Mr. Cooper to purchase Roosevelt Management, Rushmore
Mr. Cooper plans on buying an investor in mortgage-related assets as well as a special servicer to prepare for a credit-cycle shift. Executives revealed this during Friday’s earnings call. Roosevelt Management Co., a registered advisory firm, and Rushmore will be closed by mid-year. Roosevelt invests in whole loans as well as mortgage servicing rights. Jay Bray, Mr. Cooper’s chairman and CEO, stated that the acquisition would provide an asset management platform for us to raise third-party capital from institutional investors who seek exposure MSR and other mortgage assets. However, he noted that the cash outlay was not significant. Cooper was asked about the impact of a predicted recession on it. One company executive stated that having additional special servicing operations could help the company weather such an event. “Many of your questions have focused on the risk of a credit-cycle change affecting returns. Our response would be to first, that we purposely have excess operating capacity to absorb higher levels loss mitigation activity and second, that we will consider a higher level of delinquency as an opportunity for our special servicing business to grow,” stated Chris Marshall, Mr. Cooper’s vice chairman and president. Mr. Cooper’s executives declined comment to analysts about Specialized Portfolio Servicing’s earlier agreement to purchase Rushmore’s assets last fiscal year. However, they pointed out that their company’s pending acquisition involves the purchase of the entity itself. It generated $155 million in net earnings last year, and $113 millions in net income in its third quarter of 2022. Cooper has been remarkably consistent in profitability, considering that lenders last year suffered the biggest quarterly loss of $155 million and $113 million in net income in the third quarter of 2022, Mr. It managed to generate $45million in pretax income during the third quarter last year. Pretax income from originations was $181million in the fourth quarter of last year. This is a small amount compared to the $181 million it earned in the third quarter of 2017. Executives said that the company is close to breaking even on production operations following rightsizing and mass layoffs. According to the MBA, the company has eliminated 1,000 positions in originations. At the deadline, the association was yet to release its fourth-quarter profitability numbers. According to Mr. Cooper executives, these numbers will likely continue reflecting an industry-average loss per loan. Cooper earned $159 million in pre-tax net income from servicing in the fourth quarter last year, when mark-to market and accounting adjustments were excluded. It earned $81 million in the same period last year when those adjustments were not included. In the fourth quarter, the company reported mark-to-market adjustments of servicing at -$56m. Analysts at Keefe, Bruyette & Woods stated that MSR valuations and returns were likely at or near peak levels in a report on the company’s earnings. Cooper executives stated that despite the expected surge in sales, the opportunity to buy MSRs at low prices and earn strong returns still looks attractive. They also mentioned that the company is continuing to improve its customer-facing technology through a business partnership. This partnership will see Sagent take the final step towards a cloud native platform. “Having a modern suite of applications increases the efficiency of servicing. Marshall stated that tasks that were previously done manually are now completed much faster.