Mr. Cooper Group Inc.

Thank you for standing by and welcome to Mr. Cooper Group's Q2 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. Should you require any further assistance, please press star zero. I would now like to hand the conference over to your host, Ken Posner. Please go ahead.

Good morning and welcome to Mr. Cooper Group's second quarter earnings call. My name is Ken Posner, and I'm SVP of Strategic Planning and Investor Relations. With me today are Jay Bray, Chairman and CEO, Chris Marshall, Vice Chairman, President and CFO, and Jamie Gow, Deputy CFO. As a quick reminder, this call is being recorded and you can find the slides on our investor relations webpage at investors.mrcoopergroup.com. During the call, we may refer to non-GAAP measures which are reconciled to GAAP results in the appendix to the slide deck. Also, we may make forward-looking statements which you should understand could be affected by risk factors that we've identified in our 10-K and other SEC filings. We are not undertaking any commitment to update these statements if conditions change. I'll now turn the call over to Jay.

Jay Haynes Thanks, Ken. Good morning, everybody, and thanks for joining us. Let's start, as always, by reviewing the quarter's highlights. We've reported net income of $439 million, or $4.85 per share, which includes operating results, a mark to market on the MSR, and the gain from the sale of Title 365. As a result, tangible book value increased to $37.24 per share, which is up by more than $15 in the past year alone, and which now represents a 22% compound annual growth rate since the WMIH merger three years ago. Operating results were strong. Our O2CE was 23%, which was above our minimum target of 12%, and incidentally, this was the ninth quarter in a row in which we've exceeded that target. And based on the results so far in July, we would expect third quarter to be the tenth quarter above the target. Originations came in where we expected, with $213 million in operating EBT on $22 billion in volume. Pricing pressure in the correspondent channel has been very intense, but revenue margins in our DTC channel have been relatively stable. The refinance recapture rate rose to 42%, and cash-out refis increased to 30%. Both of these numbers are moving in the right direction. Servicing turned in an excellent quarter with strong EBO revenues of $181 million, and the portfolio grew 4% in the quarter or 16% on an annualized basis, thanks to solid performance in all of our channels. The balance sheet is in terrific shape. Thanks to the sale of Title 365 and strong operating cash flow, we started July with $1.2 billion in cash and $1.7 billion in immediately available liquidity, which is a huge amount of dry powder for both portfolio growth and stock repurchase. Our board has authorized a new stock repurchase program of $500 million. And with the three-year anniversary of the WMIH merger occurring in the next couple of we are likely to begin repurchasing stock very soon. As we announced after quarter end, we've entered into an agreement to sell our reverse mortgage portfolio. Reverse was a profitable initiative for us, but it was never a growth driver. Exiting this segment will help us focus on the core business, and the sell will be a huge positive for the balance sheet, as it will boost our capital ratio above our target of 15%. With the dispositions of title in reverse, we're following a disciplined strategy of rationalizing and simplifying the business model in order to focus on servicing and originations, where we see very exciting growth and where we believe we can strengthen our leadership position. With that, let's turn to the next slide and let's talk more about growth. We've commented before that we have the operational capacity to significantly expand our portfolio. And this morning, I'd like to share with you a new strategic target we set of reaching $1 trillion in UPB and approximately $5 million in customers. We think of Mr. Cooper as an integrated mortgage company with both servicing and originations. But as we look forward, we expect to see servicing and the related customers emerging as a strategic high ground for the industry. In coming years, we expect massive consolidation until the industry is dominated by a small number of mega-servicers with highly concentrated market share, similar to other technology-enabled sectors. These servicers will enjoy huge economies of scale and very high entry barriers, and they will be positioned to generate very significant revenues from reCAPTCHA, just as we saw in 2020. they will be positioned to retain customers for life. Very few mortgage servicers will make it to this level. Large strategic investments are necessary to build an efficient and scalable platform which can quickly incorporate changes in the legal and regulatory environment. Servicers, they must delight their customers with both digital tools and team members who go to bat on their behalf. And servicers must have strong capabilities and loss mitigation. At Mr. Cooper, we have the most efficient platform in the industry, and more scale will add to our advantage. We have state-of-the-art technology in which we're continuing to invest, and I firmly believe we have the right talent in place throughout the organization. How long will it take us to reach one trillion? We have plans in place to get there in as quick as three years, although the actual pace at which we grow will certainly depend on market conditions. because we have no intention of sacrificing margins or taking on imprudent risk of any type. We have been guiding to growth of five to 10% per year. But as I think about our current opportunities, I would say that if we do not grow at a 10% pace or faster, I'd be disappointed. So that's where we're going. And now I'll turn the call over to Chris, who'll take you through the quarter. Thank you, Jay.