Mr. Cooper turns a profit, led by record mortgage volume

Record originations helped Mr. Cooper Group generate its first full-quarter profit since its formation through a merger between WMIH and Nationstar last year.

But its profitability was lower than it might otherwise have been due to a decline in the value of its mortgage servicing rights.

The company had net income of $83 million for the third quarter, compared with an $87 million loss in the second quarter. For the two months following the merger last year, Mr. Cooper had $1 billion of net income; Nationstar had a one-month loss of $64 million just prior to its acquisition by shell company WMIH.

In the first quarter this year, Mr. Cooper lost $186 million, while in the fourth quarter of 2018 it lost $136 million.

Mr. Cooper originated $11.9 billion during the third quarter, with purchase mortgages making up just 39% of its production. In the second quarter, it funded just under $10 billion, with 53% being purchase loans.

Correspondent loan purchases contributed $6.4 billion to third-quarter production, while $4.9 billion came through the direct-to-consumer channel and $600 million through wholesale purchases.

Pretax income in this segment was $178 million, up from $118 million in the second quarter.

Even with the $83 million mark-to-market hit to the MSR portfolio, servicing pretax income improved compared with the second quarter. At $9 million, the number was up from a loss of $135 million during the second quarter. There was a $231 million charge to the fair value of Mr. Cooper's servicing during the previous fiscal period.

The pretax income for Mr. Cooper's Xome business doubled to $14 million from $7 million in the second quarter.

Separately, Redwood Trust recorded net income of $34 million, up from $31 million in the second quarter, but down from $41 million one year ago.

"The third quarter marked a historic time for Redwood, a time where we made significant progress positioning the company for the future of housing finance," said Redwood Trust CEO Chris Abate in a press release. "While the rate environment offered a variety of opportunities and challenges, we were able to leverage the strength of our business model to navigate through continued market volatility and execute on our long-term strategic initiatives. We spent ample time in the third quarter focused on the acquisition of CoreVest, our long-term funding needs, and our portfolio optimization goals, which we believe will deliver strong and durable returns for our shareholders."

During the third quarter, Redwood purchased $1.5 billion of jumbo mortgages and originated another $162 million of business purpose residential loans. It also closed three securitizations totaling $1.1 billion.