Mr. Cooper (COOP)

Risks

• We may be unable to obtain sufficient capital to operate our business.
• Our substantial indebtedness may limit our financial and operating activities and our ability to incur additional debt to fund future needs.
• Our earnings may decrease because of changes in prevailing interest rates and/or declines in home prices.
• We use financial models that rely heavily on estimates in determining the fair value of certain assets and liabilities, such as MSRs and excess spread, and if our estimates or assumptions prove to be incorrect, it may affect our earnings.
• The IRS could challenge the amount, timing and/or use of our NOL carry forwards.
• Possible changes in legislation could negatively affect our ability to use the tax benefits associated with our NOL carry forwards.
• Our hedging strategies may not be successful in mitigating our risks associated with interest rates.
• We have third-party credit and servicer risks which could have a material adverse effect on our business, liquidity, financial condition and results of operation.
• Changes in the method of determining the London Inter-Bank Offered Rate (“LIBOR”), or the replacement of LIBOR with an alternative reference rate, may adversely affect interest rates and financial markets as a whole.
• A significant increase in delinquencies for the loans, including as a result of the COVID-19 pandemic, that we own and service could have a material impact on our revenues, expenses and liquidity and on the valuation of our MSRs.
• We may not be able to maintain or grow our business if we do not acquire MSRs or enter into additional subservicing agreements on favorable terms.
• Some of the loans we service are higher risk loans, which are more expensive to service than conventional mortgage loans and may lead to liquidity challenges.
• We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances.
• Our counterparties may terminate our servicing rights and subservicing contracts.
• We could have a downgrade in our servicer ratings.
• We may not be able to maintain the volumes in our loan originations business, which would adversely affect our ability to replenish our servicing business.
• We are highly dependent upon loan programs administered by Fannie Mae, Freddie Mac, the Federal Housing Administration, the Department of Veterans Affairs, the US Department of Agriculture and Ginnie Mae (collectively, the “Agencies”) to generate revenues through mortgage loan sales to institutional investors.
• We may not be successful in implementing certain strategic initiatives.
• Technology failures or cyber-attacks against us or our vendors could damage our business operations, and new laws and regulations could increase our costs.
• Our capital investments in technology may not achieve anticipated returns.
• We and our vendors have operations in India that could be adversely affected by changes in political or economic stability or by government policies.
• Our vendor relationships subject us to a variety of risks.
• We could have, appear to have or be alleged to have conflicts of interest with Xome.
• Our risk management policies and procedures may not be effective.
• Our business could suffer if we fail to attract, or retain, highly skilled employees and changes in our executive management team may be disruptive to our business.
• Negative public opinion could damage our reputation and adversely affect our business.
• Our business is subject to the risks of earthquakes, hurricanes, fires, floods, health pandemics and other natural catastrophic events.
• We operate within a highly regulated industry on federal, state and local levels and our business results are significantly impacted by the laws and regulations to which we are subject, as well as scrutiny from governmental or regulatory agencies.
• We are subject to numerous legal proceedings, federal, state or local governmental examinations and enforcement investigations. Some of these matters are highly complex and slow to develop, and results are difficult to predict or estimate.
• Unlike competitors that are national banks, we are subject to state licensing and operational requirements that result in substantial compliance costs.
• Our business would be adversely affected if we lose our licenses.
• We may incur increased litigation costs and related losses if a court overturns a foreclosure or if a loan we are servicing becomes subordinate to a Home Owners Association lien.
• Residential mortgage foreclosure proceedings in certain states have been delayed due to lack of judicial resources and legislation and as a result of the COVID-19 pandemic, all of which could have a negative effect on our ability to liquidate loans timely and slow the recovery of advances and thus impact our earnings or liquidity.
• Our common stock, and any other instruments treated as stock for purposes of Section 382, is subject to transfer restrictions under our Certificate of Incorporation which, if not complied with, could result in the forfeiture of such stock and related distributions.
• Anti-takeover provisions in our Certificate of Incorporation and Amended and Restated Bylaws (“Bylaws”) and under Delaware law, as well as certain existing contractual arrangements, make a third-party acquisition of us difficult.
• The market price of our common stock may decrease, and you may lose all or part of your investment.