What happened
Despite a volatile and ultimately tough day for markets, shares of mortgage servicer Mr. Cooper Group (COOP -1.50%) jumped more than 19% today after the company reported earnings results for the fourth quarter of 2021, and announced a new partnership.
So what
Mr. Cooper Group reported earnings per share of $2.01 in the fourth quarter on revenue of $625 million, easily topping analyst estimates. Unpaid principal balances in the company's servicing portfolio in the quarter grew to $710 billion, up 17% year over year.
Image source: Getty Images.
For this year, management is guiding for 10%-plus growth on unpaid principal balances and a return on tangible common equity (ROTCE) at the lower end of the 12% to 20% range. The company is coming off a 25.7% ROTCE in 2021.
The market also seemed to react favorably to Mr. Cooper Group's announcement earlier today regarding a strategic partnership with the servicing fintech Sagent. Mr. Cooper Group will receive an equity stake in the firm and Sagent will also purchase certain intellectual property rights related to Mr. Cooper Group's technology.
Under the agreement, the two companies will work together to create the "industry's first cloud-native, homeowner-first servicing platform."
Now what
Mr. Cooper Group is the largest non-bank mortgage servicing company in the country. Unlike mortgage lenders, the company doesn't write the loan but rather collects loan payments for investors.
As a result, mortgage servicing companies tend to benefit when interest rates rise because fewer homeowners are refinancing and more are making mortgage payments, which servicers collect a fee on.
This makes Mr. Cooper Group well positioned to benefit from the multiple rate hikes expected this year, and the partnership with Sagent looks exciting as well.
