average exchange inventory under management	26,958		19,454		7,504		26,294		16,812		9,482

Total revenues, ~~and~~ total expenses, ~~decreased~~interest expense and other (expense) income, net remained consistent during the three months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~2021~~2022.

Total revenues increased during the six months ended June 30, 2023 as compared to 2022 primarily due to ~~sale of our Valuations and Field Services businesses~~increased revenue from Xome driven by greater sales volume in ~~2021.~~connection with exchange inventory growth. Total ~~revenues and total~~ expenses ~~decreased~~increased during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 primarily due to an increase in allocated costs in 2023, driven by higher percentage of total headcount in Corporate/Other in 2023 following the workforce reduction in the Originations segment in 2022. Interest expense remained consistent during the six months ended June 30, 2023 as compared to ~~2021 primarily due to sale of our Title, Valuations and Field Services businesses in 2021.~~

~~Interest expense increased in the three and nine months ended September 30, 2022 as compared to 2021 primarily due to the issuance of the unsecured senior notes due 2031 in the fourth quarter of 2021.~~2022.

The change in other (expense) income, net, in the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~2021 was primarily due to a loss of $13 that was recorded in~~ 2022 for fair value changes in our equity investments and $5 in losses in connection with our equity method investment in Sagent in 2022. The change in other (expense) income, net, in the nine months ended September 30, 2022 as compared to 2021 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 gain of $487 that was recorded in the second quarter of 2021 upon completion of the sale of our Title business.~~Transaction.

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Liquidity and Capital Resources

We measure liquidity by unrestricted cash and availability of ~~borrowings~~collateralized borrowing capacity on our MSR ~~facilities~~ and other debt facilities. We held cash and cash equivalents on hand of ~~$530~~$517 as of ~~September~~June 30, ~~2022~~2023 compared to ~~$895~~$527 as of December 31, ~~2021.~~2022. During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we generated net cash of ~~$3,144~~$149 from operating activities and bought back ~~4.1~~3.3 million shares of our outstanding common stock for a total cost of ~~$185~~$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 ~~three and nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we increased capacity on our MSR facilities by ~~$200 and $1,340, respectively. As of September 30, 2022, total borrowing capacity was $11,300, of which $8,224 was unused.~~

~~As of September 30, 2022, our total advance facility capacity was $1,075, of which $543 remained unused. For more information on our advance facilities, see~~ ~~Note 9, Indebtedness~~ ~~in the Notes to the Condensed Consolidated Financial Statements.~~$2,050.

There have been no significant changes to our sources and uses of cash as disclosed in our Annual Reports on Form 10-K for the year ended December 31, ~~2021.~~2022.

Cash Flows

The table below presents cash flows information:

Table 14. Cash Flows


		Nine Months Ended September 30,							Six Months Ended June 30,
		2022		2021		Change			2023		2022		Change
Net cash attributable to:	Net cash attributable to:							Net cash attributable to:
Operating activities	Operating activities	$	3,144	$	(770)	$	3,914	Operating activities	$	149	$	2,582	$	(2,433)
Investing activities	Investing activities	(987)		1,011		(1,998)		Investing activities	(576)		(885)		309
Financing activities	Financing activities	(2,520)		(240)		(2,280)		Financing activities	412		(2,109)		2,521
Net (decrease) increase in cash, cash equivalents, and restricted cash		$	(363)	$	1	$	(364)
Net decrease in cash, cash equivalents, and restricted cash								Net decrease in cash, cash equivalents, and restricted cash	$	(15)	$	(412)	$	397

Operating activities

~~Our~~Cash generated from operating activities ~~generated cash of $3,144~~decreased to $149 during the ~~nine~~six months ended ~~September~~June 30, ~~2022 compared to cash used of $770~~2023 from $2,582 in ~~2021.~~2022. The ~~change in cash attributable to operating activities~~decrease was primarily ~~related~~due to ~~continuing operations, driven by $2,416~~a 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 $1,069 of~~ cash used ~~in 2021, as a result~~for the repurchase of ~~sales proceeds and~~ loan ~~payment proceeds exceeding loan purchases.~~assets out of Ginnie Mae securitizations.

Investing activities

~~Our~~Cash used in investing activities ~~used cash of $987~~decreased to $576 during the ~~nine~~six months ended ~~September~~June 30, ~~2022 compared to cash generated of $1,011~~2023 from $885 in ~~2021.~~2022. The ~~change in cash attributable to investing activities~~decrease was primarily ~~related~~due to ~~discontinued operations, driven by $1,030~~a decline of ~~proceeds from sale of the reverse servicing portfolio in 2021. Additionally, investing activities from continuing operations included an increase of $826~~$310 in cash used for the purchase of mortgage servicing rights in ~~2022, partially offset by an increase of $271 in cash generated by proceeds on sales of mortgage servicing rights.~~2023.

Financing activities

Our financing activities ~~used~~generated cash of ~~$2,520~~$412 during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to cash used of ~~$240~~$2,109 in ~~2021.~~2022. The ~~increase in cash used in financing activities~~change was primarily ~~related~~due to ~~continuing operations, driven by~~ a net borrowing of $630 in 2023 compared to net repayment of ~~$1,933~~$1,597 in 2022 ~~compared to net borrowing of $1,950 in 2021~~ on our advance, warehouse and ~~warehouse facilities, partially offset by $1,495 in financing activities from discontinued operations in 2021.~~MSR 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.

~~Table of Contents~~

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 covenants~~requirements, which are measured at our operating subsidiary, Nationstar Mortgage LLC. As of ~~September~~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 ~~September~~June 30, ~~2022,~~2023, we were in compliance with our seller/servicer financial requirements for FHFA and Ginnie Mae.

In 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 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.

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


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Advance facilities principal amount	Advance facilities principal amount	$	532	$	614	Advance facilities principal amount	$	610	$	669
Warehouse facilities principal amount	Warehouse facilities principal amount	1,504		4,125		Warehouse facilities principal amount	1,107		817
MSR facilities principal amount	MSR facilities principal amount	1,040��		270		MSR facilities principal amount	1,809		1,410
Unsecured senior notes principal amount	Unsecured senior notes principal amount	2,700		2,700		Unsecured senior notes principal amount	2,700		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 ~~September~~June 30, ~~2022,~~2023, we had a total borrowing capacity of ~~$1,075,~~$975, of which we could borrow an additional ~~$543.~~$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 ~~September~~June 30, ~~2022~~2023, we had a total borrowing capacity of ~~$10,525~~$5,025 and $4,750 for warehouse and MSR facilities, of which we could borrow an additional ~~$7,981.~~$3,918 and $2,941, respectively.

Unsecured Senior Notes

In 2020 and 2021, we completed offerings of unsecured senior notes with maturity dates 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 ~~September~~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.

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 ~~derivatives~~derivative 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 ~~2020-04~~2022-06 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, for~~may 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 elected~~At present, the Company has limited exposure to ~~apply any~~LIBOR based index rates. Due to the short-term maturities of the ~~amendments through September 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 ~~and~~when renewed. In addition, our derivative financial instruments are ~~currently assessing the impact of~~not 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 include~~2022, except that we have increased the ~~broad effects~~target hedge ratio on our MSR hedge position from 25% of the ~~COVID-19 pandemic. The pandemic~~net duration risk in our MSR portfolio at year-end 2022 to a target of 75% as of June 30, 2023, with the goal of mitigating the risk to capital and ~~governmental programs created as~~tangible 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 rate~~OAS 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 ~~September~~June 30, ~~2022~~2023 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 ~~September~~June 30, ~~2022~~2023 given hypothetical instantaneous parallel shifts in the yield curve. Actual results could differ materially.

Table 16. Change in Fair Value


		September 30, 2022					June 30, 2023
		Down 25 bps		Up 25 bps			Down 25 bps		Up 25 bps
Increase (decrease) in assets	Increase (decrease) in assets					Increase (decrease) in assets
Mortgage servicing rights at fair value	Mortgage servicing rights at fair value	$	(111)	$	106	Mortgage servicing rights at fair value	$	(71)	$	64
Mortgage loans held for sale at fair value	Mortgage loans held for sale at fair value	7		(7)		Mortgage loans held for sale at fair value	4		(5)
Derivative financial instruments:	Derivative financial instruments:					Derivative financial instruments:
Interest rate lock commitments	Interest rate lock commitments	6		(6)		Interest rate lock commitments	6		(7)
Forward MBS trades	Forward MBS trades	(11)		11		Forward MBS trades	(11)		12

Total change in assets	Total change in assets	(109)		104		Total change in assets	(72)		64
Increase (decrease) in liabilities	Increase (decrease) in liabilities					Increase (decrease) in liabilities
Mortgage servicing rights financing at fair value	Mortgage servicing rights financing at fair value	(2)		2		Mortgage servicing rights financing at fair value	(2)		2
Excess spread financing at fair value	Excess spread financing at fair value	(2)		2		Excess spread financing at fair value	(3)		3
Derivative financial instruments:	Derivative financial instruments:					Derivative financial instruments:
Interest rate lock commitments	Interest rate lock commitments	(6)		6		Interest rate lock commitments	(2)		2
Forward MBS trades	Forward MBS trades	(1)		1		Forward MBS trades	(13)		13
Treasury futures	Treasury futures	(20)		19		Treasury futures	(49)		48
Total change in liabilities	Total change in liabilities	(31)		30		Total change in liabilities	(69)		68
Total, net change	Total, net change	$	(78)	$	74	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 ~~September~~June 30, ~~2022.~~2023.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September~~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 ~~September~~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

~~For~~The Company and its subsidiaries are routinely and currently involved in a ~~description~~number of ~~our material~~ legal proceedings, ~~see~~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. 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 ~~stock~~new 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 ~~September~~June 30, ~~2022,~~2023, we repurchased shares of our common stock at a total cost of ~~$50~~$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
July 2022 — $ — — $ 117
August 2022 834 $ 44.85 834 $ 80
September 2022 302 $ 41.79 302 $ 67
Total 1,136 1,136


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 2023	616	$	45.46	616	$	96
June 2023	596	$	48.54	596	$	67
Total	1,212			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).

5556

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Item 6. Exhibits

Incorporated by Reference

Exhibit
Number

Description

Form

File No.

Exhibit

Filing Date

Filed or Furnished Herewith

2.1

Agreement and Plan of Merger, dated as of May 10, 2023, by and among Mr. Cooper Group Inc., Home Point Capital Inc. and Heisman Merger Sub, Inc.

8-K

001-14667

2.1

05/11/2023

10.1

Amended and Restated Loan and Security Agreement, dated as of April 3, 2023, between Nationstar Mortgage LLC, as borrower and Barclays Bank PLC, as lender

10.2

Amendment Number One, dated as of May 11, 2023 to the Amended and Restated Loan and Security Agreement, dated as of April 3, 2023, between Nationstar Mortgage LLC, as borrower and Barclays Bank PLC, as lender

10.3

Amendment Number Two, dated as of June 23, 2023 to the Amended and Restated Loan and Security Agreement, dated as of April 3, 2023, between Nationstar Mortgage LLC, as borrower and Barclays Bank PLC, as lender

10.4

Second Amended and Restated Loan and Security Agreement, dated as of April 3, 2023, between Nationstar Mortgage LLC, as borrower and Citibank, N.A. as lender

10.5

Amendment Number One, dated June 23, 2023 to Second Amended and Restated Loan and Security Agreement, dated as of April 3, 2023, between Nationstar Mortgage LLC, as borrower and Citibank, N.A. as lender

10.6

Amendment Number 8, dated June 6, 2023 to Mortgage Loan Participation Sale Agreement dated as of August 30, 2016 between JPMorgan Chase Bank, National Association, as purchaser and Nationstar Mortgage LLC, as seller

10.7

Amendment No. 10, dated as of June 27, 2023 to Master Repurchase Agreement dated as of May 17, 2019 among Nationstar Sub 1J LLC and Nationstar REO Sub 1J LLC, as seller parties, Nationstar Mortgage LLC, as guarantor and JPMorgan Chase Bank, National Association, as buyer

31.1

Certification by Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification by Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Table of Contents

Incorporated by Reference

Exhibit
Number

Description

Form

File No.

Exhibit

Filing Date

Filed or Furnished Herewith

~~10.1~~

Amendment Number Twenty dated September 30, 2022 to the Second Amended and Restated Master Repurchase Agreement dated as of January 29, 2016 between Barclays Bank PLC, as agent and Nationstar Mortgage LLC, as seller

~~10.2~~

Amendment No. 2 dated as of August 3, 2022 to Loan and Security Agreement dated as of August 20, 2020 among Nationstar Mortgage LLC, as borrower, Morgan Stanley Bank, N.A., as lender and Morgan Stanley Mortgage Capital Holdings LLC, as administrative agent

~~10.3~~

Conformed Amendments through Amendment Number 3, dated August 12, 2022, to Third Amended and Restated Master Repurchase Agreement, entered into as of August 31, 2020 by and between Bank of America, N.A., as buyer and Nationstar Participation Sub 1BM LLC, as seller, and acknowledged, guaranteed and agreed to by Nationstar Mortgage LLC, as guarantor or pledgor

~~31.1~~

~~Certification by Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

~~31.2~~

~~Certification by Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

~~32.1~~

~~Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

~~32.2~~

~~Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

101.INS

Inline 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.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101.)

+ 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.

5658

Table of Contents

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.

~~October~~July 26, ~~2022~~2023						/s/ Jay Bray
Date						Jay Bray Chief Executive Officer (Principal Executive Officer)

~~October~~July 26, ~~2022~~2023						/s/ ~~Jaime Gow~~Kurt Johnson
Date						~~Jaime Gow~~Kurt Johnson Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer)

5759


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Revenue - service related, net	$	4	$	13
Salaries, wages and benefits expense	(7)		(23)
General and administrative expense	(14)		50
Interest income	31		118
Interest expense	(26)		(90)
Loss on classification as discontinued operations	(3)		(64)
(Loss) income from discontinued operations before income tax (benefit) expense	(15)		4
Less: Income tax (benefit) expense	(4)		1
Net (loss) income from discontinued operations	$	(11)	$	3


	Three Months Ended September 30, 2022
Financial Information by Segment	Servicing		Originations		Corporate/Other		Consolidated
Revenues
Service related, net	$	353	$	20	$	22	$	395
Net (loss) gain on mortgage loans held for sale	(21)		136		—		115
Total revenues	332		156		22		510
Total expenses	147		112		57		316
Interest income	71		12		—		83
Interest expense	(53)		(11)		(40)		(104)
Other expense, net	—		—		(20)		(20)
Total other (expenses) income, net	18		1		(60)		(41)
Income (loss) from continuing operations before income tax expense (benefit)	$	203	$	45	$	(95)	$	153
Depreciation and amortization for property and equipment and intangible assets from continuing operations	$	6	$	5	$	(2)	$	9
Total assets	$	9,703	$	1,252	$	1,860	$	12,815