The following discussion should be read in conjunction with the information
contained in our consolidated financial statements, including the notes thereto.
The following discussion contains, in addition to the historical information,
forward-looking statements that include risks and uncertainties (see discussion
of "Forward-Looking Statements" included elsewhere in this Annual Report on Form
10-K). Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those
factors set forth under Item 1A. Risk Factors and elsewhere in this Annual
Report on Form 10-K. All dollar amounts presented herein are in millions, except
per share data and other key metrics, unless otherwise noted.

Basis of Presentation

"Predecessor" financial information in the MD&A relates to Nationstar, and "Successor" relates to Mr. Cooper.



The below presentation discusses the results of the operations for the year
ended December 31, 2019 compared to the year ended December 31, 2018. The
financial results for the year ended December 31, 2019 and five months ended
December 31, 2018 reflect the results of the Successor. With respect to the year
ended December 31, 2018, we have separately provided the financial results of
the Predecessor for the seven months ended July 31, 2018, and the financial
results of the Successor for the five months ended December 31, 2018, which, in
each case, are presented under GAAP.

The below presentation also includes a "Combined" column that combines the
Predecessor and Successor results referenced above with respect to the year
ended December 31, 2018. Although the separate financial results of the
Predecessor and Successor for the seven months ended July 31, 2018 and the five
months ended December 31, 2018 are presented under GAAP, the results reported in
the "Combined" column reflect non-GAAP financial measures, as a different basis
of accounting was used with respect to the financial results for the Predecessor
as compared to the financial results of the Successor. We have not provided a
reconciliation of the financial metrics reflected under the "Combined" column as
such reconciliation cannot be provided without unreasonable effort as a result
of this accounting variance.

We believe that non-GAAP financial measures should be considered in addition to,
and not a substitute for, financial information prepared in accordance with
GAAP. We present non-GAAP financial measures in reporting its financial results
to provide additional and supplemental disclosure to evaluate operating results.
In particular, we believe that providing this "Combined" information is useful
as a supplement to our standard GAAP financial presentation as it significantly
enhances the period-over-period comparability of our financial results. In
addition, our management uses this "Combined" presentation to evaluate our
ongoing operations and for internal planning and forecasting purposes.

For a discussion of results of operations for the year ended December 31, 2018,
on a combined basis, compared to the year ended December 31, 2017 (the
Predecessor), please refer to Part II, Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations, in our Annual Report
on Form 10-K for the year ended December 31, 2018.

Overview





We are a leading servicer and originator of residential mortgage loans, and a
provider of real estate services through our Xome subsidiary. Our purpose is to
keep the dream of homeownership alive, and we do this as a servicer by helping
mortgage borrowers manage what is typically their largest financial asset, and
by helping our investors maximize the returns from their portfolios of
residential mortgages. We have a track record of significant growth, having
expanded our servicing portfolio from $10 billion in 2009 to $643 billion as of
December 31, 2019. We believe this track record reflects our strong operating
capabilities, which include a proprietary low-cost servicing platform, strong
loss mitigation skills, a commitment to compliance, a customer-centric culture,
a demonstrated ability to retain customers, growing origination capabilities,
and significant investment in technology.


33 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------




Our strategy to position the Company for continued, sustainable long-term growth
includes initiatives to improve profitability and strengthen the balance sheet.
Key strategic initiatives include the following:

• Strengthen our balance sheet by building capital and liquidity, reducing

leverage, taking advantage of market conditions to refinance existing

senior notes, and implementing derivative hedging strategies;

• Drive stronger profitability through a variety of efficiency initiatives,

including ongoing improvement in unit cost economics in Servicing,

Originations, and Xome, as well as finalizing our Project Titan servicing


       transformation initiative and identifying and realizing other
       opportunities for cost savings throughout the organization;

• Improve results at Xome by winning new third-party customers and gaining

wallet share with existing customers by cross-selling multiple services


       and by delivering strong performance and excellent customer service;


•      Continue to focus on improving the customer experience in all of our

segments, as well as sustaining the culture and talent of our workforce;

and

• Maintain strong relationships with agencies, investors, regulators, and

other constituencies and a strong reputation for compliance and customer


       service.




Results of Operations

Table 1. Consolidated Operations




                                     Successor                        Predecessor
                          Year Ended       Five Months Ended      Seven Months Ended
                      December 31, 2019    December 31, 2018         July

31, 2018       Combined(1)      $ Change       % Change
Revenues -
operational           $       2,512        $            758       $         1,000       $     1,758     $       754           43  %
Revenues -
Mark-to-market                 (505 )                  (164 )                 196                32            (537 )     (1,678 )%
Total revenues                2,007                     594                 1,196             1,790             217           12  %
Total expenses                1,851                     707                   945             1,652             199           12  %
Total other income
(expenses), net                (159 )                   (24 )                 (49 )             (73 )           (86 )        118  %
(Loss) income before
income tax (benefit)
expense                          (3 )                  (137 )                 202                65             (68 )       (105 )%
Less: Income tax
(benefit) expense              (273 )                (1,021 )                  48              (973 )           700          (72 )%
Net income                      270                     884                   154             1,038            (768 )        (74 )%
Less: Net loss
attributable to
non-controlling
interests                        (4 )                     -                     -                 -              (4 )       (100 )%
Net income
attributable to
Successor/Predecessor $         274        $            884       $           154       $     1,038     $      (764 )        (74 )%


(1) Refer to Basis of Presentation section for discussion on presentation of


     combined results.



Net income decreased for the year ended December 31, 2019 compared to the same
period in 2018, on a combined basis. Net income was higher in 2018, on a
combined basis, primarily due to $973 income tax benefit recognized compared to
$273 income tax benefit recognized in 2019. In addition, mark-to-market ("MTM")
revenues decreased due to a negative MTM of $505 in 2019, primarily driven by
declining interest rates, compared to a positive MTM of $32 in 2018, on a
combined basis. Operational revenues and total expenses increased for the year
ended December 31, 2019 compared to the same period in 2018, on a combined
basis, largely due to growth in originations volume driven by declining interest
rates and incremental volumes made available with the acquisition of Pacific
Union and related origination channels. In addition, in February 2019, we
acquired Seterus mortgage servicing platform and assumed certain assets related
thereto from IBM ("Seterus acquisition") for a total purchase price of $8, which
also contributed to the increase in operational revenue and total expenses.

Total other income (expenses), net, increased for the year ended December 31,
2019 compared to the same period in 2018, on a combined basis. The increase was
primarily due to an increase in interest expense in our Corporate/Other segment
in 2019 as a result of a higher debt balance and higher interest rates under the
new unsecured senior notes that were issued in July 2018 to fund the Merger with
Nationstar.

                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 34

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Table 2. Provision for Income Taxes




                                   Successor                             

Predecessor


                  Year Ended December     Five Months Ended        Seven 

Months Ended July


                        31, 2019          December 31, 2018                31, 2018             Combined(1)      $ Change        % Change
Income tax
(benefit) expense $         (273 )       $       (1,021 )         $              48            $      (973 )   $       700          (72 )%

Effective tax
rate(2)                   7718.8 %                742.4 %                      23.8 %



(1)  Refer to Basis of Presentation section for discussion on presentation of
     combined results.


(2)  Effective tax rate is calculated using whole numbers.



Income tax benefit decreased for the year ended December 31, 2019 as compared to
the same period in 2018, on a combined basis, primarily driven by a decrease in
the release of the valuation allowance associated with the pre-Merger net
operating loss ("NOL") carryforwards, as well as state adjustments and permanent
differences. The release of the valuation allowance decreased from $990 for the
five months ended December 31, 2018 to $285 for the year ended December 31,
2019. The effective tax rate for the year ended December 31, 2019 was 7718.8% as
compared to the effective tax rate of 742.4% and 23.8% for the five months ended
December 31, 2018 and the seven months ended July 31, 2018, respectively. The
increase in the effective tax rate in 2019 as compared to the five months ended
December 31, 2018 resulted from adjustments having a relatively higher impact on
the effective tax rate due to a significantly lower loss before income tax
benefit of $3 in 2019 as compared to loss before income tax benefit of $137 in
the five months ended December 31, 2018. The relative impact of adjustments to
the effective tax rate will significantly increase as the income (loss) before
income tax expense (benefit) approaches zero.


Segment Results


We have four reportable segments: Servicing, Originations, Xome, and Corporate/Other.

• The Servicing segment performs operational activities on behalf of

investors or owners of the underlying mortgages, including collecting and

disbursing borrower payments, investor reporting, customer service,

modifying loans where appropriate to help borrowers stay current, and,

when necessary, performing collections, foreclosures, and the sale of REO.

• The Originations segment originates residential mortgage loans through our

direct-to-consumer channel, which provides refinance options for our

existing customers, and through our correspondent and wholesale channels,

which purchase or originate loans from mortgage bankers and brokers.

• The Xome segment provides a variety of real estate services to mortgage

originators, mortgage and real estate investors, and mortgage servicers,

including valuation, title, and field services, and operates an exchange

which facilitates the sale of foreclosed properties.

• The Corporate/Other segment represents unallocated overhead expenses,

including the costs of executive management and other corporate functions

that are not directly attributable to our operating segments, our senior

unsecured notes, and the results of a legacy mortgage investment

portfolio, which consists of non-prime and non-conforming residential

mortgage loans that were transferred to a securitization trust ("Trust


       2009-A") in 2009. We collapsed Trust 2009-A and executed the sale of the
       loans held in the trust in September 2019.



35 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------




Table 3. Segment Results


                                                                           Successor
                                                                 Year Ended December 31, 2019
                                                                                   Total Operating
                      Servicing     Originations       Xome       Elimination         Segments         Corporate/ Other      Consolidated
Revenues
Service related, net $     408     $         80     $    422     $       (3 )     $         907       $             2       $        909
Net gain on mortgage
loans held for sale        124              963            -              -               1,087                    11              1,098
Total revenues             532            1,043          422             (3 )             1,994                    13              2,007
Total expenses             690              568          398             (3 )             1,653                   198              1,851
Other income
(expenses), net:
Interest income            500               98            -              -                 598                     7                605
Interest expense          (469 )            (98 )          -              -                (567 )                (212 )             (779 )
Other income
(expenses), net              4                4           14              -                  22                    (7 )               15
Total other income
(expenses), net             35                4           14              -                  53                  (212 )             (159 )
Income (loss) before
income tax expense
(benefit)            $    (123 )   $        479     $     38     $        -       $         394       $          (397 )     $         (3 )



                                                                           Successor
                                                              Five Months Ended December 31, 2018
                                                                                    Total Operating
                      Servicing     Originations       Xome        Elimination         Segments         Corporate/ Other      Consolidated
Revenues
Service related, net $     217     $       24       $    177     $           -     $         418       $             -       $       418
Net gain on mortgage
loans held for sale         19            157              -                 -               176                     -               176
Total revenues             236            181            177                 -               594                     -               594
Total expenses             303            155            178                 -               636                    71               707
Other income
(expenses), net:
Interest income            222             27              -                 -               249                     7               256
Interest expense          (173 )          (26 )           (1 )               -              (200 )                 (93 )            (293 )
Other income, net            6              5              1                 -                12                     1                13
Total other income
(expenses), net             55              6              -                 -                61                   (85 )             (24 )
Income (loss) before
income tax expense
(benefit)            $     (12 )   $       32       $     (1 )   $           -     $          19       $          (156 )     $      (137 )




                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 36

--------------------------------------------------------------------------------

Predecessor

Seven Months Ended July 31, 2018


                                                                              Elimination/            Total Operating
                      Servicing(1)     Originations        Xome           Reclassification(1)            Segments         Corporate/ Other      Consolidated
Revenues
Service related, net $        740     $        36       $     149     $                (25 )         $         900       $             1       $        901
Net gain on mortgage
loans held for sale             -             270               -                       25                     295                     -                295
Total revenues                740             306             149                        -                   1,195                     1              1,196
Total expenses                474             245             123                        -                     842                   103                945
Other income
(expenses), net:
Interest income               288              38               -                        -                     326                     7                333
Interest expense             (268 )           (37 )             -                        -                    (305 )                 (83 )             (388 )
Other (expenses)
income, net                    (1 )             -               9                        -                       8                    (2 )                6
Total other income
(expenses), net                19               1               9                        -                      29                   (78 )              (49 )
Income (loss) before
income tax expense
(benefit)            $        285     $        62       $      35     $                  -           $         382       $          (180 )     $        202



(1)  For the Predecessor's Servicing segment results purposes, all revenues are
     attributable to servicing the portfolio. Therefore, $25 of net gain on

mortgage loans was moved to revenues - service related, net during the seven

months ended July 31, 2018. For consolidated results purposes, these amounts


     were reclassed to net gain on mortgage loans held for sale.




Servicing Segment



The Servicing segment's strategy is to generate income by growing the portfolio
and maximizing the servicing margin. We believe several competitive strengths
have been critical to our long-term growth as a servicer, including our low-cost
platform, our expertise in mitigating losses for investors, our commitment to
strong customer service and regulatory compliance, our history of successfully
boarding new loans, and the ability to retain existing customers by offering
attractive refinance options. We believe that our operational capabilities are
reflected in strong servicer ratings.

Table 4. Servicer Ratings




                                  Successor
                    Fitch(1)     Moody's(2)      S&P(3)
Rating date       January 2020    May 2019      May 2019


Residential          RPS2-       Not Rated    Above Average
Master Servicer      RMS2+          SQ2       Above Average
Special Servicer     RSS2-       Not Rated    Above Average
Subprime Servicer    RPS2-       Not Rated    Above Average


(1) Fitch Rating Scale of 1 (Highest Performance) to 5 (Low/No Proficiency)




(2)  Moody's Rating Scale of SQ1 (Strong Ability/Stability) to SQ5 (Weak
     Ability/Stability)


(3)  S&P's Rating Scale of Strong to Weak



37 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------

Servicing Portfolio Composition



As of December 31, 2019, the unpaid principal balance in our servicing portfolio
consisted of approximately $621 billion in forward loans, of which $324 billion
was subservicing, and $23 billion in reverse mortgage loans.

• The term "forward" refers to loans we service which are not "reverse


       mortgage loans," as discussed below.



•      Our subservicing portfolio consists of loans where we perform the
       servicing responsibilities for a contractual fee, but do not own the

servicing rights and therefore do not record an MSR on balance sheet.

• Reverse mortgage loans, most commonly HECMs, provide seniors 62 and older

with a loan upon which draws can be made periodically. The draws are

secured by the equity in the borrower's home. We have acquired our reverse


       mortgages in prior years through several transitions and it is now in
       run-off mode. For a significant portion of our reverse mortgages, we
       record MSRs on balance sheet, similar to the accounting for forward
       mortgages, except in cases where the costs of servicing are expected to

exceed revenues, in which case a Mortgage Servicing Liability ("MSL") is

created. Additionally, due to program requirements, we consolidate certain


       reverse mortgages on our balance sheet and accrue interest income and
       expense.




                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 38

--------------------------------------------------------------------------------




The charts below set forth the portfolio mix between serviced, subserviced and
reverse mortgage loans, and the composition of our servicing portfolio ending
UPB by investor group as of December 31, 2019 and 2018.


                [[Image Removed: chart-e6648e9eb764345dd80.jpg]]
                    [[Image Removed: servicingchartv2.jpg]]

39 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------

The following tables set forth the results of operations from the Servicing segment: Table 5. Servicing Segment Results of Operations




                                 Successor                      Predecessor
                                                                Seven Months
                      Year Ended       Five Months Ended       Ended July 31,
                  December 31, 2019    December 31, 2018            2018          Combined(1)      $ Change       % Change
Revenues
Operational       $       1,273        $            464       $        656       $     1,120     $       153           14  %
Amortization               (236 )                   (64 )             (112 )            (176 )           (60 )         34  %
Mark-to-market             (505 )                  (164 )              196                32            (537 )     (1,678 )%
Total revenues              532                     236                740               976            (444 )        (45 )%
Total expenses              690                     303                474               777             (87 )        (11 )%
Total other
income
(expenses), net              35                      55                 19                74             (39 )        (53 )%
(Loss) income
before income tax
(benefit) expense $        (123 )      $            (12 )     $        285

$ 273 $ (396 ) (145 )%

(1) Refer to Basis of Presentation section for discussion on presentation of


     combined results.



For the year ended December 31, 2019, we incurred a loss before income tax
benefit of $123 compared to an income before income tax expense of $273 for the
same period in 2018, on a combined basis. The change in (loss) income before
income tax (benefit) expense was primarily due to a decrease in total revenues,
partially offset by a decrease in total expenses. Total revenues decreased
primarily as a result of negative mark-to-market revenues in 2019 compared to
positive mark-to-market revenues in 2018, on a combined basis, partially offset
by an increase in operational revenues. In addition, total other income
(expenses), net decreased for the year ended December 31, 2019 compared to the
same period in 2018, on a combined basis. Refer to Table 10. Servicing -
Revenues, Table 11. Servicing - Expenses, and Table 12. Servicing - Other Income
(Expenses), Net, for further discussions on the changes in total revenues, total
expenses and total other income (expenses), net, respectively.


                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 

10-K 40

--------------------------------------------------------------------------------

Table 6. Servicing Portfolio - Unpaid Principal Balances




                                                       Successor                         Predecessor
                                            Year Ended        Five Months Ended       Seven Months Ended
                                        December 31, 2019     December 31, 2018         July 31, 2018
Average UPB
Forward MSRs - fair value               $        311,601     $         282,806       $          279,520
Subservicing and other(1)                        283,743               203,341                  187,407
Reverse loans - amortized cost                    25,270                29,837                   33,380
Total average UPB                       $        620,614     $         515,984       $          500,307

                                                                              Successor
                                                              December 31, 2019       December 31, 2018
Ending UPB
Forward MSRs - fair value
Agency                                                       $         240,688       $          229,108
Non-agency                                                              56,094                   66,373
Total MSRs - fair value                                                296,782                  295,481

Subservicing and other(1)
Agency                                                                 308,532                  208,607
Non-agency                                                              15,451                   15,279
Total subservicing and other                                           323,983                  223,886

Reverse loans - amortized cost
MSR                                                                      2,508                    3,940
MSL                                                                     13,994                   16,538
Securitized loans                                                        6,223                    7,937
Total reverse portfolio serviced                                        22,725                   28,415
Total ending UPB                                             $         643,490       $          547,782


(1) Subservicing and other includes (i) loans we service for others, (ii)

residential mortgage loans originated but have yet to be sold, and (iii)


     agency REO balances for which we own the mortgage servicing rights.



41 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------

The following table provides a rollforward of our forward servicing and subservicing portfolio UPB: Table 7. Forward Servicing and Subservicing Portfolio UPB Rollforward




                                                          Successor                            Predecessor
                                         Year Ended December      Five Months Ended         Seven Months Ended
                                              31, 2019            December 31, 2018           July 31, 2018
Balance - beginning of period           $        519,367        $        465,819          $          473,256
Additions:
Originations                                      39,355                   8,936                      12,327
Acquisitions                                     210,638                  82,559                      25,987
Deductions:
Dispositions                                     (35,004 )               (10,140 )                    (1,877 )
Principal reductions and other                   (21,792 )                (7,837 )                   (11,240 )
Voluntary reductions(1)                          (87,683 )               (18,131 )                   (29,172 )
Involuntary reductions(2)                         (3,816 )                (1,689 )                    (3,241 )
Net changes in loans serviced by others             (300 )                  (150 )                      (221 )
Balance - end of period                 $        620,765        $        519,367          $          465,819



(1)  Voluntary reductions are related to loan payoffs by customers.


(2)  Involuntary reductions refer to loan chargeoffs.



During the year ended December 31, 2019, our forward servicing and subservicing
portfolio UPB increased when compared to 2018, primarily due to increased
boarding of loans generated from the acquisitions of Pacific Union and Seterus,
and the portfolio growth from our subservicing clients. The increase in
dispositions was primarily due to various MSR sales.

The table below summarizes the overall performance of the forward servicing and
subservicing portfolio:
Table 8. Key Performance Metrics - Forward Servicing and Subservicing Portfolio(1)


                                                                           Successor
                                                            December 31, 2019     December 31, 2018
Loan count                                                         3,588,162             3,133,784
Average loan amount(2)                                     $         172,980     $         165,748
Average coupon - credit sensitive(3)                                     4.7 %                 4.9 %
Average coupon - interest sensitive(3)                                   4.3 %                 4.2 %
60+ delinquent (% of loans)(4)                                           2.0 %                 2.2 %
90+ delinquent (% of loans)(4)                                           1.7 %                 1.9 %
120+ delinquent (% of loans)(4)                                          1.5 %                 1.7 %
Total prepayment speed (12-month constant prepayment rate)              14.7 %                 9.1 %



(1) Characteristics and key performance metrics of our servicing portfolio

exclude UPB and loan counts acquired but not yet boarded and currently

serviced by others.

(2) Average loan amount is presented in whole dollar amounts.

(3) The weighted average coupon amounts for our credit and interest sensitive

pools presented in the table above are only reflective of our owned forward

MSR portfolio that is reported at fair value.

(4) Loan delinquency is based on the current contractual due date of the loan.


     In the case of a completed loan modification, delinquency is based on the
     modified due date of the loan.



Delinquency is a significant assumption in determining the mark-to-market
adjustment and is a key indicator of MSR portfolio performance. Delinquent loans
contribute to lower MSR values due to higher costs to service and increased
carrying costs of advances. We continued to experience low delinquency rates
during the year ended December 31, 2019, which preserves the value of our MSRs.


                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 42

--------------------------------------------------------------------------------

Table 9. Forward Loan Modifications and Workout Units




                         Successor             Predecessor
                                  Five
                                 Months
                  Year Ended     Ended        Seven Months
                   December     December       Ended July
                   31, 2019     31, 2018        31, 2018       Combined(1)    Amount Change      % Change
HAMP
modifications           11            5                38              43              (32 )        (74 )%

Non-HAMP


modifications       20,683       13,120            16,828          29,948           (9,265 )        (31 )%
Workouts            19,669        7,066            22,700          29,766          (10,097 )        (34 )%
Total
modification and
workout units       40,363       20,191            39,566          59,757          (19,394 )        (32 )%



(1)  Refer to Basis of Presentation section for discussion on presentation of
     combined results.


Total modifications and workouts during the year ended December 31, 2019 decreased compared to the same period in 2018, on a combined basis, primarily due to lower delinquency rates and lower disaster-related (hurricanes and wildfires) loss mitigation activity.

43 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------

The following table provides the composition of revenues for the Servicing segment: Table 10. Servicing - Revenues




                                             Successor                                            Predecessor
                                                    Five Months Ended December 31,        Seven Months Ended July 31,
                 Year Ended December 31, 2019                    2018                                 2018                    Combined(1)             $ Change              % Change
                      Amt              bps(2)           Amt               bps(2)               Amt             bps(2)        Amt       bps(2)      Amt      bps(2)       Amt        bps(2)
Forward MSR
Operational
Revenue
Base servicing
fees           $         999                16     $     367                 17          $       501             17       $   868        17      $  131        (1 )        15  %      (6 )%
Modification
fees(3)                   17                 -             8                  -                   21              1            29         1         (12 )      (1 )       (41 )%    (100 )%
Incentive
fees(3)                   15                 -             5                  -                   13              -            18         -          (3 )       -         (17 )%       -  %
Late payment
fees(3)                   84                 2            29                  2                   45              2            74         2          10         -          14  %       -  %
Other
ancillary
revenues(3)              172                 3            40                  2                   63              2           103         2          69         1          67  %      50  %
Total forward
MSR
operational
revenue                1,287                21           449                 21                  643             22         1,092        22         195        (1 )        18  %      (5 )%
Base
subservicing
fees and other
subservicing
revenue(3)               239                 4            67                  3                   87              2           154         3          85         1          55  %      33  %
Reverse
servicing fees            31                 -            16                  1                   37              1            53         1         (22 )      (1 )       (42 )%    (100 )%
Total
servicing fee
revenue                1,557                25           532                 25                  767             25         1,299        26         258        (1 )        20  %      (4 )%
MSR financing
liability
costs                    (41 )               -           (20 )               (1 )                (33 )           (1 )         (53 )      (1 )        12         1         (23 )%     100  %
Excess spread
costs -
principal               (243 )              (4 )         (48 )               (2 )                (78 )           (3 )        (126 )      (2 )      (117 )      (2 )        93  %     100  %
Total
operational
revenue                1,273                21           464                 22                  656             21         1,120        23         153        (2 )        14  %      (9 )%
Amortization,
net of
accretion
Forward MSR
amortization            (527 )              (9 )        (128 )               (6 )               (190 )           (7 )        (318 )      (6 )      (209 )      (3 )        66  %      50  %
Excess spread
accretion                243                 4            53                  2                   78              3           131         3         112         1          85  %      33  %
Reverse MSL
accretion(4)              47                 1            15                  1                    -              -            15         -          32         1         213  %     100  %
Reverse MSR
amortization               1                 -            (4 )                -                    -              -            (4 )       -           5         -        (125 )%       -  %
Total
amortization,
net of
accretion               (236 )              (4 )         (64 )               (3 )               (112 )           (4 )        (176 )      (3 )       (60 )      (1 )        34  %      33  %
Mark-to-Market
Adjustments
MSR MTM(5)              (669 )             (11 )        (153 )               (7 )                295             10           142         3        (811 )     (14 )      (571 )%    (467 )%
Excess spread
/ financing
MTM                      164                 3           (11 )               (1 )                (99 )           (3 )        (110 )      (2 )       274         5        (249 )%    (250 )%
Total MTM
adjustments             (505 )              (8 )        (164 )               (8 )                196              7            32         1        (537 )      (9 )    (1,678 )%    (900 )%

Total revenues
- Servicing    $         532                 9     $     236                 11          $       740             24       $   976        21      $ (444 )     (12 )       (45 )%     (57 )%




                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 44

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(1)  Refer to Basis of Presentation section for discussion on presentation of
     combined results.


(2)  Calculated basis points ("bps") are as follows: Annual $ amount/Total
     Average UPB X 10000.

(3) Certain ancillary and other non-base fees related to subservicing operations


     are separately presented as other subservicing revenues.


(4)  The Predecessor recorded MSL accretion within reverse servicing fees,
     whereas the Successor has elected to record MSL accretion within
     Amortization, net of accretion.

(5) The amount of MSR MTM includes the impact of negative modeled cash flows

which have been transferred to reserves on advances and other receivables.

The negative modeled cash flows relate to advances and other receivables

associated with inactive and liquidated loans that are no longer part of the

MSR portfolio. The impact of negative modeled cash flows was $62 and $25 for

the year ended December 31, 2019 and five months ended December 31, 2018,

respectively. The impact of negative modeled cash flows for the Predecessor

was $38 for the seven months ended July 31, 2018.





Forward - Due to the increase of the forward MSR portfolio's UPB, base servicing
fee revenue increased for the year ended December 31, 2019 as compared to the
same period in 2018, on a combined basis. The improvement in delinquency rates
in 2019 contributed to the decrease in modification fees. Other ancillary
revenues increased primarily due to the gain on sale from the securitization of
reperforming GNMA loans and the collapse of Trust 2009-A.

Forward MSR amortization increased for the year ended December 31, 2019 as
compared to the same period in 2018, on a combined basis, primarily due to the
increase in the average forward MSR UPB and higher prepayments driven by the
lower interest rate environment.

Total MTM adjustments were negative in the year ended December 31, 2019 as compared to positive MTM adjustments in the same period in 2018, on a combined basis, primarily due to the declining interest rate environment during 2019.



Subservicing - Subservicing fees increased for the year ended December 31, 2019
as compared to the same period in 2018, on a combined basis, due to significant
growth in the subservicing portfolio UPB.

Reverse - Reverse servicing fees for the year ended December 31, 2019 decreased
as compared to the same period in 2018, on a combined basis, primarily due to
the decline in the reverse mortgage portfolio. In addition, the Predecessor
recorded MSL accretion within reverse servicing fees, whereas the Successor has
elected to record MSL accretion within Amortization, net of accretion.


45 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------

The table below summarizes expenses for the Servicing segment: Table 11. Servicing - Expenses




                                 Successor                          Predecessor
               Year Ended December 31,    Five Months Ended      Seven Months Ended
                        2019              December 31, 2018        July 31, 2018        Combined(1)           Change            % Change
                    Amt         bps(2)      Amt       bps(2)        Amt      bps(2)     Amt     bps(2)     Amt     bps(2)     Amt     bps(2)
Salaries,
wages and
benefits       $        346       5      $    131       6        $   175       6      $ 306       6      $  40      (1)       13  %    (17 )%
General and
administrative
Servicing
support fees            121       2            59       3             71       2        130       3         (9 )    (1)       (7 )%    (33 )%
Corporate and
other general
and
administrative
expenses                162       3            66       3             80       3        146       3         16       -        11  %      -  %
Foreclosure
and other
liquidation
related
expenses                 42       1            38       2            133       4        171       3       (129 )    (2)      (75 )%    (67 )%
Depreciation
and
amortization             19       -             9       -             15       -         24       -         (5 )     -       (21 )%      -  %
Total general
and
administrative
expenses                344       6           172       8            299       9        471       9       (127 )    (3)      (27 )%    (33 )%
Total expenses
- Servicing    $        690       11     $    303       14       $   474       15     $ 777       15     $ (87 )    (4)      (11 )%    (27 )%



(1)  Refer to Basis of Presentation section for discussion on presentation of
     combined results.


(2)  Calculated basis points ("bps") are as follows: Annual $ amount/Total
     Average UPB X 10000.



Total expenses decreased during the year ended December 31, 2019 compared to the
same period in 2018, on a combined basis, primarily due to a decrease in
foreclosure and other liquidation related expenses, partially offset by
increased salaries, wages and benefits expense and corporate and other general
and administrative expenses. Foreclosure and other liquidation related expenses
were higher in 2018, on a combined basis, as a result of a refined modeling
method driven by a change in estimate recorded in connection with the Merger and
associated with the refinement of loss expectations on the FNMA reverse mortgage
portfolio, which led to increased reserves. The increase in salaries, wages and
benefits is primarily due to the expansion of the servicing portfolio and an
increase in headcount largely driven by the Pacific Union and Seterus
acquisitions. The increase in corporate and other general and administrative
expenses was primarily a result of higher expenses related to our Project Titan,
which is expected to increase operational efficiencies and enhance overall
customer experience.


                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 

10-K 46

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The table below summarizes other income (expenses), net for the Servicing segment: Table 12. Servicing - Other Income (Expenses), Net




                                          Successor                                          Predecessor
                                                Five Months Ended December 31,       Seven Months Ended July 31,
               Year Ended December 31, 2019                  2018                                2018                    Combined(1)             Change              % Change
                    Amt             bps(2)          Amt              bps(2)               Amt             bps(2)        Amt      bps(2)       Amt      bps(2)      Amt     bps(2)
Income earned
on reverse
mortgage
interest       $    313                 5      $    206                 10          $       274              9       $   480        9      $ (167 )      (4 )     (35 )%    (44 )%
Other interest
income              187                 3            16                  1                   14              1            30        1         157         2       523  %    200  %
Interest
income              500                 8           222                 11                  288             10           510       10         (10 )      (2 )      (2 )%    (20 )%

Reverse
mortgage
interest
expense            (236 )              (4 )        (147 )               (6 )               (221 )           (7 )        (368 )     (7 )       132         3       (36 )%    (43 )%
Advance
interest
expense             (29 )               -           (13 )               (1 )                (19 )           (1 )         (32 )     (1 )         3         1        (9 )%   (100 )%
Other interest
expense            (204 )              (3 )         (13 )               (1 )                (28 )           (1 )         (41 )     (1 )      (163 )      (2 )     398  %    200  %
Interest
expense            (469 )              (7 )        (173 )               (8 )               (268 )           (9 )        (441 )     (9 )       (28 )       2        (6 )%    (22 )%
Other income
(expenses),
net                   4                 -             6                  -                   (1 )            -             5        -          (1 )       -       (20 )%      -  %
Total other
income
(expenses),
net -
Servicing      $     35                 1      $     55                  3          $        19              1       $    74        1      $  (39 )       -       (53 )%      -  %

Weighted
average cost -
advance
facilities          3.9 %                           4.1 %                                   3.9 %                        4.0 %               (0.1 )%               (3 )%
Weighted
average cost -
excess spread
financing           8.9 %                           8.8 %                                   8.8 %                        8.8 %                0.1  %                1  %



(1)  Refer to Basis of Presentation section for discussion on presentation of
     combined results.


(2)  Calculated basis points ("bps") are as follows: Annual $ amount/Total
     Average UPB X 10000.



Total other income (expenses), net decreased during the year ended December 31,
2019 as compared to the same period in 2018, on a combined basis, primarily due
to an increase in interest expense. The increase in interest expense was
primarily due to an increase in other interest expense as a result of an
increase of $45 in excess spread costs and $92 of earnings credits and bank fee
credits which the Predecessor previously classified as interest expense, and $21
of compensating interest expense driven by higher payoff volume. Partially
offsetting the increase in other interest expense was a decrease in reverse
mortgage interest expense, primarily due to the decline in the reverse mortgage
interest portfolio balance, as well as the accretion of the HMBS bond premium
due to a decline in the quarterly revaluation of the original mark-to-market
premium on HMBS bonds, which was estimated in connection with the Merger. In
addition, interest income decreased due to a decrease in income earned on
reverse mortgage interest, partially offset by an increase in other interest
income. Income earned on reverse mortgage interest decreased due to the decline
in the reverse mortgage interests balance and the amortization of a net asset
premium into income. Other interest income increased primarily as a result of
aforementioned $92 of earnings credits and bank fee credits which the
Predecessor previously classified as interest expense, coupled with higher
interest income due to higher yields on custodial balances combined with higher
balances driven by portfolio growth.



47 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------

Servicing Portfolio and Liabilities



The tables below summarize the servicing portfolio and related liabilities in
the Servicing segment:
Table 13. Servicing Portfolios and Related Liabilities


                                                                 Successor
                                    December 31, 2019                                  December 31, 2018
                                                       Weighted Avg.                                      Weighted Avg.
                        UPB         Carrying Amount        Coupon           UPB        Carrying Amount        Coupon
Forward MSRs - fair
value
Agency              $  240,688     $         2,944          4.5 %       $ 229,108     $         3,027          4.5 %
Non-agency              56,094                 552          4.7 %          66,373                 638          4.8 %
Total forward MSRs
- fair value           296,782               3,496          4.5 %         295,481               3,665          4.5 %

Subservicing and
other(1)
Agency                 308,532                 N/A          N/A           208,607                 N/A          N/A
Non-agency              15,451                 N/A          N/A            15,279                 N/A          N/A
Total subservicing
and other              323,983                 N/A          N/A           223,886                 N/A          N/A

Reverse portfolio -
amortized cost
MSR                      2,508                   6          N/A             3,940                  11          N/A
MSL                     13,994                 (61 )        N/A            16,538                 (71 )        N/A
Securitized loans        6,223               6,279          N/A             7,937               7,934          N/A
Total reverse
portfolio serviced      22,725               6,224          N/A            28,415               7,874          N/A
Total servicing
portfolio unpaid
principal balance   $  643,490     $         9,720          N/A         $ 547,782     $        11,539          N/A



(1) Subservicing and other amounts include loans we service for others,

residential mortgage loans originated but have yet to be sold, and agency


     REO balances for which we own the mortgage servicing rights.




                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 48

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We assess whether acquired portfolios are more credit sensitive or interest
sensitive in nature on the date of acquisition. We consider numerous factors in
making this assessment, with the primary factors consisting of the overall
portfolio delinquency characteristics, portfolio seasoning and residential
mortgage loan composition. Interest rate sensitive portfolios typically consist
of single-family conforming residential forward mortgage loans serviced for GSEs
or other third-party investors. Credit sensitive portfolios primarily consist of
higher delinquency single-family non-conforming residential forward mortgage
loans in private-label securitizations.
Table 14. Fair Value MSR Valuation


                                                              Successor
                                 December 31, 2019                                December 31, 2018
                       UPB          Carrying Amount        bps          UPB          Carrying Amount        bps
Forward MSRs -
fair value
Credit sensitive   $  147,895     $           1,613        109      $  135,752     $           1,495        110
Interest sensitive    148,887                 1,883        126         159,729                 2,170        136
Total forward MSRs
- fair value       $  296,782     $           3,496        118      $  295,481     $           3,665        124



As of December 31, 2019, when measuring the fair value of the portfolio as a
basis point of the unpaid principal balance, our credit and interest sensitive
pools decreased in value compared to December 31, 2018 primarily due to higher
forecasted prepayment speeds as a result of the declining interest rate
environment in 2019.


49 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------




The following table provides information on the fair value of our owned forward
MSR portfolio.
Table 15. MSRs - Fair Value, Rollforward


                                                           Successor                             Predecessor
                                         Year Ended December       Five Months Ended          Seven Months Ended
                                              31, 2019             December 31, 2018            July 31, 2018

Fair value - beginning of period $ 3,665 $ 3,413

           $            2,937

Additions:


Servicing resulting from mortgage loans
sold                                                 434                      120                          162
Purchases of servicing rights                        858                      479                          144
Dispositions:
Sales and cancellation of servicing
assets(1)                                           (408 )                   (111 )                          4
Changes in fair value:
Due to changes in valuation inputs or
assumptions used in the valuation
model:
Credit sensitive                                    (205 )                    (78 )                        203
Interest sensitive                                  (384 )                    (45 )                        127
Other changes in fair value:
Scheduled principal payments                         (94 )                    (39 )                        (45 )
Disposition of negative MSRs and
other(2)                                              64                       14                           27
Prepayments
Voluntary prepayments
Credit sensitive                                     (99 )                    (36 )                        (71 )
Interest sensitive                                  (309 )                    (37 )                        (54 )
Involuntary prepayments
Credit sensitive                                      (7 )                     (7 )                        (12 )
Interest sensitive                                   (19 )                     (8 )                         (9 )
Fair value - end of period              $          3,496        $           3,665           $            3,413


(1) Amount for the seven months ended July 31, 2018 was related to the sale of

nonperforming loans, which had a negative MSR value.

(2) Amounts primarily represent negative fair values reclassified from the MSR

asset to reserves as underlying loans are removed from the MSR and other


     reclassification adjustments.




                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 50

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The following table sets forth the weighted-average assumptions in estimating
the fair value of forward MSRs.
Table 16. MSRs - Fair Value


                                    Successor
                     December 31, 2019    December 31, 2018

Total MSRs Portfolio
Discount rate                     9.7 %               10.2 %
Prepayment speeds                13.1 %               10.8 %
Average life                5.8 years            6.7 years

Credit Sensitive
Discount rate                    10.4 %               11.3 %
Prepayment speeds                12.7 %               11.8 %
Average life                6.0 years            6.4 years

Interest Sensitive
Discount rate                     9.1 %                9.3 %
Prepayment speeds                13.5 %               10.0 %
Average life                5.7 years            7.0 years


The discount rate for credit sensitive and interest sensitive MSRs as of December 31, 2019 remained consistent compared to December 31, 2018. The weighted average life of loans for both credit and interest sensitive MSRs decreased as a result of increased weighted average prepayment speeds, which were attributable to lower average interest rates period over period.



The discount rate, which is used to determine the present value of estimated
future net servicing income, is based on the required rate of return market
investors would expect for an asset with similar risk characteristics. The
discount rate is determined through review of recent market transactions as well
as comparing the discount rate to those utilized by third-party valuation
specialists. Total prepayment speeds represent the annual rate at which
borrowers are forecasted to repay their mortgage loan principal, which includes
estimates for both voluntary and involuntary borrower liquidations. The expected
weighted-average life represents the total years we expect to service the MSR.

Excess Spread Financing



As further disclosed in Note 4, Mortgage Servicing Rights and Related
Liabilities, in the notes to consolidated financial statements, we have entered
into sale and assignment agreements treated as financing arrangements whereby
the acquirer has the right to receive a specified percentage of the excess cash
flow generated from an MSR.

The servicing fees associated with an MSR can be segregated into (i) a base
servicing fee and (ii) an excess servicing fee. The base servicing fee, along
with ancillary income and other revenues, is designed to cover costs incurred to
service the specified pool plus a reasonable margin. The remaining servicing fee
is considered excess. We sell a percentage of the excess fee, as a method for
efficiently financing acquired MSRs and the purchase of loans.

Excess spread financings are recorded at fair value, and the impact of fair
value adjustments on future revenues and capital resources varies primarily due
to (i) prepayment speeds and (ii) our ability to recapture prepayments through
the origination platform. See Note 4, Mortgage Servicing Rights and Related
Liabilities, in the notes to consolidated financial statements, for additional
information regarding the range of assumptions and sensitivities related to the
measurement of the excess spread financing liability as of December 31, 2019 and
2018.


51 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------




The following table sets forth the change in the excess spread liability and the
related weighted average assumptions.
Table 17. Excess Spread Financing


                                                           Successor                             Predecessor
                                         Year Ended December       Five Months Ended          Seven Months Ended
                                              31, 2019             December 31, 2018            July 31, 2018
Fair value - beginning of period        $          1,184        $           1,039           $              996
Additions:
New financings                                       542                      255                           70
Deductions:
Repayments of debt                                   (27 )                    (38 )                         (3 )
Settlements of principal balances                   (219 )                    (77 )                       (105 )
Changes in fair value:
Credit sensitive                                     (61 )                     23                           73
Interest sensitive                                  (108 )                    (18 )                          8
Fair value - end of period              $          1,311        $           1,184           $            1,039

                                                                                    Successor
Key Weighted-Average Assumptions:                                  December 31, 2019          December 31, 2018
Total Excess Spread Portfolio
Discount rate                                                                11.6 %                       10.4 %
Prepayment speeds                                                            12.6 %                       11.0 %
Recapture rate                                                               20.1 %                       18.6 %
Average life                                                            5.8 years                    6.5 years

Credit Sensitive
Discount rate                                                                12.3 %                       11.1 %
Prepayment speeds                                                            12.5 %                       11.6 %
Recapture rate                                                               21.6 %                       18.0 %
Average life                                                            5.9 years                    6.3 years

Interest Sensitive
Discount rate                                                                10.5 %                        9.0 %
Prepayment speed                                                             12.8 %                        9.9 %
Recapture rate                                                               17.6 %                       16.0 %
Average life                                                            5.8 years                    7.0 years



Due to market driven events occurring within the year ended December 31, 2019,
we updated the discount rate utilized for valuation of excess spread financing
liabilities to accurately reflect the fair value.


                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 

10-K 52

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The following table sets forth the change in the MSRs financing liability and
the related weighted average assumptions.
Table 18. MSRs Financing Liability - Rollforward


                                                             Successor                                      Predecessor
                                                                          Five Months Ended
                                         Year Ended December 31, 2019

December 31, 2018 Seven Months Ended July 31, 2018 Fair value - beginning of period $

                   32           $            26         $                      10
Changes in fair value:
Changes in valuation inputs or
assumptions used in the valuation model                     23                        11                                22
Other changes in fair value                                (18 )                      (5 )                              (6 )
Fair value - end of period              $                   37           $            32         $                      26

                                                                                                 Successor
Weighted-Average Assumptions                                              December 31, 2019              December 31, 2018
Advance financing rates                                                              3.5 %                             4.2 %
Annual advance recovery rates                                                       18.8 %                            19.0 %



We entered into several sale agreements whereby we sold the right to receive
repayment of servicing advances on private-label servicing advances and the
right to receive a portion of the base fee component on the related MSRs, and
also transferred the obligations to make future advances. These transactions are
recorded as an MSR Financing Liability in our consolidated balance sheets and
represent the incremental costs relative to the market participant assumptions
contained in the MSR valuation. Changes in the value of the MSR financing
liability are recorded against servicing revenue and interest imputed on the
outstanding liability is recorded as interest expense.

We estimate fair value of the MSR financing liability based on the present value
of future expected discounted cash flows with the discount rate approximating
current market rate for similar financial instruments. The cash flow assumptions
and prepayment assumptions used in the model are based on various factors, with
the key assumptions at December 31, 2019 and 2018 being advance financing rates
and annual advance recovery rates. The liability value increased in 2019
primarily due to the increase in the UPB of the underlying MSR, which resulted
in an increase in the amounts owed to the counterparty over 2019.

The following table provides an overview of our forward servicing portfolio and
amounts that involve excess spread financing with our co-invest partners for the
periods indicated.
Table 19. Leveraged Portfolio Characteristics


                                                                        Successor
                                                        December 31, 2019       December 31, 2018
Owned forward servicing portfolio - unencumbered      $            83,557     $           103,644
Owned forward servicing portfolio - encumbered                    213,225                 191,837
Subserviced forward servicing portfolio and other                 323,983                 223,886
Total unpaid principal balance                        $           620,765     $           519,367



The encumbered forward servicing portfolio consists of residential mortgage
loans included within our excess spread financing transactions and MSR financing
liability. Subserviced and other amounts include (1) loans serviced for others,
(2) residential mortgage loans originated but not yet sold, and (3) agency REO
balances for which we own the mortgage servicing rights.


53 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------

Reverse - MSRs Participating Interests - Amortized Cost



The table below provides detail of the characteristics and key performance
metrics of the reverse servicing portfolio, which is included in reverse MSRs,
MSLs and participating interests in reverse mortgages. Such assets are recorded
at amortized cost.
Table 20. Reverse - Mortgage Portfolio Characteristics


                                                Successor
                                 December 31, 2019     December 31, 2018
Loan count                                165,364               192,810
Ending unpaid principal balance $          22,725     $          28,415
Average loan amount(1)          $         137,426     $         147,374
Average coupon                                3.6 %                 4.5 %
Average borrower age                           80                    79



(1)  Average loan amount is presented in whole dollar amounts.



Historically, the Predecessor acquired servicing rights and participating
interests in reverse mortgage portfolios. Reverse mortgage loans, most commonly
HECMs, provide seniors 62 and older with a loan upon which draws can be made
periodically. The draws are secured by the equity in the borrower's home. For
acquired servicing rights, an MSR or MSL is established on the acquisition date
at fair value, as applicable, based on the expected discounted cash flow from
servicing the reverse portfolio.

Each quarter, we accrete the MSL to revenues - service related, net, of the
respective portfolios run-off. The MSL is assessed for increased obligation
based on its fair value, using a variety of assumptions, with the key assumption
being discount rates, prepayment speeds and the borrower life expectancy. The
MSLs are stratified based on predominant risk characteristics of the underlying
serviced loans. Impairment, if any, represents the excess of amortized cost of
an individual stratum over its estimated fair value and is recognized through an
increase in the valuation allowance.

Based on our assessment, no impairment or increased obligation was required to
be recorded for reverse MSRs and MSLs, respectively, as of December 31, 2019 and
2018.


Originations Segment



The strategy of our Originations segment is to originate or acquire new loans
for the servicing portfolio at a more attractive cost than purchasing MSRs in
bulk transactions and to retain our existing customers by providing them with
attractive refinance options. The Originations segment plays a strategically
important role because its profitability is typically counter cyclical to that
of the Servicing segment. Furthermore, by originating or acquiring loans at a
more attractive cost than would be the case in bulk MSR acquisitions, the
Originations segment improves our overall profitability and cash flow. Growing
the Originations segment has been a strategic focus for us for several years.

The Originations segment includes three channels:

• Our direct-to-consumer lending channel relies on our call centers, website

and mobile apps to interact with customers. Our primary focus is to assist

our customers with a refinance or home purchase by providing them with a

needs-based approach to understanding their current mortgage options.

• Our correspondent lending channel acquires newly originated residential


       mortgage loans that have been underwritten to investor guidelines. This
       includes both conventional and government-insured loans that qualify for
       inclusion in securitizations that are guaranteed by the GSEs. Our

correspondent lending channel enables us to replenish servicing portfolio


       run-off typically at better rate of return than traditional bulk or flow
       acquisitions.


• Our wholesale lending channel works with mortgage brokers to source loans

which are underwritten and funded by us in our name. Counterparty risk is


       mitigated through quality and compliance monitoring and all brokers are
       subject to our eligibility requirements coupled with an annual
       recertification process.




                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 54

--------------------------------------------------------------------------------

The charts below set forth the pull through adjusted lock volume and funded volume by channel and channel mix.




                      [[Image Removed: pullthroughv3.jpg]]

                     [[Image Removed: channelmixv2a01.jpg]]





55 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------




The following tables set forth the results of operations for the Originations
segment:
Table 21. Originations Segment Results of Operations


                                  Successor                         Predecessor
                      Year Ended        Five Months Ended        Seven Months Ended
                  December 31, 2019     December 31, 2018          July 31, 2018        Combined(1)       $ Change        % Change
Total revenues    $       1,043        $          181           $            306       $        487     $      556           114  %
Total expenses              568                   155                        245                400            168            42  %
Total other
income
(expenses), net               4                     6                          1                  7             (3 )         (43 )%
Income before
income tax        $         479        $           32           $             62       $         94     $      385           410  %
expense

Originations
Margin
Revenue           $       1,043        $          181           $            306       $        487     $      556           114  %
Pull through
adjusted lock
volume            $      42,393        $        8,295           $         11,907       $     20,202     $   22,191           110  %
Revenue as a
percentage of
pull through
adjusted lock
volume(2)                  2.46 %                2.18 %                     2.57 %             2.41 %         0.05  %          2  %

Expenses          $         568        $          155           $            245       $        400     $      168            42  %
Funded volume     $      40,182        $        8,884           $         12,317       $     21,201     $   18,981            90  %
Expenses as a
percentage of
funded volume(3)           1.41 %                1.74 %                     1.99 %             1.89 %        (0.48 )%        (25 )%

Originations
Margin                     1.05 %                0.44 %                     0.58 %             0.52 %         0.53  %        102  %


(1) Refer to Basis of Presentation section for discussion on presentation of

combined results.

(2) Calculated on pull-through adjusted lock volume as revenue is recognized at

the time of loan lock.

(3) Calculated on funded volume as expenses are incurred based on closing of the


     loan.



Income before income tax expense increased for the year ended December 31, 2019
as compared to the same period in 2018, on a combined basis, primarily due to an
increase in total revenues driven by origination volume growth. The growth in
originations volume was driven by declining interest rates, and incremental
volumes made available with the acquisition of Pacific Union and related
origination channels. The Originations Margin for the year ended December 31,
2019 increased as compared to the same period in 2018, on a combined basis,
primarily due to the lower interest rate environment and growth in the
direct-to-consumer channel, along with lower expenses as a percentage of funded
volume.

Originations Segment Revenues

Service related fee, net - Originations refers to fees collected from customers
for originated loans and from other lenders for loans purchased through the
correspondent channel, and includes loan application, underwriting, and other
similar fees.

Net gain on loans originated and sold represents the gains and losses from the
origination, purchase, and sale of loans and related derivative instruments.
Gains from the origination and sale of loans are affected by the volume and
margin of our originations activity and is impacted by fluctuations in interest
rates.

Capitalized servicing rights represents the fair value attributed to mortgage
servicing rights at the time in which they are retained in connection with the
sale of loans during the period.


                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 

10-K 56

--------------------------------------------------------------------------------

Total revenues, including net gain on mortgage loans held for sale, for our Originations segment are set forth in the tables below: Table 22. Originations - Revenues




                                  Successor                         Predecessor
                      Year Ended        Five Months Ended        Seven Months Ended
                  December 31, 2019     December 31, 2018          July 31, 2018        Combined(1)       $ Change        % Change
Service related,
net -
Originations      $          80        $           24           $             36       $         60     $       20            33  %
Net gain on
mortgage loans
held for sale
Net gain on loans
originated and
sold                        562                    46                        115                161            401           249  %

Capitalized


servicing rights            420                   114                        156                270            150            56  %
Provision for
repurchase
reserves, net of
release                     (19 )                  (3 )                       (1 )               (4 )          (15 )         375  %
Total net gain on
mortgage loans
held for sale               963                   157                        270                427            536           126  %
Total revenues -
Originations      $       1,043        $          181           $            306       $        487     $      556           114  %

Key Metrics
Consumer direct
lock pull through
adjusted
volume(2)         $      18,151        $        3,588           $          6,100       $      9,688     $    8,463            87  %
Other locked pull
through adjusted
volume(2)                24,242                 4,707                      5,807             10,514         13,728           131  %
Total pull
through adjusted
lock volume       $      42,393        $        8,295           $         11,907       $     20,202     $   22,191           110  %
Funded volume     $      40,182        $        8,884           $         12,317       $     21,201     $   18,981            90  %
Volume of loans
sold              $      40,092        $        9,183           $         12,915       $     22,098     $   17,994            81  %
Recapture
percentage                 26.2 %                24.8 %                     23.8 %             24.6 %          1.6  %          7  %
Purchase as a
percentage of
funded volume              41.5 %                55.8 %                     46.7 %             64.7 %        (23.2 )%        (36 )%
Value of
capitalized
servicing on
retained
settlements             147 bps               144 bps                    141 bps            142 bps          5 bps             4  %



(1) Refer to Basis of Presentation section for discussion on presentation of

combined results.

(2) Pull through adjusted volume represents the expected funding from locks


     taken during the period.



Total revenues increased for the year ended December 31, 2019 compared to the
same period in 2018, on a combined basis, primarily driven by the higher volumes
in a declining interest rate environment and the incremental volumes made
available with the acquisition of Pacific Union and related origination
channels, which occurred in February 2019. Total revenues increased 114% or $556
period over period as pull through adjusted lock volume increased 110% during
the same period.


57 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------

The table below summarizes expenses for the Originations segment: Table 23. Originations - Expenses




                              Successor                      Predecessor
                                        Five Months
                                           Ended
                      Year Ended       December 31,       Seven Months Ended
                  December 31, 2019        2018             July 31, 2018  

      Combined(1)       $ Change       % Change
Salaries, wages
and benefits      $            375     $        95       $              148     $         243     $       132           54 %
General and
administrative
Loan origination
expenses                        58              19                       32                51               7           14 %
Corporate and
other general and
administrative
expenses                        61              18                       26                44              17           39 %
Marketing and
professional
service fees                    53              18                       32                50               3            6 %
Depreciation and
amortization                    18               5                        7                12               6           50 %
Loss on
impairment of
assets                           3               -                        -                 -               3          100 %
Total general and
administrative                 193              60                       97               157              36           23 %
Total expenses -
Originations      $            568     $       155       $              245     $         400     $       168           42 %


(1) Refer to Basis of Presentation section for discussion on presentation of


     combined results.



Total expenses for the year ended December 31, 2019 increased when compared to
the same period in 2018, on a combined basis, primarily due to growth in
volumes, which was driven by the low interest rate environment, and the
incremental volumes made available with the Pacific Union acquisition and
related origination channels. The volume growth contributed to the increase in
salaries, wages and benefits, due to increased compensation and headcount
related costs, and loan origination expenses. The increase in loan origination
expenses attributable to higher volume was partially offset by expense reduction
initiatives. In addition, corporate and other general and administrative
expenses increased during the year ended December 31, 2019 primarily driven by
the Pacific Union acquisition.

The table below summarizes other income (expenses), net for the Originations
segment:
Table 24. Originations - Other Income (Expenses), Net


                                  Successor                            Predecessor
                                              Five Months
                  Year Ended December 31,    Ended December      Seven

Months Ended July
                            2019                31, 2018                 31, 2018              Combined(1)         $ Change        % Change
Interest income   $             98           $        27        $              38            $         65       $        33            51  %
Interest expense               (98 )                 (26 )                    (37 )                   (63 )             (35 )          56  %
Other income, net                4                     5                        -                       5                (1 )         (20 )%
Total other
income
(expenses), net -
Originations      $              4           $         6        $               1            $          7       $        (3 )         (43 )%

Weighted average
note rate -
mortgage loans
held for sale                  4.3 %                 4.9 %                    4.5 %                   4.7 %            (0.4 )%         (9 )%
Weighted average
cost of funds
(excluding
facility fees)                 4.1 %                 4.5 %                    4.2 %                   4.4 %            (0.3 )%         (7 )%


(1) Refer to Basis of Presentation section for discussion on presentation of


     combined results.



                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 58

--------------------------------------------------------------------------------

Interest income relates primarily to mortgage loans held for sale. Interest expense is associated with the warehouse facilities utilized to finance newly originated loans.



Interest income for the year ended December 31, 2019 increased when compared to
the same period in 2018, on a combined basis, primarily driven by higher funded
volume. The increase in interest income was offset by an increase in interest
expense due to higher cost of funds from an increase in originations volume.
Other income, net remained relatively flat in the year ended December 31, 2019
when compared to the same period in 2018, on a combined basis, due to the
recognition of incentives we received related to our financing of certain loans
satisfying certain consumer relief characteristics. In September 2018, we
entered into a master repurchase agreement that provided us with incentives to
finance mortgage loans satisfying certain consumer relief characteristics as
provided in the agreement. We recorded $4 and $5 in other income, net related to
such incentives in the year ended December 31, 2019 and 2018, on a combined
basis, respectively. The master repurchase agreement expired during the third
quarter of 2019.


Xome Segment



Xome is a real estate data and services company that provides services for
mortgage originators and servicers, including Mr. Cooper, as well as mortgage
and real estate investors. Xome is strategically important because it generates
fee income that complements our servicing and origination businesses without
requiring a significant amount of capital or exposing us to the same level of
interest rate or credit risk.

Xome is organized into three divisions: Exchange, Services and Data/Technology.

• The Exchange division consists of the Xome.com auction platform which

utilizes proprietary technology designed to provide efficient execution


       for sales of foreclosed properties.



•      The Services division includes title, escrow, collateral valuation and
       field services related to real estate investments or transactions

including purchases, sales, refinances and defaults. Services includes the


       business of AMS, which we acquired in August 2018.


• The Data/Technology division contains a diversified set of businesses that

provide technology solutions to real estate service providers, aggregators


       and a variety of investors. This includes providing aggregation,
       standardization and licensing for one of the nation's largest set of MLS,
       public records and neighborhood demographic data.



59 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------

The charts below set forth Xome's total revenues, Exchange properties sold, and Services completed orders.


                         [[Image Removed: xomev6.jpg]]

[[Image Removed: chart-0034a08c5783ff769dda11.jpg]][[Image Removed: chart-6e1de4948111321f0fca11.jpg]]

Mr. Cooper Group Inc. - 2019 Annual Report on Form 

10-K 60

--------------------------------------------------------------------------------

Table 25. Xome Segment Results of Operations




                                   Successor                        Predecessor
                                                                    Seven Months
                   Year Ended December     Five Months Ended       Ended July 31,
                         31, 2019          December 31, 2018            2018          Combined(1)        $ Change         % Change
Xome - Operations
Total revenues    $           422          $           177        $        149       $        326     $         96            29  %
Total expenses                398                      178                 123                301               97            32  %
Total other
income                         14                        -                   9                  9                5
(expenses), net                                                                                                               56  %
Income (loss)
before income tax
expense (benefit) $            38          $            (1 )      $         35       $         34     $          4            12  %
Income (loss)
before taxes                  9.0 %                   (0.6 )%             23.5 %             10.4 %           (1.4 )%        (13 )%
margin - Xome

Xome - Revenues
Exchange          $            79          $            34        $         

62 $ 96 $ (17 ) (18 )% Services

                      323                      135                  74                209              114            55  %
Data/Technology                20                        8                  13                 21               (1 )          (5 )%
Total revenues -
Xome              $           422          $           177        $        149       $        326     $         96            29  %

Key Metrics
Exchange
properties sold             9,851                    3,952               6,920             10,872           (1,021 )          (9 )%
Average Exchange
properties under
management                  7,893                    5,660               6,567              6,189            1,704            28  %

Services


completed orders        1,630,002                  808,503             264,031          1,072,534          557,468            52  %
Percentage of
revenue earned
from third-party
customers                    52.5 %                   56.2  %             28.0 %             43.3 %            9.2  %         21  %

Xome - Expenses
Salaries, wages
and benefits      $           148          $            73        $         58       $        131     $         17            13  %
General and
administrative
Operational
expenses                      236                      100                  58                158               78            49  %
Depreciation and
amortization                   14                        5                   7                 12                2            17  %
Total general and
administrative                250                      105                  65                170               80            47  %
Total expenses -
Xome              $           398          $           178        $        123       $        301     $         97            32  %


(1) Refer to Basis of Presentation section for discussion on presentation of


     combined results.



Income before income tax expense increased for the year ended December 31, 2019
as compared to the same period in 2018, on a combined basis, primarily driven by
an increase in total revenues and other income (expenses), net, partially offset
by an increase in total expenses.

Total revenues increased for the year ended December 31, 2019 as compared to the
same period in 2018, on a combined basis, primarily due to an increase in
Services revenues as a result of the August 2018 acquisition of AMS, which added
higher volumes of units for valuation and field services. Partially offsetting
the increase in Services revenues was a decrease in Exchange revenues, primarily
as a result of lower foreclosure sales and inventories across the industry and
nation.

Total expenses increased for the year ended December 31, 2019 as compared to the
same period in 2018, on a combined basis, primarily due to an increase in
operational expenses, primarily related to the acquisition of AMS. Total other
income (expenses), net increased primarily due to the $15 change in the
contingent consideration for the acquisition of AMS for the year ended December
31, 2019.

61 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------




Corporate/Other Segment



The following tables set forth the results of operations for the Corporate/Other
segment:
Table 26. Corporate/Other Segment Results of Operations


                                    Successor                           Predecessor
                  Year Ended December      Five Months Ended        Seven Months Ended
                        31, 2019           December 31, 2018           July 31, 2018       Combined(1)      $ Change       % Change

Corporate/Other -
Operations
Total revenues    $           13         $             -            $             1       $         1     $        12        1,200  %
Total expenses               198                      71                        103               174              24           14  %
Total other
income
(expenses), net             (212 )                   (85 )                      (78 )            (163 )           (49 )         30  %
Loss before
income tax
benefit -
Corporate/Other   $         (397 )       $          (156 )          $       

(180 ) $ (336 ) $ (61 ) 18 %



Corporate/Other -
Expenses
Salaries, wages
and benefits      $           88         $            38            $            45       $        83     $         5            6  %
General and
administrative
Operational
expenses                      62                      13                         54                67              (5 )         (7 )%
Depreciation and
amortization                  40                      20                          4                24              16           67  %
Loss on
impairment of
assets                         8                       -                          -                 -               8          100  %
Total general and
administrative               110                      33                         58                91              19           21  %
Total expenses -
Corporate/Other   $          198         $            71            $           103       $       174     $        24           14  %

Corporate/Other -
Other Income
(Expenses), Net
Interest income,
legacy portfolio  $            6         $             5            $      

7 $ 12 $ (6 ) (50 )% Other interest income

                         1                       2                          -                 2              (1 )        (50 )%
Total interest
income                         7                       7                          7                14              (7 )        (50 )%

Interest expense,
legacy portfolio              (1 )                    (1 )                       (3 )              (4 )             3          (75 )%
Interest expense
on unsecured
senior notes                (203 )                   (90 )                      (77 )            (167 )           (36 )         22  %
Other interest
expense                       (8 )                    (2 )                       (3 )              (5 )            (3 )         60  %
Total interest
expense                     (212 )                   (93 )                      (83 )            (176 )           (36 )         20  %
Other (expense)
income, net                   (7 )                     1                         (2 )              (1 )            (6 )        600  %
Total other
income
(expenses), net -
Corporate/Other   $         (212 )       $           (85 )          $      

(78 ) $ (163 ) $ (49 ) 30 %



Weighted average
cost - unsecured
senior notes                 7.9 %                   7.1 %                      7.4 %             7.2 %           0.7 %         10  %


(1) Refer to Basis of Presentation section for discussion on presentation of


     combined results.




                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 62

--------------------------------------------------------------------------------




Loss before income tax benefit increased in the year ended December 31, 2019 as
compared to 2018, on a combined basis, primarily due to an increase in total
expenses and the change in total other income (expenses), net. Total expenses
increased primarily due to amortization of intangible assets related to the
Merger with Nationstar. In addition, during the fourth quarter of 2019, we
recorded an $8 impairment of assets in connection with an ancillary business.

Total other income (expenses), net for the Corporate/Other segment consists of
interest expense on our unsecured senior notes, the interest income and expense
from our legacy portfolio, and other interest related to a revolving facility
used for general corporate purposes.

The change in total other income (expenses), net in the year ended December 31,
2019 as compared to 2018, on a combined basis, was primarily due to an increase
in interest expense on unsecured senior notes, as a result of a higher debt
balance and higher borrowing rates under the new unsecured senior notes that
were issued in July 2018 to fund the Merger with Nationstar. In addition, net
interest income related to the legacy portfolio declined due to the collapse of
Trust 2009-A and the sale of loans held in the trust. Other income (expenses),
net declined in the year ended December 31, 2019 as compared to 2018, on a
combined basis, primarily due to a $5 impairment on an equity investment.

Partially offsetting the increase in total expenses and the change in total
other income (expenses), net was an increase in total revenues in the year ended
December 31, 2019 as compared to 2018, on a combined basis, due to the gain
recognized on the collapse of Trust 2009-A, our legacy portfolio, and the sale
of the loans held in the trust.

As a result of the collapse of Trust 2009-A and the sale of the loans held in
the trust in September 2019, there was no legacy portfolio as of December 31,
2019.

Table 27. Legacy Portfolio Composition




                                           Successor
                                       December 31, 2018
Performing - UPB                      $               145
Nonperforming (90+ delinquency) - UPB                  27
REO - estimated fair value                              4
Total legacy portfolio                $               176




63 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------




Changes in Financial Position


Table 28. Changes in Assets


                                             Successor
                             December 31, 2019       December 31, 2018         $ Change          % Change
Cash and cash equivalents  $               329     $               242     $           87             36.0  %
Mortgage servicing rights                3,502                   3,676               (174 )           (4.7 )%
Advances and other
receivables, net                           988                   1,194               (206 )          (17.3 )%
Reverse mortgage
interests, net                           6,279                   7,934             (1,655 )          (20.9 )%
Mortgage loans held for
sale at fair value                       4,077                   1,631              2,446            150.0  %
Deferred tax asset, net                  1,345                     967                378             39.1  %
Other                                    1,785                   1,329                456             34.3  %
Total assets               $            18,305     $            16,973     $        1,332              7.8  %



Total assets as of December 31, 2019 increased by $1,332 or 7.8% compared with
December 31, 2018 primarily due to the increase in mortgage loans held for sale
and other, partially offset by decreases in reverse mortgage interests, mortgage
servicing rights, and advances and other receivables. Mortgage loans held for
sale increased in 2019 primarily due to higher origination volumes in a
declining interest rate environment, and the incremental volumes made available
with the acquisition of Pacific Union and related origination channels, which
occurred in February 2019. Other increased primarily due to $483 of other assets
related to the Pacific Union acquisition, as indicated in Note 3, Acquisitions,
in the notes to consolidated financial statements, and $121 of right of use
assets recorded in 2019 as a result of adoption of ASU 2016-02. Reverse mortgage
interests, net decreased $1,655 primarily due to the collection on participating
interests in HMBS. Mortgage servicing rights decreased in 2019 primarily due to
a negative mark-to-market adjustment driven by declining interest rates.
Advances and other receivables decreased primarily due to recoveries on
advances.

Table 29. Changes in Liabilities and Stockholder's Equity




                                             Successor
                             December 31, 2019       December 31, 2018         $ Change          % Change
Unsecured senior notes,
net                        $             2,366     $             2,459     $          (93 )           (3.8 )%
Advance facilities, net                    422                     595               (173 )          (29.1 )%
Warehouse facilities, net                4,575                   2,349              2,226             94.8  %
MSR related liabilities -
nonrecourse at fair value                1,348                   1,216                132             10.9  %
Other nonrecourse debt,
net                                      5,286                   6,795             (1,509 )          (22.2 )%
Other liabilities                        2,077                   1,614                463             28.7  %
Total liabilities                       16,074                  15,028              1,046              7.0  %
Total stockholders' equity               2,231                   1,945                286             14.7  %
Total liabilities and
stockholders' equity       $            18,305     $            16,973     $        1,332              7.8  %



Total stockholders' equity at December 31, 2019 increased by $286 or 14.7%
compared with the balance as of December 31, 2018 primarily due to net income of
$270 during the year ended December 31, 2019. Total liabilities at December 31,
2019 increased by $1,046 or 7.0% compared with the balance as of December 31,
2018 primarily due to an increase in warehouse facilities and other liabilities,
which was partially offset by a decrease in other nonrecourse debt. Warehouse
facilities increased by $2,226 primarily due to the warehouse facilities
acquired as part of the Pacific Union acquisition and higher origination
volumes. The increase in other liabilities was primarily due to $530 of payables
and other liabilities related to the Pacific Union acquisition. Other
nonrecourse debt decreased by $1,509 primarily due to repayments of reverse
mortgage related nonrecourse debt, which was partially offset by proceeds from
issuance of HECM securitizations.



                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 64

--------------------------------------------------------------------------------

Liquidity and Capital Resources





We measure liquidity by unrestricted cash and availability of borrowings on our
MSR and other facilities. We recorded cash and cash equivalents on hand of $329
and total stockholders' equity of $2,231 as of December 31, 2019. As of December
31, 2019, we had $1,359 collateral pledged against the MSR facilities, of which
we could borrow up to $840. During the year ended December 31, 2019, operating
activities generated cash totaling $702.

We have sufficient borrowing capacity to support our operations. As of December
31, 2019, total available borrowing capacity was $9,690, of which $4,672 was
unused.

Sources and Uses of Cash
Our primary sources of funds for liquidity include: (i) servicing fees and
ancillary revenues; (ii) payments received from sale or securitization of loans;
(iii) payments from the liquidation or securitization of our outstanding
participating interests in reverse mortgage loans; (iv) advance and warehouse
facilities, other secured borrowings and the unsecured senior notes; and (v)
payments received in connection with the sale of advance receivables and excess
spread.

Our primary uses of funds for liquidity include: (i) funding of servicing
advances; (ii) originations of loans; (iii) payment of interest expenses; (iv)
payment of operating expenses; (v) repayment of borrowings and repurchases or
redemptions of outstanding indebtedness; (vi) payments for acquisitions of MSRs;
(vii) scheduled and unscheduled draws on our serviced reverse residential
mortgage loans; and (viii) payment of our technology expenses.

We service reverse mortgage loan portfolios with a UPB of $22,725 as of
December 31, 2019, which includes $2,508 of reverse MSRs, $13,994 of reverse
MSLs and $6,223 of reverse mortgage interests. Reverse mortgages provide seniors
aged 62 and older with the ability to monetize the equity in their homes in a
lump sum, line of credit or annualized draws. The unpaid principal balance of
the loan is accreted for borrower draws and other costs such as mortgage
insurance premiums, property taxes and insurance. Recovery of advances and draws
related to reverse MSRs is generally recovered over a two to three-month period
from the investor. However, for reverse mortgage portfolio recorded as a loan,
the repayment of loan balances and collection of servicing fees occurs upon the
payoff or other liquidation of the loan. We securitize our holdings in reverse
mortgage loans in order to finance subsequent borrower draws and loan related
costs. Draws on reverse mortgage loans totaled $242 in 2019, $316 in 2018, on a
combined basis, and $403 in 2017.

We believe that our cash flows from operating activities, as well as capacity
with existing facilities, provide adequate resources to fund our anticipated
ongoing cash requirements. We rely on these facilities to fund operating
activities. As the facilities mature, we anticipate renewal of these facilities
will be achieved. Future debt maturities will be funded with cash and cash
equivalents, cash flow from operating activities and, if necessary, future
access to capital markets. We continue to optimize the use of balance sheet cash
to avoid unnecessary interest carrying costs.

During 2019, we expanded our subservicing portfolios in order to grow our
operations without the capital required for acquisition costs and carrying costs
of advances that is associated with ownership of mortgage servicing rights. We
completed boardings of $258 billion UPB in connection with new and existing
subservicing agreements.

On January 16, 2020, we completed an offering of $600 aggregate principal amount
of 6.000% Senior Notes due 2027 (the "Notes"). The Notes will bear interest at
6.000% per annum and will mature on January 15, 2027. Interest on the Notes will
be payable semi-annually on January 15 and July 15 of each year, beginning on
July 15, 2020. In February 2020, the net proceeds of the offering, together with
cash on hand, were used to redeem in full the outstanding 6.500% Senior Notes
due 2021 and 6.500% Senior Notes due 2022.


65 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------




Cash Flows
The table below presents the major sources and uses of cash flow for operating
activities:
Table 30. Operating Cash Flow


                                    Successor                           Predecessor
                   Year Ended December      Five Months Ended       Seven Months Ended
                         31, 2019           December 31, 2018          July 31, 2018       Combined(1)      $ Change      % Change
Net income        $           270          $          884           $           154       $     1,038     $     (768 )        (74 )%
Fair value
changes in MSRs,
MSR related
liabilities and
mortgage loans
held for
investment                    838                     234                       (80 )             154            684          444  %
Deferred tax
(benefit) expense            (366 )                (1,021 )                      63              (958 )          592          (62 )%
Other non-cash
adjustments to
net income                 (1,249 )                  (294 )                    (388 )            (682 )         (567 )         83  %
Originations net
sales activities           (1,204 )                   (10 )                     520               510         (1,714 )       (336 )%
Changes in
working capital             2,413                   1,458                     2,025             3,483         (1,070 )        (31 )%
Net cash
attributable to
operating
activities        $           702          $        1,251           $         2,294       $     3,545     $   (2,843 )        (80 )%


(1) Refer to Basis of Presentation section for discussion on presentation of


     combined results.



Our operating activities generated cash of $702 during the year ended December
31, 2019 compared to $3,545 in 2018, on a combined basis. The decrease in cash
generated from operating activities was primarily due to the cash used in
originations net sales activities and the changes in working capital.

Cash used in originations net sales activities was $1,204 during the year ended
December 31, 2019 compared to $510 cash generated in 2018, on a combined basis.
The change was primarily due to a higher funding of $19,041 for loan origination
activities driven by the declining interest rate environment, and an increase in
funds used of $1,824 to repurchase forward loan assets out of Ginnie Mae
securitizations. The increase in funding was partially offset by an increase in
proceeds of $19,151 on the sales of previously originated loans and the sale of
loans related to the collapse of Trust 2009-A, our legacy portfolio.

Cash generated from the changes in working capital was $2,413 during the year
ended December 31, 2019 compared to $3,483 cash generated in 2018, on a combined
basis. The change was primarily due to less collections on reverse mortgage
interests driven by normal portfolio run-off.

Cash generated from fair value changes in MSRs, MSR related liabilities and
mortgage loans held for investment during the year ended December 31, 2019
increased by $684 when compared to 2018, on a combined basis. The change was
primarily due to an increase in fair value changes and amortization/accretion of
mortgage servicing rights/liabilities of $957, primarily due to the negative
mark-to-market adjustment for the year ended December 31, 2019.

Cash used from the deferred tax benefit during the year ended December 31, 2019
decreased by $592 when compared to 2018, on a combined basis, primarily due to
the reversal of the valuation allowance associated with the NOL carryforwards of
WMIH in the five months ended December 31, 2018.


                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 

10-K 66

--------------------------------------------------------------------------------




The table below presents the major sources and uses of cash flow for investing
activities:
Table 31. Investing Cash Flows


                                    Successor                           Predecessor
                  Year Ended December      Five Months Ended        Seven Months Ended
                        31, 2019           December 31, 2018           July

31, 2018 Combined(1) $ Change % Change Acquisitions, net $ (85 ) $

           (33 )          $             -       $       (33 )   $       (52 )        158  %
Purchase of
forward mortgage
servicing rights,
net of
liabilities
incurred                    (547 )                  (307 )                 

   (134 )            (441 )          (106 )         24  %
Proceeds on sale
of assets                      -                       -                         13                13             (13 )       (100 )%
Proceeds on sale
of forward and
reverse mortgage
servicing rights             343                     105                          -               105             238          227  %
Other                        (49 )                   (15 )                      (41 )             (56 )             7          (13 )%
Net cash
attributable to
investing
activities        $         (338 )       $          (250 )          $       

(162 ) $ (412 ) $ 74 (18 )%

(1) Refer to Basis of Presentation section for discussion on presentation of


     combined results.



Our investing activities used $338 during the year ended December 31, 2019,
which decreased from $412 of cash used in 2018, on a combined basis. The
decrease in cash attributable to investing activities was primarily due to an
increase in proceeds on sale of forward mortgage servicing rights of $238.
Although we continue to seek to acquire servicing portfolios at advantageous
pricing, the amounts and timing of these opportunities is not of a consistent
frequency and can result in cash flow variability between periods. Partially
offsetting the increase in proceeds was an increase in cash used of $106 in the
purchase of forward mortgage servicing rights, net of liabilities incurred, and
net cash of $85 used in connection with the acquisitions of Pacific Union and
Seterus.


67 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------




The table below presents the major sources and uses of cash flow for financing
activities:
Table 32. Financing Cash Flow


                                  Successor                         Predecessor
                      Year Ended        Five Months Ended        Seven Months Ended
                  December 31, 2019     December 31, 2018          July 31, 2018        Combined(1)       $ Change       % Change
Increase
(decrease) in
warehouse
facilities        $       1,704        $         (351 )         $           (585 )     $       (936 )   $     2,640         (282 )%
(Decrease)
increase in
advance
facilities                 (186 )                  45                       (305 )             (260 )            74          (28 )%
Repayment of
notes payable              (294 )                   -                          -                  -            (294 )       (100 )%
Payment of
unsecured senior
notes and
nonrecourse debt           (129 )              (1,036 )                      (69 )           (1,105 )           976          (88 )%
Issuance of
excess spread
financing                   542                   255                         70                325             217           67  %
Repayment of
excess spread
financing                   (27 )                 (38 )                       (3 )              (41 )            14          (34 )%
Settlement of
excess spread
financing                  (219 )                 (77 )                     (105 )             (182 )           (37 )         20  %
Decrease of
participating
interest
financing                (1,591 )                (831 )                   (1,391 )           (2,222 )           631          (28 )%
Changes in HECM
securitizations             (99 )                 (31 )                      311                280            (379 )       (135 )%
Other                       (14 )                   1                        (34 )              (33 )            19          (58 )%
Net cash
attributable to
financing
activities        $        (313 )      $       (2,063 )         $         (2,111 )     $     (4,174 )   $     3,861          (93 )%



(1) Refer to Basis of Presentation section for discussion on presentation of


     combined results.



Our financing activities used $313 cash during the year ended December 31, 2019,
which decreased from $4,174 of cash used in 2018, on a combined basis. The
decrease in cash attributable to financing activities was primarily due to an
increase of $1,704 in warehouse facilities during the year ended December 31,
2019 compared to a pay down on warehouse facilities of $936 in 2018, on a
combined basis. Payment of warehouse facilities was higher in 2018, on a
combined basis, due to proceeds from HECM securitizations being used to pay down
the facilities, which did not occur in the same period in 2019. In addition, the
cash used for payment of unsecured senior notes and nonrecourse debt decreased
by $976 primarily due to the redemption and repayment of unsecured senior notes
in 2018, on a combined basis. Cash used for participating interest financing
decreased in 2019 primarily due to a lower repayment of participating interest
financing in 2019 compared to the same period in 2018, on a combined basis.
Partially offsetting these decreases in cash used is an increase in cash used
for repayment of notes payable and HECM securitizations when compared to the
same period in 2018, on a combined basis. During the year ended December 31,
2019, cash of $294 was used to pay off the notes payable assumed from the
Pacific Union acquisition. The cash used in the change in HECM securitizations
during the year ended December 31, 2019 increased due to scheduled pay downs and
amounts incurred to settle the collapsed trusts exceeding proceeds from the
securitization of new trusts, resulting in a net cash outflow of $99. In
addition, during 2018, on a combined basis, proceeds from securitizations of new
trusts exceeded scheduled pay downs and amounts incurred to settle the collapsed
trusts, resulting in a net cash inflow of $280.


Capital Resources



Capital Structure and Debt
We require access to external financing resources from time to time depending on
our cash requirements, assessments of current and anticipated market conditions
and after-tax cost of capital. If needed, we believe additional capital could be
raised through a combination of issuances of equity, corporate indebtedness,
asset-backed acquisition financing and/or cash from operations. Our access to
capital markets can be impacted by factors outside our control, including
economic conditions.


                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 68

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Financial Covenants
Our credit facilities contain various financial covenants which primarily relate
to required tangible net worth amounts, liquidity reserves, leverage
requirements, and profitability requirements, which are measured at our
operating subsidiary,
Nationstar Mortgage LLC. As of December 31, 2019, we were in compliance with our
required financial covenants.

Seller/Servicer Financial Requirements
We are also subject to net worth, capital ratio and liquidity requirements
established by the Federal Housing Finance Agency ("FHFA") for Fannie Mae and
Freddie Mac Seller/Servicers, and Ginnie Mae for single family issuers. In both
cases, these requirements apply to our operating subsidiary, Nationstar Mortgage
LLC.

Minimum Net Worth

The minimum net worth requirement for Fannie Mae and Freddie Mac is defined as follows:

? Base of $2.5 plus 25 basis points of outstanding UPB for total loans serviced.

? Tangible Net Worth comprises of total equity less goodwill, intangible

assets, affiliate receivables and certain pledged assets.

The minimum net worth requirement for Ginnie Mae is defined as follows:



?      The sum of (i) base of $2.5 plus 35 basis points of the issuer's total
       single-family effective outstanding obligations, and (ii) base of $5 plus
       1% of the total effective HMBS outstanding obligations.

? Tangible Net Worth is defined as total equity less goodwill, intangible


       assets, affiliate receivables and certain pledged assets. Effective for
       fiscal year 2020, under the Ginnie Mae MBS Guide, the issuers will no
       longer be permitted to include deferred tax assets when computing the
       minimum net worth requirement.


Minimum Capital Ratio

? In addition to the minimum net worth requirement, we are also required to


       hold a ratio of Tangible Net Worth to Total Assets (excluding HMBS
       securitizations) greater than 6%.


Minimum Liquidity

The minimum liquidity requirement for Fannie Mae and Freddie Mac is defined as follows:

? 3.5 basis points of total Agency servicing.

? Incremental 200 basis points of total nonperforming Agency, measured as

90+ delinquencies, servicing in excess of 6% of the total Agency servicing

UPB.

? Allowable assets for liquidity may include: cash and cash equivalents

(unrestricted), available for sale or held for trading investment grade

securities (e.g., Agency MBS, Obligations of GSEs, US Treasury

Obligations); and unused/available portion of committed servicing advance


       lines.



The minimum liquidity requirement for Ginnie Mae is defined as follows:



?      Maintain liquid assets equal to the greater of $1 or 10 basis points of
       our outstanding single-family MBS.

? Maintain liquid assets equal to at least 20% of our net worth requirement


       for HECM MBS.



Secured Debt to Gross Tangible Asset Ratio



Under Ginnie Mae guide, effective September 1, 2019, we are also required to
maintain a secured debt to gross tangible asset ratios greater than 60%.
Effective September 1, 2019, since we have a Ginnie Mae single-family servicing
portfolio that exceeds $75 billion in UPB, we are also required to obtain an
external primary servicer rating and issuer credit ratings from two different
rating agencies and receive a minimum rating of a B or its equivalent. Effective
for fiscal year 2020, we are permitted to satisfy minimum liquidity requirements
using a combination of AAA rated government securities that are marked to market
in addition to cash and certain cash equivalents.


69 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------




In addition, Fannie Mae or Freddie Mac may require capital ratios in excess of
stated requirements. Refer to Note 20, Capital Requirements, in the notes to
consolidated financial statements for additional information. As of December 31,
2019, we were in compliance with our seller/servicer financial requirements for
FHFA and Ginnie Mae.

Table 33. Debt


                                             Successor
                             December 31, 2019      December 31, 2018
Advance facilities, net     $               422    $               595
Warehouse facilities, net                 4,575                  2,349
Unsecured senior notes, net               2,366                  2,459



Advance Facilities
As part of our normal course of business, we borrow money to fund servicing
advances. Our servicing agreements require that we advance our own funds to meet
contractual principal and interest payments for certain investors, and to pay
taxes, insurance, foreclosure costs and various other items that are required to
preserve the assets being serviced. Delinquency rates and prepayment speeds
affect the size of servicing advance balances along with our stop advance
policies. These servicing requirements affect our liquidity. We rely upon
several counterparties to provide us with financing facilities to fund a portion
of our servicing advances.

Warehouse Facilities
Loan origination activities generally require short-term liquidity in excess of
amounts generated by our operations. The loans we originate are financed through
several warehouse lines on a short-term basis. We typically hold the loans for
approximately 30 days and then sell or place the loans in government
securitizations in order to repay the borrowings under the warehouse lines. Our
ability to fund current operations depends upon our ability to secure these
types of short-term financings on acceptable terms and to renew or replace the
financings as they expire.

As servicer for reverse mortgage loans, among other things, we are required to
fund borrower draws on the loans. We typically pool borrower draws for
approximately 30 days before including them in a HMBS securitization. As of
December 31, 2019, unsecuritized borrower draws totaled $67, and our maximum
unfunded advance obligation related to these reverse mortgage loans was $2,617.

Unsecured Senior Notes
In 2013 and 2018, we completed offerings of unsecured senior notes, which mature
on various dated through July 2026. We pay interest semi-annually to the holders
of these notes at interest rates ranging from 6.500% to 9.125%.

As of December 31, 2019, the expected maturities of our unsecured senior notes based on contractual maturities are presented below:

Table 34. Contractual Maturities - Unsecured Senior Notes




Year Ending December 31,                                 Amount
2020                                                    $     -
2021(1)                                                     492
2022(1)                                                     206
2023                                                        950
2024                                                          -
Thereafter                                                  750
Unsecured senior notes principal amount                   2,398

Unamortized debt issuance costs, premium and discount (32 ) Unsecured senior notes, net

$ 2,366

(1) This note was subsequently redeemed in full in February 2020. See Note 26,

Subsequent Events, in the notes to consolidated financial statements for


     further information.




                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 70

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The table below sets forth our contractual obligations, excluding our excess spread financing, MSR financing and participating interest financing at December 31, 2019:

Table 35. Contractual Obligations




                             Less than 1
                                 Year          1 - 3 Years       3-5 Years       More than 5 Years        Total
Unsecured senior notes(1)   $          -     $         698     $       950     $               750     $    2,398
Interest payment from
unsecured senior notes(2)            191               343             214                     137            885
Advance facilities                   135               287               -                       -            422
Warehouse facilities               4,263               313               -                       -          4,576
Finance lease obligations              2                 -               -                       -              2
Operating lease obligations           40                55              29                      32            156
Total                       $      4,631     $       1,696     $     1,193     $               919     $    8,439

(1) On January 16, 2020, we completed an offering of $600 aggregate principal

amount of 6.000% Senior Notes due 2027. In February 2020, the net proceeds

of the offering, together with cash on hand, were used to redeem in full the

outstanding 6.500% Senior Notes due 2021 and 6.500% Senior notes due 2022.


     See Note 26, Subsequent Events, in the notes to consolidated financial
     statements for additional information.


(2)  Interest expense on advance and warehouse facilities is not presented in
     this table due to the short-term nature of these facilities.



In addition to the above contractual obligations, we have also been involved
with several securitizations, which were structured as secured borrowings. These
structures resulted in us carrying the securitized loans as mortgages on our
consolidated balance sheets and recognizing the asset-backed certificates
acquired by third parties as nonrecourse debt. The timing of the principal
payments on this nonrecourse debt is dependent on the payments received on the
underlying mortgage loans and liquidation of REO. For more information regarding
our indebtedness, see Note 12, Indebtedness, in the notes to consolidated
financial statements.



71 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------




Critical Accounting Policies



Various elements of our accounting policies, by their nature, are inherently
subject to estimation techniques, valuation assumptions and other subjective
assessments. In particular, we have identified the following policies that, due
to the judgment, estimates and assumptions inherent in those policies, are
critical to an understanding of our consolidated financial statements. These
policies relate to fair value measurements, particularly those determined to be
Level 3 as discussed in Note 18, Fair Value Measurements, in notes to
consolidated financial statements, business combinations and goodwill, and
valuation and realization of deferred tax assets. We believe that the judgment,
estimates and assumptions used in the preparation of our consolidated financial
statements are appropriate given the factual circumstances at the time. However,
given the sensitivity of our consolidated financial statements to these critical
accounting policies, the use of other judgments, estimates and assumptions could
result in material differences in our results of operations or financial
condition. Fair value measurements considered to be Level 3 representing
estimated values based on significant unobservable inputs include (i) the
valuation of MSRs, (ii) the valuation of excess spread financing and (iii) the
valuation of mortgage servicing rights financing liability.

MSRs at Fair Value
We generally retain the servicing rights for existing forward residential
mortgage loans transferred to a third party. We recognize MSRs in such transfers
that meet the requirements for sale accounting. Additionally, we may acquire the
rights to service forward residential mortgage loans from third parties. We
apply fair value accounting to this class of MSRs, with all changes in fair
value recorded within revenues - service related, net in the consolidated
statements of operations. We estimate the fair value of these MSRs using a
process that combines the use of a discounted cash flow model and analysis of
current market data. The cash flow assumptions and prepayment assumptions used
in the model are based on various factors, with the key assumptions being
mortgage prepayment speeds, discount rates and average life of loan.

We use internal financial models that use market participant data to value MSRs.
These models are complex and use asset specific collateral data and market
inputs for interest and discount rates. In addition, the modeling requirements
of MSRs are complex because of the high number of variables that drive cash
flows associated with MSRs. Although the general accuracy of our valuation
models is validated, valuations are highly dependent upon the reasonableness of
our assumptions and the predictability of the relationships that drive the
results of the models. On a quarterly basis, we obtain external market
valuations from independent third-party MSR valuation experts in order to
validate the reasonableness of our internal valuation.

Excess Spread Financing
In conjunction with the acquisition of certain MSRs, we have entered into sale
and assignment agreements, which we account for as financings with third parties
associated with funds and accounts under management of New Residential,
BlackRock Financial Management, Inc. and Värde Partners, Inc., whereby we sell
the right to receive a portion of the excess cash flow generated from certain
underlying MSR portfolios after receipt of a fixed base servicing fee per loan.
We retain all ancillary revenues associated with servicing the portfolio and the
remaining portion of the excess cash flow after receipt of the fixed base
servicing fee. We measure these financing arrangements at fair value to more
accurately represent the future economic performance of the acquired MSRs and
related excess servicing financing, with all changes in fair value recorded as a
charge or credit to servicing related revenue, net in the consolidated
statements of operations. We estimate the fair value of these financings using a
process that combines the use of a discounted cash flow model and analysis of
current market data based on the value of the underlying MSRs. In addition,
should we refinance any loan in the portfolios, subject to certain limitations,
we are required to transfer the new loan or a replacement loan of similar
economic characteristics into the portfolios. The new or replacement loan will
be governed by the same terms set forth in the sale and assignment agreement
described above. This is referred to collectively as recapture component of
excess spread financing liability. The cash flow assumptions and prepayment
assumptions used in the model are based on various factors with the key
assumptions being mortgage prepayment speeds, discount rates, average life and
recapture rate.

Mortgage Servicing Rights Financing Liability
From time to time, we will enter into certain transactions with third parties to
sell certain mortgage servicer rights and servicer advances under specified
terms. When these transfers qualify for sale treatment, we derecognize the
transferred assets on our consolidated balance sheets. We have determined that
for a portion of these transactions, the related mortgage servicing rights sales
are contingent upon the receipt of consents from various third parties. Until
these required consents are obtained, legal ownership of the mortgage servicing
rights continues to reside with us. We continue to account for the mortgage
servicing rights on our consolidated balance sheets. Consequently, we record a
mortgage servicing rights financing liability associated with this financing
transaction.


                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K 72

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We have elected to measure MSR financing agreements at fair value, with all
changes in fair value recorded within revenues - service related, net in the
consolidated statements of operations. The fair value of MSR financing is based
on the present value of future expected discounted cash flows with the discount
rate approximating current market rate for similar financial instruments. The
cash flow assumptions and prepayment assumptions used in the model are based on
various factors, with the key assumptions being advance financing rates and
advance recovery rates.

Business Combinations and Goodwill
Acquisitions that qualify as a business combination are accounted for using the
acquisition method of accounting. The fair value of consideration transferred
for an acquisition is allocated to the assets acquired and liabilities assumed
based on their fair value as of the acquisition date. Goodwill is recorded as
the difference, if any, between the aggregate consideration paid for an
acquisition and the fair value of the net tangible and identified intangible
assets acquired under a business combination.

Under the acquisition method of accounting, we complete valuation procedures for
an acquisition to determine the fair value of the assets acquired and
liabilities assumed. These valuation procedures require management to make
assumptions and apply significant judgment to estimate the fair value of the
assets acquired and liabilities assumed. If the estimates or assumptions used
should significantly change, the resulting differences could materially affect
the fair value of net assets. We estimate the fair value of the intangible
assets acquired generally through a combination of a discounted cash flow
analysis (the income approach) and an analysis of comparable market transactions
(the market approach). For the income approach, we base the inputs and
assumptions used to develop these estimates on a market participant perspective
which include estimates of projected revenues, discount rates, economic lives
and income tax rates, among others, all of which require significant management
judgment. For the market approach, we apply judgment to identify the most
comparable market transactions to the transaction. Finite lived intangible
assets, which are primarily comprised of customer relationships and technology,
are amortized over their estimated useful lives using the straight-line method,
or on a basis more representative of the time pattern over which the benefit is
derived, and are assessed for impairment whenever events or changes in
circumstances indicate the carrying value of the asset may not be recoverable.

Goodwill is not amortized, but is reviewed for impairment annually as of
October 1 and monitored for interim triggering events on an ongoing basis.
Goodwill is reviewed for impairment utilizing either a qualitative assessment or
a quantitative goodwill impairment test. If we choose to perform a qualitative
assessment and determines the fair value more likely than not exceeds the
carrying value, no further evaluation is necessary. For reporting units where we
perform the quantitative goodwill impairment test, we compare the fair value of
each reporting unit, which we primarily determine using an income approach based
on the present value of discounted cash flows, to the respective carrying value,
which includes goodwill. If the fair value of the reporting unit exceeds its
carrying value, the goodwill is not considered impaired. If the carrying value
is higher than the fair value, the difference would be recognized as an
impairment loss.

Realization of Deferred Tax Assets
Our provision for income taxes is calculated using the balance sheet method,
which requires the recognition of deferred income taxes. Deferred income taxes
reflect the net tax effect of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes and certain changes in the valuation allowance. We
provide a valuation allowance against deferred tax assets if, based on available
evidence, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. In determining the adequacy of the valuation
allowance, we consider all forms of evidence, including: (1) historic earnings
or losses; (2) anticipated taxable income resulting from the reversal of taxable
temporary differences; (3) tax planning strategies; and (4) anticipated future
earnings exclusive of the reversal of taxable temporary differences. Of all of
the sources of taxable income, we generally rely upon reversals of existing
deferred tax liabilities, tax planning strategies, and future taxable income
excluding reversing differences. In determining the appropriate amount of
valuation allowance required, we consider (1) internal forecasts of our future
pre-tax income exclusive of reversing temporary differences and carryforwards,
(2) the nature and timing of future reversals of existing deferred tax assets
and liabilities, (3) future originating temporary and permanent differences, and
(4) NOL carryforward expiration dates, among others.



73 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------




Other Matters


Recent Accounting Developments

Below provides recently issued accounting pronouncements applicable to us but not yet effective.



Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses
(Topic 326) ("ASU 2016-13") requires expected credit losses for financial
instruments held at the reporting date to be measured based on historical
experience, current conditions and reasonable and supportable forecasts. The
update eliminates the probable initial recognition threshold in current GAAP and
instead reflects an entity's current estimate of all expected credit losses over
the life of the asset. Previously, when credit losses were measured under GAAP,
an entity generally only considered past events and current conditions in
measuring the incurred loss. The new standard requires the estimated loss amount
to reflect management's best estimate of all expected credit losses for the
Company's financial assets that are measured at amortized cost. The guidance
became effective on January 1, 2020 for the Company. The standard requires a
cumulative-effect adjustment to retained earnings as of the beginning of the
year of adoption.

To implement and adopt this standard, management developed a detailed project
plan, formed an internal committee from various internal departments, and
performed a scoping analysis. As a result, the Company determined that Reverse
Mortgage Interests, net of reserves, Advances and Other Receivables, net of
reserves, and certain financial assets included in Other Assets are within the
scope of ASU 2016-13. For each of these financial instruments carried at
amortized cost, the Company enhanced its processes to consider and include the
requirements of ASU 2016-13, as applicable, into the determination of
credit-related losses. Specifically, the Company considered that the guarantee
from HUD on Reverse Mortgage Interests limits the credit losses on this product
primarily to those caused by operational errors from servicing; credit losses
from adopting ASU 2016-13 are not material. For Advances and Other Receivables,
the Company considered that the majority of estimated losses are due to
servicing operational errors, while credit-related losses have historically been
minimal and accordingly are estimated to not be material over the life of the
receivable. For Other Assets, certain financial assets (i.e. trade receivables
and other receivables) the Company considered that these are short-term in
nature (less than one year), and the estimated credit-related losses over the
life of these receivables are similar to those resulting from the Company's
existing loss reserve process. After considering and implementing the
requirements of ASU 2016-13 as applicable, the Company does not expect a
material impact of adopting ASU 2016-13 to the consolidated financial
statements.

Accounting Standards Update No. 2018-13, Fair Value Measurement (Topic 820) -
Changes to the Disclosure Requirements for Fair Value Measurement, ("ASU
2018-13") removes the requirement to disclose the amount of and reasons for
transfers between Level 1 and Level 2 fair value measurement methodologies, the
policy for timing of transfers between levels and the valuation processes for
Level 3 fair value measurements. It also adds a requirement to disclose changes
in unrealized gains and losses for the period included in other comprehensive
income for recurring Level 3 fair value measurements held at the end of the
reporting period and the range and weighted average of significant unobservable
inputs used to develop Level 3 measurements. For certain unobservable inputs,
entities may disclose other quantitative information in lieu of the weighted
average if the other quantitative information would be a more reasonable and
rational method to reflect the distribution of unobservable inputs used to
develop Level 3 fair value measurements. ASU 2018-13 will be effective for the
Company on January 1, 2020. The guidance will not have a material impact to the
disclosures currently provided by the Company.


Impact of Inflation and Changing Prices



Our consolidated financial statements and notes thereto presented herein have
been prepared in accordance with GAAP, which requires the measurement of
financial position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increased cost of our
operations. Unlike most industrial companies, nearly all of our assets and
liabilities are monetary in nature. As a result, interest rates have a greater
impact on our performance than do the effects of general levels of inflation.
Further, interest rates do not necessarily move in the same direction or to the
same extent as the prices of goods and services.


Variable Interest Entities and Off Balance Sheet Arrangements



See Note 14, Securitizations and Financings, in the notes to consolidated
financial statements in Item 8, Financial Statements and Supplementary Data,
which is incorporated herein for a summary of our transactions with VIEs and
unconsolidated balances, and details of their impact on our consolidated
financial statements.


                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 

10-K 74

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Derivatives

See Note 11, Derivative Financial Instruments, in the notes to consolidated financial statements in Item 8, Financial Statements and Supplementary Data, which is incorporated herein for a summary of our derivative transactions.

75 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------


                               GLOSSARY OF TERMS

This Glossary of Terms defines some of the terms that are used throughout this report and does not represent a complete list of all defined terms used.



Advance Facility. A secured financing facility to fund advance receivables which
is backed by a pool of mortgage servicing advance receivables made by a servicer
to a certain pool of mortgage loans.

Agency. Government entities guaranteeing the mortgage investors that the
principal amount of the loan will be repaid; the Federal Housing Administration,
the Department of Veterans Affairs, the US Department of Agriculture and Ginnie
Mae (and collectively, the "Agencies")

Agency Conforming Loan.  A mortgage loan that meets all requirements (loan type,
maximum amount, LTV ratio and credit quality) for purchase by Fannie Mae,
Freddie Mac, or insured by the FHA, USDA or guaranteed by the VA or sold into
Ginnie Mae.

Asset-Backed Securities ("ABS"). A financial security whose income payments and
value is derived from and collateralized (or "backed") by a specified pool of
underlying receivables or other financial assets.

Bulk acquisitions or purchases. MSR portfolio acquired on non-retained basis through an open market bidding process.



Base Servicing Fee. The servicing fee retained by the servicer, expressed in
basis points, in an excess MSR arrangement in exchange for the provision of
servicing functions on a portfolio of mortgage loans, after which the servicer
and the co-investment partner share the excess fees on a pro rata basis.

Conventional Mortgage Loans. A mortgage loan that is not guaranteed or insured
by the FHA, the VA or any other government agency. Although a conventional loan
is not insured or guaranteed by the government, it can still follow the
guidelines of GSEs and be sold to the GSEs.

Correspondent lender, lending channel or relationship. A correspondent lender is
a lender that funds loans in their own name and then sells them off to larger
mortgage lenders. A correspondent lender underwrites the loans to the standards
of an investor and provides the funds at close.

Credit-Sensitive Loan. A mortgage loan with certain characteristics such as low
borrower credit quality, relaxed original underwriting standards and high LTV,
which we believe indicates that the mortgage loan presents an elevated credit
risk of borrower default versus payoff.

Delinquent Loan. A mortgage loan that is 30 or more days past due from its contractual due date.

Department of Veterans Affairs ("VA"). The VA is a cabinet-level department of
the U.S. federal government, which guarantees certain home loans for qualified
borrowers eligible for securitization with GNMA.

Direct-to-consumer originations. A type of mortgage loan origination pursuant to
which a lender markets refinancing and purchase money mortgage loans directly to
selected consumers through telephone call centers, the Internet or other means.

Excess Servicing Fees. In an excess MSR arrangement, the servicing fee cash flows on a portfolio of mortgage loans after payment of the base servicing fee.



Excess Spread. MSRs with a co-investment partner where the servicer receives a
base servicing fee and the servicer and co-investment partner share the excess
servicing fees. This co-investment strategy reduces the required upfront capital
from the servicer when purchasing or investing in MSRs.

Federal National Mortgage Association ("Fannie Mae" or "FNMA").  FNMA was
federally chartered by the U.S. Congress in 1938 to support liquidity,
stability, and affordability in the secondary mortgage market, where existing
mortgage-related assets are purchased and sold. Fannie Mae buys mortgage loans
from lenders and resells them as mortgage-backed securities in the secondary
mortgage market.

Federal Housing Administration ("FHA"). The FHA is a U.S. federal government
agency within the Department of Housing and Urban Development (HUD). It provides
mortgage insurance on loans made by FHA-approved lenders in compliance with FHA
guidelines throughout the United States.

                      Mr. Cooper Group Inc. - 2019 Annual Report on Form 

10-K 76

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Federal Housing Finance Agency ("FHFA"). A U.S. federal government agency that
is the regulator and conservator of Fannie Mae and Freddie Mac and the regulator
of the 12 Federal Home Loan Banks.

Federal Home Loan Mortgage Corporation ("Freddie Mac" or "FHLMC"). Freddie Mac
was chartered by Congress in 1970 to stabilize the nation's residential mortgage
markets and expand opportunities for homeownership and affordable rental
housing. Freddie Mac participates in the secondary mortgage market by purchasing
mortgage loans and mortgage-related securities for investment and by issuing
guaranteed mortgage-related securities.


Government National Mortgage Association ("Ginnie Mae" or "GNMA"). GNMA is a
self-financing, wholly owned U.S. Government corporation within HUD. Ginnie Mae
guarantees the timely payment of principal and interest on MBS backed by
federally insured or guaranteed loans - mainly loans insured by the FHA or
guaranteed by the VA. Ginnie Mae securities are the only MBS to carry the full
faith and credit guarantee of the U.S. federal government.

Government-Sponsored Enterprise ("GSE"). Certain entities established by the
U.S. Congress to provide liquidity, stability and affordability in residential
housing. These agencies are Fannie Mae, Freddie Mac and the 12 Federal Home Loan
Banks.

Home Affordable Modification Program ("HAMP"). A U.S. federal government program
designed to help eligible homeowners avoid foreclosure through mortgage loan
modifications. Participating servicers may be entitled to receive financial
incentives in connection with loan modifications they enter into with eligible
borrowers and subsequent success fees to the extent that a borrower remains
current in any agreed upon loan modification.

Home Affordable Refinance Program ("HARP"). A U.S. federal government program
designed to help eligible homeowners refinance their existing mortgage loans.
The mortgage must be owned or guaranteed by a GSE, originated during a defined
time period, and applicants must be up-to-date on their mortgage payments but
unable to obtain refinancing because the value of their homes has declined.

Home Equity Conversion Mortgage ("HECM"). Reverse mortgage loans issued by FHA.
HECMs provide seniors aged 62 and older with a loan secured by their home which
can be taken as a lump sum, line of credit, or scheduled payments. HECM loan
balances grow over the loan term through borrower draws of scheduled payments or
line of credit draws as well as through the accrual of interest and FHA mortgage
insurance premiums. In accordance with FHA guidelines, HECMs are designed to
repay through foreclosure and subsequent liquidation of loan collateral after
the loan becomes due and payable. Shortfalls experienced by the servicer of the
HECM through the foreclosure and liquidation process can be claimed to FHA in
accordance with applicable guidelines.

HECM mortgage-backed securities ("HMBS"). A type of asset-backed security that is secured by a group of HECM loans.



 Interest Rate Lock Commitments ("IRLC"). Agreements under which the interest
rate and the maximum amount of the mortgage loan are set prior to funding the
mortgage loan.

Interest-Sensitive Loan. A mortgage loan which is primarily impacted by changes
in forecasted interest rates, which in turn impacts voluntary prepayment speed.
Interest-sensitive loans typically consist of single-family conforming
residential forward mortgage loans serviced for GSEs or other third-party
investors.

Loan Modification. Temporary or permanent modifications to loan terms with the
borrower, including the interest rate, amortization period and term of the
borrower's original mortgage loan. Loan modifications are usually made to loans
that are in default, or in imminent danger of defaulting.

Loan-to-Value Ratio ("LTV"). The unpaid principal balance of a mortgage loan as
a percentage of the total appraised or market value of the property that secures
the loan. An LTV over 100% indicates that the UPB of the mortgage loan exceeds
the value of the property.

Lock period. A set of periods of time that a lender will guarantee a specific rate is set prior to funding the mortgage loan.



Loss Mitigation. The range of servicing activities provided by a servicer in an
attempt to minimize the losses suffered by the owner of a defaulted mortgage
loan. Loss mitigation techniques include short-sales, deed-in-lieu of
foreclosures and loan modifications, among other options.


77 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------

Mortgage-Backed Securities ("MBS"). A type of asset-backed security that is secured by a group of mortgage loans.



Mortgage Servicing Right ("MSRs"). The right and obligation to service a loan or
pool of loans and to receive a servicing fee as well as certain ancillary
income. MSRs may be bought and sold, resulting in the transfer of loan servicing
obligations. MSRs are designated as such when the benefits of servicing the
loans are expected to adequately compensate the servicer for performing the
servicing.

MSR Facility. A line of credit backed by mortgage servicing rights that is used
for financing purposes.  In certain cases, these lines may be a sub-limit of
another warehouse facility or alternatively exist on a stand-alone basis.  These
facilities allow for same or next day draws at the request of the borrower.

Mortgage Servicing Liability ("MSL"). The right and obligation to service a loan
or pool of loans and to receive a servicing fee as well as certain ancillary
income. MSLs may be bought and sold, resulting in the transfer of loan servicing
obligations. MSLs are designated as such when the benefits of servicing the
loans are not expected to adequately compensate the servicer for performing the
servicing.

Non-Conforming Loan. A mortgage loan that does not meet the standards of eligibility for purchase or securitization by Fannie Mae, Freddie Mac or Ginnie Mae.

Originations. The process through which a lender provides a mortgage loan to a borrower.

Pull through adjusted lock volume. Represents the expected funding from locks taken during the period.

Prepayment Speed. The rate at which voluntary mortgage prepayments occur or are projected to occur. The statistic is calculated on an annualized basis and expressed as a percentage of the outstanding principal balance.



Primary Servicer. The servicer that owns the right to service a mortgage loan or
pool of mortgage loans. This differs from a subservicer, which has a contractual
agreement with the primary servicer to service a mortgage loan or pool of
mortgage loans in exchange for a subservicing fee based upon portfolio volume
and characteristics.

Prime Mortgage Loan. Generally, a high-quality mortgage loan that meets the
underwriting standards set by Fannie Mae or Freddie Mac and is eligible for
purchase or securitization in the secondary mortgage market. Prime Mortgage
loans generally have lower default risk and are made to borrowers with excellent
credit records and a monthly income at least three to four times greater than
their monthly housing expenses (mortgage payments plus taxes and other debt
payments) as well as significant other assets. Mortgages not classified as prime
mortgage loans are generally called either sub-prime or Alt-A.

Private Label Securitizations. Securitizations that do not meet the criteria set by Fannie Mae, Freddie Mac or Ginnie Mae.




Real Estate Owned ("REO"). Property acquired by the servicer on behalf of the
owner of a mortgage loan or pool of mortgage loans, usually through foreclosure
or a deed-in-lieu of foreclosure on a defaulted loan. The servicer or a
third-party real estate management firm is responsible for selling the REO. Net
proceeds of the sale are returned to the owner of the related loan or loans. In
most cases, the sale of REO does not generate enough to pay off the balance of
the loan underlying the REO, causing a loss to the owner of the related mortgage
loan.

Recapture. The refinancing of a loan currently in the portfolio, or the financing of a customer's new purchase which resulted in the payoff of an existing loan.



Refinancing. The process of working with existing borrowers to refinance their
mortgage loans. By refinancing loans for borrowers we currently service, we
retain the servicing rights, thereby extending the longevity of the servicing
cash flows.

Reverse Mortgage Loan. A reverse mortgage loan, most commonly a Home Equity
Conversion Mortgage, enables seniors to borrow against the value of their home,
and no payment of principal or interest is required until the death of the
borrower or the sale of the home. These loans are designed to go through the
foreclosure and claim process to recover loan balance.


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Servicing. The performance of contractually specified administrative functions
with respect to a mortgage loan or pool of mortgage loans. Duties of a servicer
typically include, among other things, collecting monthly payments, maintaining
escrow accounts, providing periodic monthly statements to the borrower and
monthly reports to the loan owners or their agents, managing insurance,
monitoring delinquencies, executing foreclosures (as necessary), and remitting
fees to guarantors, trustees and service providers. A servicer is generally
compensated with a specific fee outlined in the contract established prior to
the commencement of the servicing activities.

  Servicing Advances. In the course of servicing loans, servicers are required
to make advances that are reimbursable from collections on the related mortgage
loan or pool of loans. There are typically three types of servicing advances:
P&I advances, T&I Advances and Corporate Advances.

(i) P&I advances cover scheduled payments of principal and interest that have
not been timely paid by borrowers. P&I Advances serve to facilitate the cash
flows paid to holders of securities issued by the residential MBS trust. The
servicer is not the insurer or guarantor of the MBS and thus has the right to
cease the advancing of P&I, when the servicer deems the next advance
nonrecoverable.

(ii) T&I advances pay specified expenses associated with the preservation of a
mortgaged property or the liquidation of defaulted mortgage loans, including but
not limited to property taxes, insurance premiums or other property-related
expenses that have not been timely paid by borrowers in order for the lien
holder to maintain its interest in the property.

(iii) Corporate advances pay costs, fees and expenses incurred in foreclosing
upon, preserving defaulted loans and selling REO, including attorneys' and other
professional fees and expenses incurred in connection with foreclosure and
liquidation or other legal proceedings arising in the course of servicing the
defaulted mortgage loans.

Servicing advances are reimbursed to the servicer if and when the borrower makes
a payment on the underlying mortgage loan at the time the loan is modified or
upon liquidation of the underlying mortgage loan but are primarily the
responsibility of the investor/owner of the loan. The types of servicing
advances that a servicer must make are set forth in its servicing agreement with
the owner of the mortgage loan or pool of mortgage loans. In some instances, a
servicer is allowed to cease Servicing Advances, if those advances will not be
recoverable from the property securing the loan.

Subservicing. Subservicing is the process of outsourcing the duties of the
primary servicer to a third-party servicer. The third-party servicer performs
the servicing responsibilities for a fee and is typically not responsible for
making servicing advances, which are subsequently reimbursed by the primary
servicer. The primary servicer is contractually liable to the owner of the loans
for the activities of the subservicer.

Unpaid Principal Balance ("UPB"). The amount of principal outstanding on a mortgage loan or a pool of mortgage loans. UPB is used together with the servicing fees and ancillary incomes as a means of estimating the future revenue stream for a servicer.

U.S. Department of Agriculture ("USDA"). The USDA is a cabinet-level department of the U.S. federal government, which guarantees certain home loans for qualified borrowers.



Warehouse Facility. A type of line of credit facility used to temporarily
finance mortgage loan originations to be sold in the secondary market. Pursuant
to a warehouse facility, a loan originator typically agrees to transfer to a
counterparty certain mortgage loans against the transfer of funds by the
counterpart, with a simultaneous agreement by the counterpart to transfer the
loans back to the originator at a date certain, or on demand, against the
transfer of funds from the originator.

Wholesale Originations. A type of mortgage loan origination pursuant to which a
lender acquires refinancing and purchase money mortgage loans from third party
correspondent lenders where the lender funds the loan.



79 Mr. Cooper Group Inc. - 2019 Annual Report on Form 10-K --------------------------------------------------------------------------------

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