Mr. Cooper Group (COOP 0.50%), the major U.S. mortgage servicing firm, reported its earnings for the second quarter of 2025 on July 23, 2025. The most notable news from the release was that both earnings per share (EPS) and revenue fell short of analyst expectations, despite operational gains in its main mortgage servicing segment. The company delivered reported EPS of $3.04 on revenue of $608 million, missing consensus estimates of $3.18 and $674.24 million. While operational stability and a large servicing portfolio continued, the quarter was marked by weak top- and bottom-line results relative to forecasts, raising some concerns about momentum.
Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
---|---|---|---|---|
EPS (GAAP) | $3.04 | $3.18 | ||
Revenue (GAAP) | $608 million | $674.24 million | ||
Pretax Operating Income (Non-GAAP) | $269 million | |||
Servicing Portfolio (Period End, UPB) | $1,509 billion | |||
Return on Common Equity (ROCE) | 15.9 % |
Source: Analyst estimates for the quarter provided by FactSet.
Overview of Mr. Cooper Group’s Business and Recent Focuses
Mr. Cooper Group (COOP 0.50%) is one of the nation’s largest mortgage servicing companies. It manages both “owned servicing” -- where it holds the servicing rights and gets recurring servicing fees -- and “subservicing,” where it provides servicing for clients who own the rights. At the end of 2024, the company managed loans for 6.7 million customers, with a total unpaid principal balance (UPB) of $1,556 billion.
The company’s recent strategy emphasizes strengthening its core mortgage servicing business, continuing to grow its subservicing segment, and focusing on originations through both direct-to-consumer and correspondent (third-party) mortgage channels. Its key success factors include its scale, its rigorous regulatory compliance, and investments in technology that are intended to make operations more efficient and customer-focused. Technology-driven efficiencies and the ability to retain customers through recapture are critical priorities. The company is also preparing for its planned merger with Rocket Companies, a deal highlighted in this and prior quarters.
Financial and Operational Results During the Quarter
The quarter was marked by modest operational progress and some areas of stability, but the headline numbers trailed estimates. EPS missed expectations by $0.14, while revenue trailed by $66.24 million. While management described the period as “another strong quarter,” the shortfalls were meaningful, especially considering the company’s historical ability to consistently deliver against guidance. Return on common equity advanced to 15.9%. Tangible book value per share rose to $75.90, reflecting growth in equity and balance sheet stability.
In the mortgage servicing segment, pretax income rose to $364 million, up from $214 million in the first quarter, but pretax operating income stayed flat at $332 million. The servicing portfolio, which includes both owned and subserviced loans, ended the quarter at $1,509 billion. While this number represents a gain of about 25% compared to the prior year, it was slightly down from the $1,514 billion figure at the end of the previous quarter. The subservicing book, a capital-efficient and high-margin product line where Mr. Cooper services loans for outside owners, stayed nearly flat at $778 billion from $780 billion last quarter. The owned mortgage servicing rights (MSR) portfolio also dipped slightly to $731 billion from $734 billion, which indicates a plateau in the company’s servicing book growth on a sequential basis.
Asset quality showed stability, with 60+ day delinquency rates improving to 1.4% from 1.5% in the previous quarter. However, the annualized conditional prepayment rate (CPR) rose to 7.0% from 5.0%. CPR is an industry metric that tracks how quickly loans are paid off ahead of schedule—something that can pressure the value of MSRs if more customers refinance or prepay loans. The company’s MSR carrying value, an estimate of the value of its mortgage servicing rights, rose modestly to $11,431 million (156 basis points of UPB).
The Originations segment reported robust growth in both funded volume and earnings. Pretax income reached $64 million, a notable increase from $45 million in the prior quarter. Funded volume increased 13.5% quarter-over-quarter to $9.44 billion, with direct-to-consumer originations at $2.6 billion and correspondent channel originations at $6.8 billion. The correspondent channel now comprises approximately 72% of originations, highlighting the company’s diversified mortgage origination model. However, the refinance recapture rate—a measure of how many customers return to Mr. Cooper when refinancing—fell to 47% from 51%, which may suggest heightened competition or more customer turnover. The overall recapture rate decreased to 17% from 19%.
The quarter did not include any new regulatory or legal expenses. The company remains in good standing with regulators, and significant legal issues flagged in prior periods have been resolved. In terms of technology, management announced ongoing investment to “drive efficiencies,” but no details were provided about new product launches or platform changes during the period.
Other material developments include the launch, after quarter-end, of an MSR Fund with an initial $200 million commitment. The company also received workplace recognition with a “Best Workplaces in Texas” award, though such awards do not have a direct financial impact.
Looking Ahead: Outlook and Key Things to Watch
Management did not provide formal financial guidance for the coming quarter or fiscal year in the earnings release. There was, however, mention of the pending merger with Rocket as a major forward-looking item. Specific financial targets, synergy projections, or closing timelines were not given, leaving some uncertainty as to the speed or substance of this future combination. Investors and observers should watch for any updated statements about the merger, including possible effects on the combined servicing and origination operations.
Multiple factors will be important for the company in quarters ahead: sustaining growth in servicing volume, reversing the flatness in subservicing, and improving recapture rates. The impact of higher prepayment speeds—indicating more customers paying off mortgages early—should also be tracked, since it can affect servicing revenue and the value of MSRs. The launch and performance of the new MSR Fund may signal future shifts in capital allocation strategy, though immediate financial details were not disclosed. COOP does not currently pay a dividend.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.