COOP - Earnings call transcript Q4 2018

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Kenneth Posner

Good morning and welcome to Mr. Cooper's Fourth Quarter Earnings Call. My name is Ken Posner and I'm the SVP of Strategic Planning and Investor Relations. With me today is Jay Bray, Chairman and CEO; Chris Marshall, Vice Chairman; and Amar Patel, Interim CFO.

Let me start by reminding you of a few things. slides at be investors.mrcoopergroup.com. to Investor on referring webpage Relations be that accessed can our We'll This is call being recorded.

to results During to the we the may GAAP statements. the non-GAAP refer deck. Appendix in measures which make finally, call, are reconciled call, we during the slide may And forward-looking to

commitment identified statements statements we and XX-K other conditions filings. Further You these affected now call risk our could should turn understand these factors over in by not to undertaking change. I'll to any are be if that that update we have the SEC Jay.

Jay Bray

and everyone. good Thanks of Ken results. to morning this is morning's call quarter purpose fourth review The

for let start crisis, who And large are those I'd me you Starting the minute a new like to if the and the with or specialized portfolio Slide financial on a importance with to update million to X grown servicers. among the been with we've non-bank issues. and credit story. journey data making XXXX, X, in of following things with two, our a shifted the non-banks. agencies strategy of recognized servicers customers of start done However, an with the provides you the have Cooper's really $XXX market the From you we've clear $XX billion servicing banks It's us some leader and Slide with on remarkable to expertise working of well. Mr.

simply, other their performing people a reflects and is the XX% we've troubled kept than average growth status of of returned our losses this out government you to homes loans. for lot in average. the capability investors. and industry more delinquent of much partners significantly shows work loans which of reduced Put double in chart we First, trust investors our The to on

a platform costs we peers. Second, very below with efficient operating servicing well direct built

team members history. customer-centric retention rate Mr. is the in the and as both highest a Cooper. the culture rebranding customers includes and established transforming company's we've experience This culture true resulting for Third, which satisfaction the company in

number and recapture creating offerings Finally, our built advantage. service customers a for we've of a competitive clear through Xome

we're Now, on X. from going about let's talk where Slide here

As technology initiative. market reason Historically, ourselves is falling That deliver effort consists loss by differentiated and of so customers. position of at our members we several are are processes experience key, and the designed servicers this means differentiated for improved an levels. some to mortgage mitigation continues automate experience cost project further Titan overall an investing which investments much of leadership servicing the to servicing the of changing. cycle, to our the we customers for performance. factors low our will in our are to success But evolve, be that team team our member point are reduce low-cost that transformation very one and Titan delinquencies and

the other theme market advantage continues be of ever most with important by risk us agencies our for trusted it the will market, management absolutely now maintain institutions. and to critical than as accounting non-bank as important recognized for government Another the servicers leadership the Institutional to is half continue be counterparties before. more to and one evolve

shifts market priorities. implied very clear some these Cooper, Mr. near-term For

feel for space. that additional capabilities missing we not are each to and now. we've with occurs of like Cooper priority in attention. But flawlessly and system Mr. recently everyone acquisitions you complete every important our our I'd and every our don't Because Cooper welcome that moving addition have our we In and recognize members record, team of Pacific new to look Union track to forward at virtually a Titan, the family. the Mr. any to and is acquisitions that our on we're to size project welcome opportunity strategically us boarded right transaction closed ensuring Seterus has from three customer

the focus on will and In executing Titan to integrating on acquisitions balance prudently addition we sheet. deleveraging our

You Thanks listening review strategy. quick in this year. can for hear about of our more the to that expect later to

the welcome Now, with to and and I'm phase move leadership person of Chris institutions for Marshall, a record super Vice excited help Chairman evolution. has Chris forward is company. the generating our value next the right to track to of of financial major He us extensive experience investors.

thanks XXXX like to to turn of and contribution I Amar an to into Before years, Chris? joining has us last call Cooper the where over over sincere in stepped especially, to who he two Patel express the I'd role enormous CFO. Mr. Chris, my made since the

Chris Marshall

customers. Jay you I remarkable start and am to Cooper. to company was how by track going of because morning its excited good a attracted strong Mr. joined Thank to saying to and growth, of commitment have its the everyone. its its position, I operations unwavering I'm and excellent record leadership

to company future deleveraging, creating a value. clear from glad I'm Board efficiency, importantly great and the on have and focus this has think most to a very I shareholder Jay and mandate

areas Cooper to result, to first strategy. quarter. now in the some third-party important turn Assurant acquisitions, very we a quarter our XX% of to executing servicing although announced origination successfully came result of an business our existing but of be and which and well as produce highlights rates. At XXXX. revenue So, as Xome's just has the continued as which the integrating Slide project the time, a pressure name Thanks up much mix will for also for acquisition, quarter a improved The focus and actions under strong year-end. busy and that at in margins the clearly stronger the in to year be three WMIH and was strong the these movements margins part review our is sharp long-term acquisitions right-size we us But wrapped the marks. merger expect took excluding let's Fourth change volumes, by And to highlighted included to segment key produced not platform growth of results, Group, the Titan is six as throughout same excellent the quarter. Mr. the last only of margins

and impacted However, we're in were in I'll in process shortly. which cover of integration the quarter result, as a detail Xome's the more profits

TBV is start But changes overview metric X, turning Slide GAAP for $XX.XX of due to of immediate $X.XX Now decline on key or MSRs. with financial to nonetheless for our million $XXX book the certainly fair impact fell for were $XX.XX, us metric I'll investors a and in loss value many the us. value an like company per it's movements. show to results to valuation servicers critical which $XXX reported from to On primarily which GAAP million rate and mortgage tangible an a which in the a important basis, a mark share measuring which

for fourth Now, in into custodial expectations the decline mark which somewhat we rates reflects higher the quarter speeds somewhat the translated for lower saw in expectations and prepay interest revenues. deposit

in WMIH page. the mark, not in re-measurements table rates. that positioned investing are chose emphasizing right from acquisition out rate In in with risk years, we And the the Historically, was capital to rising selling the the hedges recent this MSR, goodwill growth to excess operational us benefit had and merger addition subservicing partners, by which Assurant Mr. on for interest strategies but to value derivative the manage capabilities, recapture rather associated this portfolio. our Cooper exactly to spread employ than and fair the broken in

revisit any any. that this share if we'll you strategy and when Now, year and with changes we make

results spending the by Assurant drag underlying impacted make mark the Titan sure the also seeing investment of and and X, you're I'd Slide related services. to project earnings amortization, clear. right-hand side the to of like turning other integrating Now, only significant very charges company intangible from were transaction is on mortgage the Not power but the

up marginal these If then expectations. you'd from broadly you $X.XX a apply rate, is with our which to income in pretax number line exclude of and tax costs come our

Now, and which we can position year guide continued discretionary profitability XXXX I analysis you think integration so growth provide of for and and investment this investments. to higher and underlying as returns beyond. will between XXXX strengthen of us you and in a our platform distinguish our that

part CPRs our provides minimal of were of fourth to capital, important to for marks quarter low the subservicing good because subservicing, in which consistent servicing rate fair value and is grew produce the want requires servicing Also portfolios. shields recapture returns, up which I highlight and total let's portfolio X% portfolio page XX% expansion on growth, and very the about to year-over-year in was quarter, was fourth and In more credit talk us more year-over-year. ongoing Now, a economics X% higher XXXX. an from a and story as to attractive turn strong thanks up growth X subservicing to strategy stress strong part overall XX%. in contributing

of in competitive the that XXXX And company growth billion. is as reflects anticipate portfolio You direction acquisition you and total years the subservicing thanks this for Pacific from Last would moving see several can X% X% today. to grow portfolio portfolio with the to by the told XX% quarter, we how least at servicing in in as March other of This advantages $XXX just stress XXXX to been we impacting non-bank Union and market. strong has over goal. growing in our Seterus, we've players servicer the well already question, entered momentum with the some exceeded total the as leading this a of

the point, Whether shifts to will the However, growth further very of deleveraging. priority XXXX and in not, to that on this portfolio from choose a at number or factors. I be we profitability to expand want clear depend

review of $XX servicing-retained And returns. look risk-adjusted led MSRs been For a hard going sell entire at on taking to through in example, portfolio this billion a and we've basis. a review the approximately us

improve expect it continue our MSRs seeing when straight this not So But time in growth expect Nonetheless, we to line mid to as every to single-digit time sell or you're from year, profitability you portfolio this should us quarter. overall over risk profile. be time. may would

a turning X. good quarter. very to servicing in on margins slide fourth This the story also was Now

the results to additional but and to in the opportunity resulted which third quickly. accelerate $XX of And is the portfolio, included profitability, relative by pleased the in during with quarter as the an also I to assignment fourth where sequential revenues growing has of inventory saw submissions to I X.X to improvement performance million was you, I basis in means partially earlier this Also Titan. said, in servicing excellent lower the we because quarter, the reverse pending with contributing disappear which same will UPB. expenses lower rates, mentioned part servicing CPR note made in each income reverse margin thanks Project a loans As we margin of mode, to quarter caution of extremely the offset the was quarter, strong were million And in run-off which points expect not subservicing, the share in was relatively in portfolio income quarter. But call $XX that order to HUD. associated this execution. allocate resources I this

Now in the ramping critical down of we similar at the these of stages because are interrelated the expecting and servicing second will highlighting that work number XXXX half then consists Project we're them stream. probably automate of of in investments peaking to and a expenses, streamline continue levels of significantly Titan technology XXXX. many

Equally We and contributing individual customers see Titan this our in more Titan noticeable Project will XXXX. needs much year, and but understand to tailored also mentioned, as provide important closely help better us Project solutions. them Jay will efficiency expect we results the begin benefits more

about servicing industry we years, the in in Titan expect industry technology other really the like Project from differentiator time. deployment over financial for Now services to us we the in not the a We're operational expect significant future. and new has sectors benefited excited results recent see to very be

XX. steady origination to switch X%, decline billion, gears Now, let's offset correspondent and by slide strong on about In at which channel. up originations by is production and was in volume volumes sequentially talk $X.X total, direct-to-consumer the thanks

of is But As rates efficient profitable. in focused volumes the channel our pressured the with the you our of fall. and very helping mainly quarter, were because DTC refinancing. on very know, channel run-up during is The existing customers

acquisition will are acquisition because beat which This Customer retention As And with reduces quickly excellent right margins PacU impressive. actions platform. planned the which size is And a been X. missed to is companies, new important integration outlook became running production Cooper, a capacity have extremely on by contingency well that the we're seeing been our and far the as That and seem to strategically teammates margins profitability. overall stronger evident. clear, has and for February purchases line QX. improve so our in origination has need our both to in volumes bulk Mr. plan. don't result, We implemented was healthy we closed

Now results reflect impact of the turning from which you'll quarter XX, to full see Xome's the slide AMS.

bring including acquisition AMS services. of another and to it Mr. for important Xome Now in title, in strategically is it field across valuation all positions scale these claims as from growth Cooper And us several businesses third-party verticals.

was we've divest and As why parent which decided AMS subscale its commented previously, is to the unit. former unprofitable,

a fourth around was us quarter being the quarter, that excellent expectations. money the to XXXX and the an conversions will quarter opportunity with $X take of system's $X through AMS During totally remains and time. million which existing is the completely AMS first first their business from on and provides with quarter. begin incurred in line we scheduled AMS will full turning cross-sell the half while the schedule continue to some impact third of with our losing the was second million, But in customers, The integration impact

of end toward working towards once of breaking are We the that the and of strong AMS results year Xome expect goal occurs. even the out

is the which are continued general profitable in most decline pretax share business. Post is cycle continue delinquencies Xome's by and for in market end the turns. meantime, these deals, year. half which But a on closing which the expect declined but quick of decline market, Excluding above income the levels times. ended Union, of capital well Xome's if $X working weakness. of acquisitions first million of positioned, the we strong credit levels will to now extremely Xome Seterus headwinds year reflecting AMS, the the we REO very we'll auction all to And largely the in offset comfortably the third-party sequentially, through the requirements grow low at operations I'll liquidity, exchange, all comment the to are impact Those with remain we fund levels. Pacific of cash as flow up our and strong at of from the in the wrap

I'll So that turn concludes for remarks call Q&A. now and back prepared our the Ken to over

Kenneth Posner

going Chris. the has team the just that to who the start is I'm for Q&A for feedback after standing And to questions Thanks, I'll us. follow-up IR by mention ask session. call Sheri or anyone

Operator

Thank you. question Our Suisse. from Harter comes [Operator Doug Instructions] first with Credit

Doug Harter

Thanks.

Jay Bray

morning, Good Doug.

Doug Harter

potential portfolio can to kind and in distinguishing commentary --- the if you portfolio of to how about, future would kind subservicing I each this you're about bar additions point? Good and view MSR you consider acquisitions, morning. talk guess, of the Around that for at purchases between the those of adding

Chris Marshall

But market in a executing don't look priorities our occurs that's I'll in it Titan, executing you our I clear, point not Titan. technology at to set priority. recent originations, we think should the to going which do we're its to at anything and that to given most MSRs to a look market at comes digesting that supplement And most flow we assume focus the size most additional that Chris, continue be scale. going that given We'll -- to virtually really And we've we importantly by really we're But buy the our But Project the acquisitions I transaction want that our that company what things. we'll the acquisitions start the to a deal basis we're going period are the just project of brings recent saying to recent to is see capabilities market. does look of transformational where acquisitions telling in is But us. our we on company and not size maintain digesting is every and this always That a at every focus is our are history you think had. this and mean, is initiatives. on where through on that. make

Doug Harter

think how about that project And mentioned return on then start do when return investment? And the a XXXX that do you we is I you guess, investment. of investment? Titan, on year what on seeing is that

Chris Marshall

of Titan XXXX. a talked year. of see aspirational So again the goal of project But about will haven't benefit to more improvements returns specific has past company in Titan. that's in IRR at of the The end what this long-term reduce as noticeable first if you're we'll commented start we disclosed goal of in And we $XXX the all, the project Titan asking. project by of past We've expenses the seeing much as overall the a see million.

initiatives the of towards we to to year. think rate, that line is time. these of And impacts -- near-term think work a Our going the efficiency sight over we begin this the beyond roughly rate million number $XX be across would run we that see have it to million Having that that. just end $XX will servicing said are more I a which far annual there we're And leave get stream. of will that run at

Doug Harter

right. you, Chris. All Thank

Operator

Thank you.

Our with comes George KBW. Bose question from next

Bose George

good Yeah, morning.

expenses follow-up that fully the they you Titan. on done a Just at The highlighted will project of XXXX? end be

Chris Marshall

several XXXX. we into But be clearly expenses go XXXX. expenses virtually what bulk there now years. career But have schedule so my in schedules slippage. I The beginning in have down is completed that should along slip be going to say be that And the XXXX it some the sharing event, just for that's completed were be with that. we'll is that XXXX. largely with because us nonmaterial of in the direct of with wouldn't occasionally I some bit of the significantly think costs to we underway ramp concerned capitalized the all tend by a us would that in see will where have you'll I projects initiatives of But a some of XXXX. long said conservatively conservatism, technology see little should expense they're

Jay Bray

a to the statements rolled what at would fruitful. that Jay And convert the related team part of early DNA members. is get of -- we've proven seeing servicing I those helping is of I'm look the progress. I customers becoming or initiatives really more very mean, a each manner add to out statement helping that you encouraged we're in are customers be to efficient this payoff that some when about mostly to its

infrastructure a it, and the we're -- in good a engagement. in place so lot see program the a behind itself everyone the think company of And in to got we've and we’re starting we're really we've got I with customer build,

Our we e-statement more past. we're to converting than success, e-statements customers the ever have in

So really positive.

Bose George

That's helpful, you, thanks. guess AMS in great. this Okay, that I end breakeven after have then expectation impact. well? Is about that? end And of XXXX as might is the Does that the said

Chris Marshall

Yes.

Bose George

or then the of guess mean, referenced, MSR prepayment MSR And that I helpful. risk, that Thanks. any you based that of I is color like great. Okay, that the you just $XX that characteristics be would on on sold. billion

Chris Marshall

say And $XX of were overall drove a that out on It's this of economics actually servicing I'd better. billion. I'd profitability retained pool -- Overall say. what was the basis really the

Bose George

just profitability. then last the one on one And Okay.

this costs. you guys quarter if So Titan hit X.X the project points excluding basis

So the when that guess Titan and that project as be I to going kick project a to I mean, as flat forward going we number think year? up expenses is fade. next benefits about in number those --

Chris Marshall

I basis understood your -- I correctly. if the that question Yeah, if wouldn't points expect X.X

Bose George

the right? quarter, because the the as after that pulling expenses Titan baseline this project that baseline at think out you Yeah, was

Chris Marshall

-- are two that also quarter. We expenses this from Titan. Yeah, the project there happened had things we

continue We close expect income anywhere from which of million also reverse, we that. had don't to to the of $XX contribution

remains have is we'll may bit we've place. the as a the it's especially servicing where little mix change. And, for lower, little given some So bit higher quarters subservicing and course, guidance -- of a in

is our feel prior in we that still place. So guidance

Bose George

Okay.

Okay, great. Thanks.

Amar Patel

is Bose, Amar. this And

the We prepay also being with as the funds benefited had profitability. very the seasonal well quarter quarter fourth low that

Bose George

Thanks. great. Okay,

Operator

Thank you.

Our next with DeVries question Barclays. comes from Mark

Mark DeVries

fall of mix? quarter. going here -- were able you It after just up the better the for saw thanks. I get Were margin you size sense like volumes the your into how just seeing the Yeah, think comments mean, are of that should you bit. origination cost forward. some to margin a that go also from about to expectations end looks I Wanted the was correspond heard right a in XXXX? we pressures as And we side

Chris Marshall

shift our So, margins. we the see that fourth affect during did mix and quarter did

in to downturn expectations The giving going guidance, expected of QX. to you the are on we feel a was as we our margin in anticipated. worse fourth you -- quarter good we other terms for were giving specific guidance than say, very where about really we specific In are we than saw downturn. But pass things

Fortunately and quickly we were able platform. the to size act right

and we by going are. market. we feel know originations margin volumes as But good dictated to So you where about are be the

you want more within to tell of our on period as than And time to fourth other a manage good so that we the feel our we relative we don't anything margins ability in about topic quarter. quick did

Mark DeVries

Okay.

Jay Bray

And add to I would that.

correspondent maintain -- our channel, discipline we the there our On margins.

be I not team to methodology addition we and think volume that stayed have with the the volume. PacU that just will the the customers, we of historically targets return in business. We PacU I have mean, chased same. consistent the chase the

And continue. margins and bought good I they that to think strong had doing expect had PacU that has them well. we of history when a we as

are they quickly -- see fourth in sized you lowered So can't moving at certainly that market time I now; from have in the guys. the the all lot disciplined to immediately. point refinance are look the job with spent think very to Chris' business very we channel. cash-out margins. the manage their mean, And When direct -- I a those and now again world I disciplined we the really think in think managing movements the a a in when place They and consumer expenses they extent process correspondent the that we volume. we've right world right-term percentage strong they're quarter did big of slowdown to I of And did of

see will does hopefully cause not same it So But market if discipline. to the think pain. as continue we'll much the I And react. you'll

Mark DeVries

Xome. you like you're you Okay, as AMS some get into got And of become efforts it. the that the to sounds profitability on the margins play bit got of turning hopeful to XXXX. exchange as a volume in of Xome? healthy just profitability a properties do -- through get a then the business How contributor listed that decline turning going as against maybe you've in It tailwind that think the you that's could assuming that's pretty to pressure around in

Amar Patel

is view of while there Cooper portfolio, third-party offset our lot that Well, are tailwinds with with the is a volume volume. being Mr. that

So the most levels business. coming while delinquencies being down are are new overall of inventory with offset third-party

our So lend close title clients replace as itself and incremental our third-party product so And with lines that with will not revenue plan but as and wallet with is – with well only to the volume share forth. grow exchange, across to that existing growth.

Jay Bray

of think be. I that power we that when what integration losing Unfortunately, could the see mean, you Assurant bought revenue simply and it, about money. I if think you it's

is get goal one and margin to number the so acceptable to the level. an And that revenue

think what the and that to will as in business we're that's the I tailwinds it year latter for so far point, to I And – do going integration. part productive. of be be the as via trying XXXX will think into the your

we Amar gain it have core the Xome said correctly, to third-party on to client. business, think continue I

a those way. got we positive opportunities that really adding takes time. a But impact – can you keep I we those and that – We've clients. couple got think in meaningful have I there. pipeline have that a could to think We close decent

margins portfolio. flow I'm inflow look large business Cooper's at in – with standpoint, a to valuation – you of really look done property shrinking keeping up lot that's that the a so is And market. at think then in I least exchange we've the happy the business. So the has title way improved to business if third think of business, given overall you degree the from our with well the about mean, appraisal core a added the parties, When we’ve Mr. our at Xome. we've there. business I

It's And got so just I core think It's us. good. get to integration. behind the is the got

Mark DeVries

Thank you. Great. Okay.

Operator

you. Thank

Hammond question of with next from America. Our Bank comes Mark

Mark Hammond

question later had morning, balance made talking comment the Good Ken. prepared Thanks. and this it the de-levering I and Jay, the during on year. remarks a about Amar sheet about Chris, and

So, wondering the de-levering year if put you on beyond? later preview XXXX that any at looking this and and in can how you points could finer you're

Chris Marshall

said – later correctly. this so when not can't mean want because won't important But we're really still didn't information five it's but year, that do preview – But thing plans. later. we developing we share Well, we when we don't minutes an It's we ready, Mark. and much, overnight. be It to done

And now. out it, going When through rolling board, when our so it we'll vetted we've begin completed that we're with keep communications. process informed. And we'll fully we've you fully

those very – I from you think and we're where is the and make those words most carefully, we understand focused. important point we growth can that chose to profitability shift make that deleveraging the in today's sure call to was

paying transaction, us disciplined a till that's that seen some to for very feel up a about you down about So transaction. when debt past, And do thing. comfortable us the in to you've of targets have company But we've we quarter. feel that. to current the regard But put lot very we've lever in or had to specific should expensive been the debt. point great important facilitate going to And we second wait expect with with do on same to as an operating them about levels. We timing the

Mark Hammond

Chris. Thanks, Okay.

Jay Bray

pre-merger we've just about over said two – past Chris Mark serious been last heart-attack But the down $XXX paid the we reiterate million de-levering it. think I in to in in years and debt. then

information when And united a the company. of will. and this we we share are it so very And focus is it make we can happen. we'll more front on But

Mark Hammond

you expectations in and relationships or had the out that incremental more Understood. retaining, if On retaining to to haven't Pacific are changed? these about place less switching the the beginning correspondents relationships still And overlap customer or then you were laid acquisitions. and Union, the the recent at with that

Jay Bray

Union Pacific integration went That's right. that expected. Yeah. I'll better tell the you than

not just the we're missed beat. Mr. clear margins this appropriate. are organized business – now meeting went appropriately both think clients. well going not kind like have Cooper beat very we haven't are a where PacU with great. as wanting of But place. was integration in we maintain to to kick-off now are the Again, the that we I I'm we team the had team. We feel missed going a as I in be that really as Clients team at the a and stayed

extremely And part We haven't missed them. members. of and things Mr. team expect are Cooper think they the excited a family the I good from to beat with we be

Mark Hammond

I've Great. got Thank all you. today. for That's

Jay Bray

Thank you.

Operator

you. Thank

Our with comes Henry next Wedbush Securities. question from Coffey

Henry Coffey

Yes. everyone. call. thanks And Chris for Good my taking morning, welcome.

Chris Marshall

you. Thank

Henry Coffey

were back think So about doing services big last I been if talking focus that essentially out is else. the work was giving we own on the business, of and the which to field eventual everybody to going kick-in just you're Xome, customers the year your

is is losses XXXX So a some to pretty that for opportunity of Or more for show know me? be that future breakeven like field the put of year? it is, contribution later at you that of up simply question us will a put acquisition going But it news? it as maybe was guess services something business. was of I the is in And on thought can or dates I AMS dramatic dominated XOME of entire kind most off. by the source with AMS the yesterday's

Chris Marshall

honestly. those with know, is expect I mean, take But over do I if AMS the some not business to the right will quite turnaround it now systems be to the that I'm words. regard integrating I we will don't And choose would sure Cooper's migrate focus to Mr. time. time. dominated.

So that's this that the quarter year. customers. our importantly more in to completed the will transition a The is there than get most cross-selling. take of second integration of maybe And process going is

to The that AMS that's are we too. long-term third-party acquisition customers want Mr. of to the And the really Cooper capture. coming through time takes that that value

that. do We of year. this continue like be to take which the end prior from exactly, communication the some fully customers by you the we think that working even expect sure time other towards clear But drag will AMS. of not can realize. I'm to breaking things today So from we And of goal but cross-selling the year, those we a last should are to

Henry Coffey

Okay. that's I right. think helpful. you're And No,

to box want You on don't the it's working. when turn not

seems that – So

Jay Bray

Henry and services we're then in mean, we – field kind let's build highly Yeah. the and pretty going the you a all are platform. can I integration, to correct point, it's that ready of if think to Assurant it De not And when confident that that until there. we're at that. you right volume go the We were back think platform we that stopped are do utilize we going the But behind Novo, I field do look handle to until sure Chris' moved services we manner. I in time to

little to of that's bit take a So time. going

Henry Coffey

more is a front? I And a bank. Is then a on the Chris, had with that other it? about you areas the hedging new from represent think does to of in And running way know towards strategy with mentality change bank-like that you see among background it about manage likely Or should MSR think a how impact that how of risk? that? we will we Or the when strategy? outlook? something that to

Chris Marshall

to I of time taking existing and strategies I But financial of rate at change just think is all. as strategy CFO as, the strategies, at a really of this pause should do in a a hikes certainly it of it a you new look. here. in that. think He's there's And don't think looking fresh think should great you all kind

should we just So then something to communication we've on there change, I'm MSR. fully will we're term. that. it. be that, will gotten that. thinking to that do going going changes a XX share why would say something with But where kind, quarter about make but we Clearly, it. with very to saying, we mark, to got to change, we're have again, us days that it near value you going we've are made full something a any not are not I'm we're evaluate it's with that in look saying, just at you, don't hedge I'm evaluate we And it if not you important change. into read not will of big use a the the a expect a for derivatives to than change more it's we've But and yet. in any clearly to be ago, my arriving a us And if making But fair illogical

Henry Coffey

And I think this is…

Jay Bray

Henry, a right? And, I historically, portfolio. today, credit-sensitive you – prepaid-sensitive We it's we -- on, honestly, portfolio natural than something the talked about the a it's that evolution, if more that had portfolio, because something look and Chris at earlier

delinquencies where is If book credit the we're piece lower. at The of you today, look are lower. sensitive much at much

And it's want think, it. And dig in why, natural kind at evolution. and that's a and to look and think others Chris I so, of this and evaluate I Ken I

Henry Coffey

I they a and -- in they when do question the to subservicing. what this changed points. come on -- was loan return be was do, to and thinking that's MSR Chris' then around of some in as quote of when that Subservicing, MSRs lot more the of us -- loan, around they on there's generate The points. of basis most comments. integration total of of subservicing -- X might start nobody with a probably and or likes hasn't I of XX But points capital at hedging and last X The your a in listening X business cost really a No, with as you. there's basis start the fee basis probably basis fee per acquisition case, Owned it think area. don't terms then, XX there's points And cost. other numbers but gross of and

servicing future are blend sort your as profitability those -- about of what together? thoughts So two you

Amar Patel

on to depending there's have that there's for per delinquency range mean, XX metric amortization because net-net. status. price a the could right. obviously, subservicing than I Yes. the be fees a Henry, that, profile. on on mentioned X, do you're It is higher delinquency X, as it you But component, takes basis purchase points the that also when that and the you MSR related loan a based

Henry Coffey

Right, right, right.

Amar Patel

and our going to the extent margins with a But that. subservicing, and the with themselves. of level, we of earn that we're have standpoint, to so, with tap XX-XX acquisition that now, subservicing. and split efficiently, margin use capital acquisition balance the can Union shown. And Pacific we got the capital, MSRs a of do Seterus the was at see or what a extent we've the roughly There added between can on maintain to on that, we'll we'll we that XX-XX. there. which margin at present To Right look healthy deal little along earn how can we on subservicing kind XXXX, the bit outlay maintain range going from Currently, with be course subservicing opportunities more over we'll we've the same is

Henry Coffey

a ask is this... So this good to time

Jay Bray

those And I I there's ongoing flow. you historically, relationships think, out they with a do if and others. partners, and look at NRZ, think, what -- portfolio, comfortable those very it's but Henry, we're Harbors of not cases, relationships. in a existing done and find we've subservicing gone we've USAA Two like been like able only lot And like move right, great in to

to in experience. ourselves we're to we're better and efficiencies further costs by differentiate differentiate the with We're view to of building by customer servicing platform, going going continuing right? further that world I and Titan and further with we're the differentiate market going to think, my drive the from is a capabilities delivering

now, the be to integration to on I space. the it to best. we delevering. right And will and do time subservicing to and able if in we're we think do think, want we're fierce But be pretty we'll competitor when of able it, we're mentioned I think going it's we grow not be that. a And the because when we're is is so, because as right, three And I focused time the focused on acquisitions certainly

that's And come so, going one of that you're things of that. out I Titan. to naturally believe I really think, the see

Henry Coffey

all you've one perfect and before set adjusted that it be important when metric, we this ROE, thing there go all these No, we EPS, Cooper? I looking got What were goals the can GAAP I've makes and If mean, what we do EPS, -- to its again. of ultimately on will sense should whether down I the and at most of focused list. the comes is on four know you phone, it ultimately Mr. gotten

Chris Marshall

any equity, value. time, think, shareholder return period focus equity a return over on that you're on not is of that I you're tangible if common I argue hard metric to generating a And long it's on. acceptable long-term, generating really

we've to we'll us the time. financials sort year. in And underlying maybe, talk that that will you the bit see is emphasizing little transition convention It's script and more really power should underlying bit. theme numbers show But we for also able not two change that see, a done over of our company. you be should expanding those in is And little emphasize of financial that converging the And and to So to GAAP don't think results a want GAAP industry. another we over sort we see us the the with be you more. And an us presentation -- emphasize. that's about what earnings that's this is you'll of

this goal point sight line So an communicate some something to us is and also year. of expect towards, that appropriate for you should us giving drive you at to

Henry Coffey

Great. Thank you very much.

Operator

Thank you.

next from Our Bologna. comes Giuliano question

Giuliano Bologna

question. taking for Thanks my Hi.

I guys… think, you

Chris Marshall

Right. Yes. Thank you.

Giuliano Bologna

guess, that so I kind questions earlier. it's So, following asked were up a of on couple of

Looking side, of on kind parts servicing margin this. two the there's to

of a a the weak range on If in like the of you in mid-X to about the, to the place terms stable then you it, side basis did they mention for unreasonable in that, about we an And seasonally half? of have expect you at in still look kind back Titan quarter ended XXXX. which of where to fourth that? expenses, the rise excluding that we look but Should of then, should the quarter, first kind with how the that forward half were call up in the relatively points And from? you and be million Titan profitability, reverse strong it seasonally Is will quarter. think $XX fourth includes cost also benefit looks them

Chris Marshall

that off some some quarter mix, as at to of certainly, not commented Again, them slip in out, change. down a peaking we're we run profitability, what be XXXX. really quarter regard the may goals more are said, be roughly that expect at Jay to for that's if going may those year schedules may there, any guidance And and a will we into our in change. levels. And in a costs new point development as to significantly because little will There think fourth similar the are I is from slip bit, we things other share pieces. drop subservicing moving the laid XXXX, previously. a there again, on now of servicing With long-term second number

we right sustain feel of good at profitability very ability the now good in our these about to platform, our So levels.

just there. So, it I think, we leave

Giuliano Bologna

That makes sense. one servicing. And then point just clarifying on

in include March. billion the -- -- You mentioned happened sales billion Does of the $XX or that that of after? $XXX $XX does UPB billion that

Amar Patel

billion, $XX the Well, subservicing we as mentioned, is retained.

it because the to while it's just of sale our subservicing So moved MSR, the portfolio within it's still subservicing.

Giuliano Bologna

platform? think profitability over field to is service higher coming of scaling continue exiting And a business have about you should and which those orders at important. how kind XXXX? Because ability switching year from come think the Then we orders you in XXXX about field going That amount internal That there works. as good. the on from to is revenue, the sounds from that the to the if we services contribution of margins, will AMS, most significant -- to likely a through contribution get on so XXXX, and the

Chris Marshall

I would going to... we're say that

Jay Bray

yes I think -- going ahead. to you're Chris. Go sorry

Chris Marshall

Jay. to going say was Go again... ahead I

Jay Bray

I go -- think Chris sorry. it's ahead a

Chris Marshall

are, boss my will methodical I on for going would contributing from be a just this wouldn't I so on and of leave changing of is is path money -- we do very Contribution and more systems integration. parcel breakeven. we'll transition I on internal year. we the Cooper, end fly. total of orders to so that. is very just but good a they job to losing the to incredible and any was than business task over working very, that But we're ready. the path clearly but feel that. The part mean stepping keep get to a say breakeven. year that's volume we're that This of I to Mr. that time breakeven at conversion towards Mr. transition logical of as difficult part transition team get to committing in following way, doing the and apologize the about a Cooper is not the it We're to getting an And going where is here

Jay Bray

Assurant that. them right, care we thing want And I to I Yes take and sure And that the they're and I and was we that keeps is product. all worst existing look could I there of of overload going Cooper Mr. on with that make running. process third-party platform customers, with think do think to our that agree priority. just add are to I highest it

get least handle to it's comfortable a of going where of Mr. couple quarters to Cooper take at that volume. so to the And there kind it that we're

it. I'm So about that's thinking how

Giuliano Bologna

That That’s questions. really helpful. for my thanks the I makes time appreciate sense. and very answering

Operator

Piper Thank our you. next Barker Jaffray. And Kevin from with question comes

Kevin Barker

morning. good Hi

Jay Bray

Kevin. morning Good

Kevin Barker

through MSR you came last I the quarter how up the was I if market-to-market related disclosed wondering could million of to the much amortization $XXX expense you believe million. marked portion of provide $XX adjustments.

Chris Marshall

was it million, Yes, $XX Kevin.

Kevin Barker

then XQ great. provide as that and follow-up, number of for Okay, XQ you And can a XXXX?

Chris Marshall

We're after you with We can. don't happy you We'll up we'll mind, just if follow do that. to -- follow call. the

Kevin Barker

how quarter? out off amortization And going expense And this in for Sure. of was is what breaking this the expense per quarter? XXXX the much to motivation intangible then run

Chris Marshall

to But you to show at want the of the it's hopefully, really have in of in and think me. after past calls. business and do important than more drivers GAAP have the we're that. we to you going don't to financials you But to given past. the in it we time, runoff bridge is motivation that agree guidance sure; with because continue make we we've the -- again to try we you the We'll front these I emphasize And on the same the to the call give

broadly pretax and page just presentation, way And on income line seven what again showing clear the see think to of them which a way I your so at that them. than think is We're were. expectations we $X.XX individual you our from walk the this is motivation to in you look that. No with items why other out that's breaking

Jay Bray

over That's complete here And had of which we this going saw there. right. is assessment XX, to because on the balance future. running When in created out intangibles And an to that be we we quarter then the then the calling that post that merger. do off merger did July we're because our

Kevin Barker

you Then That lastly, I amortized could provide guess the great. MSR. guys wondering just Okay, was sense. makes the if cost I of

Chris Marshall

follow Yes Kevin. the you up sure. will after call Ken, with

Kevin Barker

guys. All right, thanks great,

Chris Marshall

Thank you.

Operator

now and over thank turn for closing like you. in call gentlemen, Thank to remarks. the I Ladies management would today's any back for to you question-and-answer participating session.

Kenneth Posner

throughout you Thank you we morning look forward this our to guys you. joining to us and XXXX. for reporting Thank results

Operator

Ladies concludes and gentlemen, thank you in today's for participating This program. conference. the

disconnect have all and a may day. You wonderful

Mr. Cooper (COOP) 7 Mar 192018 Q4 Earnings call transcript