The Mortgage Servicing Industry

Andrew Greig and Abishek Ramani

August 10, 2016

2009 Top 25 Servicer Landscape

Rank

Corporation

Volume (B) Market Share (%)

Top 25 Mortgage Servicers

1 Bank of America

2,160

20.0

2 Wells Fargo

1,796

16.7

20

3 Chase

1,396

12.9

18

4 Citi

719

6.7

16

5 GMAC

350

3.2

14

6 SunTrust Mortgage

177

1.6

12

7 US Bank Home Mtg.

176

1.6

10

8 OneWest (IndyMac)

162

1.5

9 PNC Mortgage

158

1.5

10 PHH Corp.

151

1.4

11 HSBC Mortgage

136

1.3

12 Metlife Home Loans

103

1.0

13 Aurora Bank

96

0.9

14 Aemrican Home Mtg.

89

0.8

15 BB&T Mortgage

86

0.8

16 Taylor, Bean & Whit.

65

0.6

17 Flagstar Bank

57

0.5

18 Goldman Sachs

55

0.5

19 Regions Financial

51

0.5

20 Fifth Third Bank

49

0.5

21 OCWEN Financial

49

0.5

22 EverBank

49

0.5

23 Capital One Financial

47

0.4

24 Sovereign

45

0.4

25 Provident Funding

44

0.4

Bank Servicers

Non-Bank Servicers

Other

Key Points:
Top Three Banks = 49.6% Market Share
Nationstar is not present
Bank Servicers > Non-Bank Servicers

2016 Top 25 Servicer Landscape

Rank

Corporation

Volume (B) Market Share (%)

1 Wells Fargo

1,649

16.5

2 Chase

910

9.1

3 Bank of America

565

5.7

4 Nationstar Mortgage

398

4.0

5 US Bank Home Mtg.

296

3.0

6 Citi

291

2.9

7 Ditech Financial

247

2.5

8 OCWEN Financial

246

2.5

9 PHH Corp.

226

2.3

10 Quicken Loans

196

2.0

11 PennyMac

160

1.6

12 SunTrust Mortgage

148

1.5

13 PNC Mortgage

138

1.4

14 BB&T Mortgage

123

1.2

15 LoanCare

111

1.1

16 Caliber Home Loans

85

0.9

17 Lakeview Loan

82

0.8

18 Freedom Mortgage

76

0.8

19 Provident Funding

75

0.7

20 Fifth Third Bank

73

0.7

21 Flagstar Bank

72

0.7

22 Pingora Loan

69

0.7

23 RoundPoint. Mrg.

59

0.6

24 HSBC

56

0.6

25 M&T Bank Corp.

53

0.5

Top 25 Mortgage Servicers

14
12
10
8
6

0
Bank Servicers

Non-Bank Servicers

Other

Key Points:
Top Three Banks = 31.3% Market Share
Nationstar Ranked Number Four
Nationstar ranked #1 non-bank
servicer
Bank Servicers Non-Bank Servicers

MSR Assets Outstanding in 2009 vs. 2016

MSR Market Share Value Banks vs Non-Banks
% Percent

90
80

5.6

Comments:
6.5

70

10.5

14.7

22.9

60

24.1

30.7

52.2

48.8

44.9

2014

2015

2016

31.5

50

40

77.6

75.3

30

67.5

63.3

57.5

20

10
0
2009

2010

2011

2012
Banks

2013
Non banks

The non-bank MSR Asset share

has tremendously changed from
5.6% in 2009 to 31.5% in 2016;
485% which was primarily
due to regulatory changes in
capital & liquidity requirement
(i.e. Basel 3)
Nationstar Mortgage took
advantage of the market shift of
MSRs from banks to non-banks
Aurora
Bank of America
USAA/Seneca

Origination Volume from 2009-2016

Market Originations Funded Volume
$ in Trillions

% Percent

2.5

6.0

5.0

4.0
1.5
3.0
1
2.0
0.5

1.0

0.0
2009

2010

2011

Purchased

2012

2013

Refinanced

2014

Interest Rates

2015

2016

Nationstars Climb to the Top

Nationstar Mortgage IPO:
IPO was released on March 7, 2012.
Nationstar Mortgages IPO was projected at $17 and $19 each
Sold $16.6 million shares at $14 each, raising about $233 million.
As of 2016, share prices have been ranging between $12 to $13.

Prudently Scaling the Business

Adaptive to Changing Market Conditions

Boarded
1,050,950 BofA
loans during
2013

Awarded Contracts by Top Financial

Institutions and Government Agencies
Completed IPO
Acquisition of Aurora
Bank servicing assets

$381B

$398B

Largest NonBank Servicer;

Rebranding and
enhancing the
Customer
Experience

$391B

Completed 1st Excess MSR

investment

Received
Five STAR
designation
from FNMA,
the highest
level of
recognition

Compliance to Consent
Order
Awarded first
FDIC contract

400
$385B

Awarded $25+B UPB of

subservicing from First
Tennessee
4th Largest
Servicer,
with
2.4mm+
Customers

450

350
300
250
200

1st to be awarded
Special Servicing
contract by NY
Federal Reserve

$208B

150
100
$107B

50

$64B
$34B

2009

2010

2011

2012

2013

2014

2015

0
1Q 2016

Nationstars Climb to the Top

Upcoming Deals & Opportunities:

Estimated Boarding Schedule(5)
$ billions

Q316

Q416

2017

Signed and approved

USAA (subservicing/flow)

$49

$7

$29

Seneca (subservicing)

46

--

--

Awarded

10

18

26

$105

$25

$55

Total expected boardings

Plan on boarding $130 billion in the

2nd half of 2016 and $55 billion in
2017
Additionally, there are consolidation
opportunities in the market place
$1.7 trillion of MSRs held by 50
institutions with portfolios
between $15 billion - $100
billion
45% non-banks/55% banks &
credit-unions

Nationstars Climb to the Top

FNMA Servicer Rating:
Nationstar received Fannie Maes highest level of performance recognition, the Five STAR
designation.
The program recognizes mortgage servicers overall performance.
Nationstar is ranked #1 over in services for customer service, foreclosure prevention
efforts and total performance.

Nationstars Climb to the Top

Rebranding-Mr. Cooper
Plan behind Mr. Cooper is to create the most customer-focused company in the
industry challenging convention and status quo- Jay Bray, CEO
The transformation focuses solely on putting customers first and become one of
the most customer-focused companies in the industry.
Mr. Cooper acts like a person who connects with the customer to deliver a better
experience
The Mr. Cooper brand plans to roll out by Q4 of 2016.

Corporate Financial Planning & Analysis Internship

The Primary Roles and Responsibilities

1. Month-End Close Process

2. Creating Accurate Forecasts
3. Formatting/Creating Reporting Files
Origination
s Finance
7%

Executive
8%
Accounting
29%

Structure
Finance
11%

Focused Mainly on Corporate Expenses

Facilities
Mgmt
3%

Systems &
Planning
10%

Treasury
5%

Servicing
Finance
9%
Investor
Rptg
17%

Gov
Relations
1%

Investor
Relations
0%

The Month-End Close Process

1.Update Files for New Actuals

2.Look for Variances against Budget & Forecast
3.Research Variances in TM1 & Workday
4.Create Comments and Notes
5.Collect a list of Reclasses

Creating the 6+6 Forecast

What is a Financial Forecast?

A plan or a roadmap
Inferences as to what the future will be
Extends over a period of time
Based off of:
Anticipated future expenses
Known future expenses

* Can become very complicated

Taking a Look at the Report

Executive

Actual

Actual

Actual

Forecast

Salaries
Management Bonus Annual
Payroll Taxes
Servicing Share Based Compensation
Group Ins and HAS
401(k) Matching
Recruiting Expense
Educational Expenses
Overtime
Severance Pay
H.S.A. Expense
Supplemental Retirement Plan
Relocation Expenses
Miscellaneous Personnel Expense
Salary-Wages-Benefits

Apr
65,109
442,526
(96,286)
136,950
2,750
2,184
1,311
44,500
63
4,758
603,863

May
78,014
442,526
38,537
107,210
2,750
2,755
782
66
4,758
1,792
679,190

Jun
80,748
450,395
48,069
134,462
3,600
2,767
38,750
732
(967,759)
66
(208,170)

Jul
57,931
442,520
7,934
90,276
2,750
2,028
100
5,059
608,598

Act
80,748
450,395
48,069
134,462
3,600
2,767
38,750
732
(967,759)
66
(208,170)

Frcst
60,690
442,520
8,053
87,364
2,750
2,124
100
5,059
608,660

B / (W)
(20,058)
(7,875)
(40,016)
(47,098)
(850)
(643)
(38,750)

(632)
967,759
(66)
5,059


816,830

Act
80,748
450,395
48,069
134,462
3,600
2,767
38,750
732
(967,759)
66
(208,170)

Bud
60,113
1,109,158
17,688
27,806
2,400
2,104
100
5,059
(1,259)
1,223,170

B / (W)
(20,635)
658,763
(30,380)
(106,655)
(1,200)
(663)
(38,750)

(632)
967,759
(66)
5,059

(1,259)
1,431,340

Temporary Labor
Offshoring
Temporary Labor Project Allocation
Temporary Labor Capitalization
Offshore/Temp Labor Costs

Total Summary
1
2
3
4
5
6
7
8
9
10
13
15
18
19
31
33
34
35
36
37
38
40
41
42
54
66
67
69
72
94
100
109
114
115
116
117
119
122
125
133
145
146
147
164
165
219
220
221
222

Employee Costs
Employee Costs

Legal, Dues, & Fees

Outsourcing & Consulting Fees
Consulting Fee
Outsourcing
Occupancy and Equipment
Telephone - Frame, DSL, Cable, Wireless
Travel/Meetings/Entertainment
Printing, Postage & Customer outreach
Depreciation - LHI
Corporate Insurance
Employee Programs
Appraisal Expense
Lien Release Fees
Penalty & Interest on Taxes
Advertising
Acquisition Expense
Other Direct Expenses
Other Direct Expenses

Total Expenses
EVP
SVP
VP
AVP

603,863

679,190

(208,170) 608,598

770,515
88,706
88,706
(98,346)
19,539
35
352
30,491
1,040
812,332

934,893
48,750
48,750
338,509
2,900
289,120
4,101
372
46,444
56
1,665,147

581,629
100,479
100,479
321,707
769
104,574
11,333
436
49,657
3,264
1,173,848

118,896
13,750
6,250
191,243
1,539
24,500
1,207
400
40,583
392,118

64

1,416,195
1
1
1

2,344,337
1
1
1

965,678
1
1
1

1,000,716
1
1
1

MTD Forecast

MTD Budget

(208,170) 608,660

816,830

(208,170) 1,223,170

1,431,340

581,629
100,479
100,479
321,707
769
104,574
11,333
436
49,657
3,264
1,173,848

118,896
13,750
6,250
191,243
1,539
24,500
1,207
400
40,583
392,118

(462,733)
(86,729)
(94,229)
(130,464)
769
(80,074)
(10,126)
(36)
(9,074)
(3,264)
(781,730)

581,629
100,479
100,479
321,707
769
104,574
11,333
436
49,657
3,264
1,173,848

118,896
13,750
6,250
190,574
1,539
17,833
1,207
380
30,417
374,596

(462,733)
(86,729)
(94,229)
(131,133)
769
(86,741)
(10,126)
(56)
(19,240)
(3,264)
(799,252)

965,678
1
1
1

1,000,778
1
1
1

35,100

(1)
1

965,678
1
1
1

1,597,766
1
1

632,088

(1)

Investor Relations & Corporate Development Internship

The Primary Roles and Responsibilities

1. Production of investor deck materials
2. Analysis of shareholder data
3. Assistance in compilation of a rolling 5-quarter booklet

Managements Discussion and Analysis Tables

1.

Pull information from the 2015 Annual Report and the 10-Qs for the past quarter

2.

Breakdown by each quarter to find the changes

3.

Work with all 3 sectors, Xome, Servicing and Originations to pile up information
regarding the tables.

Table 9. Servicing Revenues

($ in millions)

MSR Operational Revenue

Base servicing fees
Modification fees
Incentive fees
Late payment fees
Other ancillary revenues
Other revenues
Total MSR operational revenue
Subservicing
MSRs - LOCOM
Total servicing fee revenue
Amortization
MSR scheduled and prepayment amortization
Excess spread accretion
LOCOM amortization
Total amortization
MSR financing liability payments
Excess spread payments - principle
Total operational revenue
Mark-to-Market Revenue
MSR MTM
Excess spread / financing MTM
Total MTM revenue
Total revenues- Servicing

Three months ended

9/30/2015
Amounts
BPS
$ 274 28
16 2
5 1
18 2
59 6
9 1
381 40
6 1
32 3
$ 419 44

3/31/2016
Amounts
BPS
$ 259 27
15 2
9 1
19 2
55 6
9 1
366 39
7 1
18 2
$ 391 42

12/31/2015
Amounts
BPS
$ 287 27
17 2
16 1
18 2
55 5
6 1
399 38
1 1
16 2
$ 414 41

$ (112)
47
(65)
(27)
(47)
$ 252

(11)
5
(6)
(3)
(5)
28

$ (118)
46
(2)
(320)
(29)
(48)
$ 263

(12) $ (130) (13) $ (134) (13) $ (107)

4 48 5 46 5 32
(1)
(8) (82) (8) (88) (9) (76)
(3) (30) (3) (31) 31 (34)
(4) (47) (5) (42) (4) (40)
26 $ 260 28 $ 247 25 $ 224

(11)
3

$ (256) (26)
3
(253) (26)
$ (1) 2

$ 128
53
68
$ 332

18
(2)
16
23

(11)
(1)
(11)
12

$ (216)
64
(152)
$ 108

(22)
6
(16)
12

6/30/2015
Amounts
BPS
$ 262 27
17 2
14 1
16 2
46 5
16 2
371 39
14 1
21 2
$ 408 41

$ 125
(44)
82
$ 328

13
(4)
8
33

3/31/2015
Amounts
BPS
$ 254 26
12 1
10 1
18 2
48 5
7 1
349 36
6 1
19 2
$ 374 39

$ (110)
(112)
(110)
$ 114

(8)
(4)
(4)
23

Creating the CFO Deck

1. Give a financial update regarding share price, capital, and financial
operations
2. Gather information from other financial institutions, including nonbanks. Example: WAC, OCN, PHH
3. Include performance metrics that overlook each quarters performance
4. Compare Q116 and Q216 using the Consolidated Balance Sheet.

A look at the CFO Deck

Relative Share Price: As of 7/20/16

SINCE
12/31/2015

What it Means to be a Cooper