"It's going to force every single operator to migrate their system to the cloud or face significant competitive disadvantages," Jay Bray, chairman and CEO, said on the fourth quarter earnings call. "For Mr. Cooper, this new platform will drive efficiencies both in terms of operating costs and the ongoing costs of maintaining and upgrading the technology."

Now Mr. Cooper will be able to shift its development resources to applications that are critical to "driving customer delight," Bray continued.

As part of the deal, Mr. Cooper agreed to use Sagent's servicing platform for a seven-year period.

"The really attractive thing here is that Sagent is going to take our technology that we've developed over many years," said Christopher Marshall, Mr. Cooper's vice chairman, president and chief financial officer on the call. "Our visionary technology leader Sridhar Sharma has made sure that every line of code we've developed in the company over the last six years has been cloud native code."

However, the core of Mr. Cooper’s platform was outdated and not cloud native. "And Sagent as part of this transaction, is going to replace that with a cloud native core and have the first end-to-end cloud native platform," Marshall said, describing it as "a complete game changer."

Marshall was asked if Mr. Cooper would sell the new technology, as it had other products it developed in the past. 

The Sagent deal is a continuity of what Mr. Cooper is doing; the company could have just taken a check for the servicing technology, Marshall responded. "We're going to be partnered with a terrific company we have a lot of confidence in. We're going to benefit from all the investment they're going to make."

Private equity firm Warburg Pincus acquired a majority stake in Sagent in 2018 from Fiserv. Last year, Sagent and Figure Technologies entered into a transaction with the ultimate aim of moving mortgage assets onto the Provenance Blockchain. Both Bray and Marshall are joining Sagent's board.

When asked how the Mr. Cooper-Sagent partnership stacks up against Black Knight, Marshall called the Jacksonville, Florida-based technology provider a great company and praised its top leadership.

"We have the utmost respect for them, but every mortgage company wants a cloud-based solution," Marshall said. "So I don't want to say anything about our good friends at Black Knight but Sagent is creating something brand new that everyone's wanted, and I would expect it's going to be a major disruption."

Meanwhile, Mr. Cooper reported fourth quarter earnings of $155 million, compared with $270 million in the third quarter and $191 million in the year-ago period.

The company funded $17.17 billion in the fourth quarter, down from $19.94 billion in the third quarter and $24.5 billion in the fourth quarter of 2020.

Originations in the correspondent channel fell 19% on a quarter-to-quarter basis, to $8.2 billion from $10.1 billion. That drop was deliberate, Marshall said, as Mr. Cooper stuck to its loan pricing discipline in the face of extreme competition in the marketplace.

Pretax operating income for originations fell to $182 million for the quarter, from $273 million three months prior and $435 million one year prior.

Its servicing operation reported pretax income of $87 million, which includes a positive mark-to-market on its MSR portfolio of $46 million. This compared with $197 million in the third quarter (with a positive mark-to-market of $153 million) and a loss of $29 million in the fourth quarter of 2020.

The MSR portfolio ended the quarter at $710 billion, up from $668 billion on Sept. 30, 2021.