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New Residential Investment (NRZ)

Participants
Kaitlyn Mauritz Head, Investor Relations
Michael Nierenberg Chairman, Chief Executive Officer and President
Nick Santoro Chief Financial Officer
Bruce Williams Chief Executive Officer, NewRez
Baron Silverstein President, NewRez
Cathy Dondzila Chief Financial Officer, NewRez
Jack Navarro President and Chief Executive Officer, Servicing, NewRez
Doug Harter Credit Suisse
Kevin Barker Piper Sandler
Stephen Laws Raymond James
Bose George KBW
Henry Coffey Wedbush Securities
Trevor Cranston JMP Securities
Mike Smith B. Riley Securities
Giuliano Bologna Compass Point
Jason Stewart JonesTrading
Call transcript
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Operator

Good morning and welcome to the New Residential Third Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kaitlyn Mauritz, Head of Investor Relations. Please go ahead.

Kaitlyn Mauritz

Great. good and Elisa you, morning everyone. Thank like third quarter would joining to you welcome Residential’s New us. to today XXXX for you all I earnings thank and

President Nierenberg, here Officer. Chairman, are me Santoro, Michael Joining CEO Chief today and and Financial Nick our our

Throughout and we division from NewRez; the call to this and NewRez; the Williams, of team Bruce NewRez of of have members addition, Dondzila, Silverstein, CFO to President management supplement we CEO Jack Baron the CEO morning, Servicing are of the website In reference Residential of NewRez. that President the including Navarro, morning. posted this was NewRez; New Cathy going earnings

so, If you would encourage the you done to have not I presentation already download now.

you Michael, that These point results. Before from would I are I their turn certain materially earnings the today statements. in forward-looking like encourage and would and out factors the statements, be to contained by reports uncertain actual will our nature our disclaimers forward-looking in to review risk over to differ with filed statements to regarding I and may quarterly call supplement release the the and SEC. annual review press statements

discussing I A will financial measures turn the to that, some will during over today’s be measures found Michael. call. also can we addition, most directly In supplement. earnings reconciliation with And be measures these GAAP of non-GAAP the comparable in to our call

Michael Nierenberg

QX for thanks our and earnings today. everyone morning, joining Good Kate. call Thanks,

of is not take and the earnings cost per we extremely maintain today of seeing focus operating worlds sheet, business portfolio will our diluted cash our share. the between to and in fortify on the opportunities do core opportunities As see illustrate, earnings being all be The balance We investment liquidity at we overall powerful. for opportunistic. patient investing levels before in the look continues great we of our environment, advantage portfolio side our today $X.XX uncertainty the of business. and and are the and great are the power lower our while our of amortization financings funds and being higher operating and the To company quarter, to

can’t this isolation. course, in you at look Of

in first our an we it will financings and continues rates issued earnings or per unsecured cost should slowdown certain and we lowering did to earnings. market The $XX funds higher by you of better business and in if as million XXX was to securitizations, way, better of term as share funds couldn’t loan levels, low one our ask for historically fronts in lowering a at we by in points a of debt loans, deal. you the interest cost origination per year market However, on did pickup our a add a day. on advances incremental mortgage in lead of think These amortization quarter operating year. basis origination of With million our a $XX good channels many eight rates refinance savings core May, this get and

our Our there. borrowers great I helping values focus core the proud am times of hard say does work our of company. on through team that one is to And

will just a and are MSR for rise rates significantly that driver grow amortization belief as help our we channel, will continue again a mortgage will higher. recapture higher value share drive grow our I market in portfolio say plenty will up hopeful as great earnings this our is company, still we feel I It into our in new operating relatively improve. business pick I have This higher had DTC we and on we our environment. market portfolio and of share, to quarter interest room While slowdown am the our MSR rate our as company. book we and have that to the begun even

call in side, On back business. portfolio are we the the

for have We month November, notices $XXX million call different of issued of to the on non-agency deals. up

done COVID time calls that we and since early any the recall, issued notices. days first is of the this you we call some haven’t If have

On being in the we non most point, investment away interest quarter all fairly front, environment. activity. see as don’t financing risk muted during relatively activity we rate at the – essentially loan this we for The positions current this as very the from non-agency low and the small were reward part our are mark-to-market

and to $XXX we During under purchased quarter, our $XXX and MBS of some portfolio. about loans we agency sold MSR in million offset million a little the non-agency bonds

Before like would I with you leave few turn to I to the a thoughts. supplement,

committed times are to levels confident uncertain liquidity. approach higher a will drive I disciplined of these our during and remain in value and maintain cash maintaining to higher. We ability book

I weeks, value unlocking our we drive we growing to the start our business will will it to continue posted to today earnings, to trade X. companies As grow has with public now the equity towards core Page with online operating and in seeing going been – refer look am and which dividend, am I in over should. forward supplement we many where few I going past going our to mortgage

tried dividends. obviously billion we look inception, we and in this you operating investment As do at Since our our slide, here to business highlight portfolio. $X.X paid what is

have We $X.X of equity billion. book

returns at XX% offer interest and was return of rates X/XX, in X/XX when been shareholder billion bit we if billion. portfolio assets, an look for our have you $XX.X $X.X total rise. market Our little which shareholders believe the billion, cap assets at of under $XXX as MSR and will When has great end we

this about sectors of billion approximately origination and we we $XX servicing origination. think year, projected As the to

$XXX million income ROE our pre-tax the million look division, servicing it and portfolio, you as far relates is ROE the year-to-date $XX of UPB pre-tax is income When billion Our $XXX so XXX%. and year-to-date year-to-date, servicing at to XX%. an

share, per core or earnings share. per of For million the $X.XX income diluted $XX.X GAAP $XXX.X $X.XX or net quarter, million diluted

quarter-over-quarter $XXX.X income, pre-tax division, XX%. origination million that’s of and up For the servicing

end the down knocked Cash $X.XX million. The cost dividend one stock hand on this revert, that of doing and common we X.X% I will if $X.XX, the Today, increased Our of little be we quarter. that the we our business common a loan at the presentation, in by see into it’s billion share, the dividend our write-down, higher on in a bit the have the Page not have you equity more we is that $X.XX again to September at When be $XXX market of share September. we end point whole. in dividend the yield that at extremely of under $X the have before discount amortization – taking When value, book before share business. higher to the the us down capture liquidity. to $X.X is are the here. the term earnings the billion. X.X% the write-down core here have Big quarter will book at look $X.XX. out going number X, cash just loan one than able origination write-off of Net and to – time I and discount the ending a book book origination Obviously, of on a the X you – result per slow $X.XX from page, to Page increase – get by things: and value value and in term bottom book a for of MSR during value one, the again look you The of was amortization. through in at amortization dividend. wrote of thing economic on $X.XX does term want reflecting $X.XX XX/XX of write-off important should am account, to could refinanced, were two per again, the MSR that to representing $XX.XX we well. just again, offset the quick value lot down business, I some book return discount later take do wrote-off levels per $XX.XX a loan going and greater a we spend the parts – that an Total XX the is believe us before perspective. into not value common summary,

the book $XX per the value is to of If upper believe $XX we share. our side today to implied you look left page,

on on opening get $X.X EBITDA, $X.X and walk book will from and there somewhere to $XX – we anywhere value if share value based value liquidity. earlier give-or-take book my to per get in you be that we essentially an from a is the mentioned to per shows companies share this should remarks, right Xx in mortgage and you between $XX a side, $XX if I company, give-or-take perspective. unlock which roughly worth X what with what Our that’s going at mortgage this when – our trading

holding was per you to of us as see per $X.XX that the get cash liquidity know $X.XX common $X.XX deployed, are things you to incremental bring $X.XX. we of if today or levels end earnings we we forward. Core Couple at $XXX here. world share, going are liquidity of point September We out million and look the $X.XX don’t as carry diluted to is to to of to higher an going what share the

the the in that was the took to and – which thing Page term If an our end into leverage, in end X.XX, again X remarks that opening we we we to XX% our the May, note, earlier refinanced other $X.XX in in QX. Q at worth was share. quarter closed about per mentioned I balance of fact which The at sheet. did loan, extra talking fortify out that of

a Mae refinancing and We and consumer SpringCastle loan to have also we they loan is securitizations from a refinanced did facility. the Ginnie secured you is our advance look things, term we unsecured deals couple which deals term of the closed notes our quarter, anywhere non-performing loan. MSR new deal, advance to eight in If deal on here, our first a and ranged into again one MSR

where down So, essentially sheet, reducing increase of driving extra does financing revenue hover We a our of income $X delivering leverage, origination assets mean? $X.X overall, XXX%, that financial we up the unencumbered that of today, funded to have cash the position One, you want grow our term balance of XX% around earnings. which line profitability, strength. Page $XXX extra We billion. great of X platform, QX want navigate accomplishments. our our and of work to reducing that as scale locking longer origination to X/XX or and up funds, was cost volume by quarter-over-quarter. liquidity, What from results, again, on and is pre-tax billion continue bottom to and million team,

July. in more where continue borrowers to facilities have to We want X of we of When quarter. around has very, the percentage and to The key leverage out, homeowners. areas save help or mark-to-market longer securitizations and exposure, X.X% think one As profile. the very in I just $XX decreased those from mark-to-market pointed we priced in we exposure portfolio, leverage homeowners October investment X% our risk financing, going to additional overall financing. are our forbearance XX%, to continue We is overall our do are to a so of total missions daily again, about in reduced X.X% business lower we to our LTVs low term typically in much term and our million our

want who to our common $X.XX shareholders dividend returns our for by quarter. in we the attractive Finally, risk generate raised

think continue We look we forward, the purchase MSR around specified back see and our of X, want agency pointed are residential and that hedge out depending by portfolio. levels portfolio rates. right of increase When call we to as we the of portfolio, we we many was we pools an we business, return I needed opportunities, of the are of to sold again, million on to residential security sheet sold MSR add securities. view at extra hedge to that? $Xish little in loan purchased portfolio are towards a investment low we When as our out We How our – $XXX assets billion about to and about do Page down think side, million We MBS about of $XXX the themselves upon in On loans just risk credit sold. additional securities. or the MBS under driven residential you interest being agency button purchased our investments on balance out continue about agency turning going now. back look as very pre-COVID levels to our our we non-agency

of our continue we will our then We to in think business, frame our portfolio FHA X the valuations X begun MSR written historical origination are that XX, all been our have for billion. when are but years, lower, through the $X portfolio to you out Obviously have MSR at we purchasing and past servicing are to Page we just MSR forbearance have MSR about about EBOs lows. they grow do we to over think year and We down lows. business. towards

we XX, think rise, this. shareholders XX% basis give our we think way MSR not would add share. when an on do interest went A I increase because portfolio provide points think we ago, a multiples MSR think If value. of As from think XX%ish. about for it’s diluted rates be drive industry, saw am than past at servicing around around when point help point. that you the to, higher returns in spend Xx again volumes I we want our off we portfolio a we quote we On if for Xx the this will and continue again, To X.XX and it refinanceable, around MSR result, XX to Xx MSRs with you price points, believe on be time Page a which will a or or will to will portfolio equate we at side, would to our that – this, some we that’s the going sense in a a it point percentage basis even we less MSRs, XX%, strip of Again, Xx XX in per to value. to year of book as of point XX think ton origination points, I great about things come about the a if now, increase up a believe I couple something out, and fact value to MSR $X.XX went hope quarters basis on out in

as our differentiates So the IOs under bit about we the IOs, That equity, other XX% and XX is mark-to-market, little call we the deal. or years. when out look I on X Total one from of our is impaired of season at a this you a here, other When think total portfolio of on – right, portfolio Page daily The which combination non point portfolio, what the LTV. lead no you seasoned $XXX get point we slower the daily go the of is wave million portfolio out impaired down are One should – and the big of MSR and is couple is have nature equity industry us book, the something when credit non-agency speeds to in would XX and limited business higher to entire and of approximately the earlier, valuations some credit I around book portfolio at XX, our of think When refi XX% as left the what which to months at the we road. no seasoned this things I forward book million. are loan loan out the that side, to the today mentioned is really $XXX bond important. you as things, look mark-to-market. look essentially

are maintaining where financing, liquidity we higher advances, uncertain. as lead advances where servicer were that March again, Page to a fortifying about to things down to extremely forward. they not should were frank of great us results quite talk our pre-COVID levels once period, balance locking kind frankly ton our overall, during XX, sheet, So, of be servicer go

balances, has – excess our of advances. friends. out some advanced from of We need servicer for we took higher the no much levels There capacity been additional around advance expected bank of any financing

advances, Page we As much servicer original the came on XX, in in projections. the our better delinquencies than improvement

resolutions. and And XX, a decline. of outlook we continued We have positive QX. higher advanced COVID-related million have quarter, limited by $XXX equity forbearance during the forbearance much requests new to of or balances more percentages forbearance number during recovered Page the driven

of X.X% from peak to are a We X.X%. down

turn When the operating will go am I then Now, I going and open business for – to some we about think at building Jack we you to origination and going and a NewRez, great at to our have at and Shellpoint team look period Q&A. look been operating in year, management which our through in for businesses. time we over am acquisition as at the XXXX, about are around end and known In came different is up business, job earlier in XXXX. July formerly in when volumes billion, many $XX the you my of NRZ opening it I company together billion. origination and When was servicing July new remarks, business, of say out we $XX servicing years Partners, Bruce of the of the operating when the done that kind purchased were about

$XX think $XX about we of servicing. billion it’s will – billion north in billion be be on billion will between $XX And today, we side, you servicing origination. $XXX of the and it If

So, growth, and work do we towards tremendous growth, lot platform. it’s a our that. continue platform, differentiated things but us all measured can – When improve of of to about to think you could we are there

some the bit We while origination When here. and coming The we are channels. and across the ability in different going with help a have environments. as grows, and MSR direct-to-consumer channels robust, we will the all little to on direct-to-consumer gain-on-sale help four in to our four benefit multi-channel, to with going that strategies, scale they retention it’s recapture, have it’s channel of channels. focus remain portfolio these our channels continues servicing the look direct-to-consumer to have originations around we be Again, across, you different that operate at big

Our third-party I the that brand and in platform, that’s have platform Shellpoint that one north under XX of customers different and industry, best to is of do servicing on the we grow. continue the believe well will

think about four our the channels. to we capture brands, are value, As on we potential working additional

a So, huge ever grow only to pre-tax us we full would $XXX of originate income loans XXX%. company. have rounded a really market origination up any Financial to but not have also seen, what mortgage best XXXX to business, have this commitment is performance in and the I million call

our to continue when very a great margins be be focus The on can’t is amortization to gains. again, that huge offsets perform we win going we enough, to lot the of do. that robust XXX%, it’s which ROE don��t $XXX servicing work and target or XX Xx there. again Page growth, our tremendous continues look gain-on-sale income, the I is think that is origination stuff year-to-date, a income, servicing going business, about to division and up and revenue our just portfolio think this a a company and is When you platform, year when to $X.X to big Page again, close billion Our – be multi-channel something of talked direct-to-consumer pre-tax million MSR lowering harp increase XXX% year-to-date well. measured for at growth, then so about pre-tax up there is the alluded about of clients the and more and extremely XXx, retaining to, XXx to I I part we growth, XX, the for and and ton origination – portfolio to our but

The volume billion and you $XX of at is up, already, end the This direct-to-consumer $XX up Page channels. $XX.X $XXX quarter, times up XX, all our MSR we again, different team to segment, on origination four When Record there are profitability billion extremely it’s am look XXX% QX this, for lock only of the estimate focused at or in is and the $XX or get to it’s because volume better channels billion get to to and direct-to-consumer year-over-year again, of protect XX. is million about for company I I XX% to our it gain about mentioned and there, billion Page at significant COVID, correspondent. quarter, our year XX%. it’s ROE values you has portfolio is something the highlights. assets. quite also increased and year industry Page frankly XXX%. again, estimate business on, what anytime. on XX% of harp of the portfolio. origination. retail, we annualized what going think one we homeowners XX% increase and leading up people, annualized our we activity Origination close on wholesale highlights during us $XXX entire origination servicing are XX, activity the If in, management million On homeowners helping the Page spoken look JV XX I side, not have helping in and XX. core then our lock helping between around better not ROI, but our

by So, down when you population from then look forbearance XX,XXX statistics just over XX% the at been by QX, have so requests great hard these in is XXX,XXX overall during the times. resolved, the which impacted the XX% work in team and new quarter, active of is homeowners, XXX,XXX forbearances, the servicing of now COVID forbearances

here then obviously, today. up wrapping Page open are XX, our up operating partners to Finally, Q&A, will we

the in drive is Clearly, ability I March to rebounded one our risks we think believe got kicked we well. adjusted So, returns. in in attracted extremely attractive we do have risk – teeth

I book is extremely think value our understated.

going do anything equity everything I extremely understated think to can is dividend. road get levels value hopefully the are on MSR lot to price to of and down the pre-COVID our equity we our those the has valuations, back room to low we and a on historically improve. and of

our on sheet. liquidity and cash of balance ton a have We

will maintain tough this through that period. We to continue

years about XX Cathy Baron doing a here XX experience, XX years, ton when side, as years, XX Bruce and is is and this the am at we team, XX talk management look well. years on for been is we has probably of the Jack experience for years, Our plus operating plus I

I to it here. turn old operator. a going So that, you back the nice to With got am team

for questions. it will We up open

Operator

Instructions] Thank you. go [Operator first ahead. of Please today Suisse. Credit Doug question comes The from Harter

Doug Harter

as just talked it you expectations about what looked had like was profitability the the you last quarter you Can kind the the think that I your direct-to-consumer how channels? various lower into about volume for of you and the head ‘XX are Thanks. talk was kind origination great, attractiveness a business? just than a bit of of little little while seeing

Michael Nierenberg

why Yes, don’t that let answer Baron one? I

Baron Silverstein

Right. Good morning.

our funded So, volumes from about in last of quarter balances. talked we terms down were what

have and really We in trying been the context is the in just landscape and able billion hire you slides of see new due we to for fundings. $X.X only that pick to up can staff. that volume to the Part our did lock locks that one of on billion in $X.X

interest Michael it sticky to retail rate channels the a somewhat view not and of that channels improved we our as the to XXX interest capacity in employees, approximately new in out last build are have out continue grow hiring going row. for by our we To in I we about people context as continue will months and in the do we be to We in how believe to funding believe each our our of also environment. continue actually try sensitive framework, bringing rate to is would to different continue X to our on will we environments, lot a our perform growth think bring fulfillment be say JV then talked

given portfolio. about well and lot shares to quarter, our in pause and those to of our take Michael Our a we has MSR direct-to-consumer our continue second grow the of did We in size of it business correspondent headroom channels. talked business the – in just both able that would market as as TPO channel and

optimistic very we well. are much for seeing XXXX the And are fourth that about like. look So what as quarter our we very, would momentum

Michael Nierenberg

to percentages, other all you grow, harder to channels thing add, side. think – to about as obviously the little one the direct-to-consumer than as grow the the bit is of correspondence side when it’s a easier Doug,

in seeing MSR part it that’s you slowing and maybe lock other focused the that in the it we the channel. parts while where is about you but today we are higher really percentage, overall in amortization the direct-to-consumer volumes channels, are think constant again, seeing are profitability And quarter-over-quarter, about our our when the down profitability, portfolio. So, those

Doug Harter

mentioned on can increase your attractiveness then kind book of anything of share kind you thoughts you us doing and stock just value the And Michael, repurchase? to give updated of price,

Michael Nierenberg

focus are think because We to our to that grow, it shares would could times, one The in back. we once is, we for want makes what you harder feel on. are unlock true to think make the we yes, we how how grow, thing really think opportunity do path. are opportunity I think I get a book our back buying to at about really And if to continue we consider value uncertain going that that’s that – we capital, do what continue not about mean, is am is cheap. think I this we to focused have it? value I believe we is Really, we when our more the point. unlock in stock, not us to difference sometimes And it’s back get these cash we today think The than we during I down opportunistic past. have in value out are thinking being like we ruling answer the shareholders.

Doug Harter

Right, thank you.

Michael Nierenberg

Thank you.

Operator

Sandler. of Piper from go question ahead. Please The Barker next Kevin comes

Kevin Barker

morning. good Hi,

Michael Nierenberg

Kevin. Hey,

Kevin Barker

XXXX I per was Hi, most valuation you sense increase my to where over of in into this multiple And $X originating in from quarter. think that last explain Xx that reference an XXXX Xx believe servicer, have which the of level was you you earnings to makes earnings to XXXX? X, and of to $X.XX earnings, be from sustainable little you valuation Xx an can why roughly $X.XX, due and increase share expect the Page to

Michael Nierenberg

anywhere multiple how going think I are to look where X in the am it those have so. derived When that mortgage X as trading, we and X we been companies weeks has there I to at relates public So, to not past it, compare or gone where the Xx about at we you where XXx are trade markets, company trades Xx. anywhere but as if this to which to in could to from us XXx public I at Rocket, from company when we, comps think a look the know the standalone EBITDA,

So, we that there. that’s why in put number

new how you Xx really companies perspective there public. a a if quarter, get lot that back from we last If at put number. Today, to that’s of Xx, comp coming to go mortgage ourselves you weren’t

and you company little projecting bit the what relates talk on it maybe want how XXXX are of side. mortgage we think Cathy how As about to, to about earnings a we we kind

Cathy Dondzila

Yes.

of year. we runway for XXXX like that has look, fragmented of also have market course got quarter the and sort the beginning sort the runway in are we take we in stay growing think, get four So newly expecting across we still market mentioned, back while that and of we fourth certainly believe, into organization even margins an believe share. are and volume. enough next upgrade terms the We that I to over of environment, to levels, come we more we to we the through still take I And channels, think still will a normalized of down higher, margins

upside value profitability take have will in MSR to the we prepayments But got will the lot look, is offset and that of MSR going upgrade do certain think our we there. a we the environments, trend So that overall down. we because see flow,

XXXX. as move is kick hedge of into natural we sort that again, to going So in

Kevin Barker

Okay.

I based look comps on a of you basing earnings times six XXXX. five the it at you at believe on lot when or were base, And XXXX. are not earnings XXXX earnings So

right Am in that I order is increase to contraction expect sustain guess in in can you continue what saying channels? that thinking I gains ‘XX is market into earnings. would channel just or you there And so given that are that within share some in various competition

Michael Nierenberg

wanted Alright. see you the in the as of what overall valuations you lower values mortgage going market company gauge, do side. in what that MSR – to whether us to see you when I about business or XXX I think in up are Kevin, ends that are think whatever you very going on gains investment we think you going increased unlocking in in to combination in volumes pre-tax in are we as share, this see to up do think value or overall market have But in that in about use so we purposes and to company, the portfolio XXX origination going as is origination pick contraction mean, contraction are our we you do, higher an the vehicle. our XXX in hard or see being, you to number that illustrative versus our XXX whether

good it’s makes we think we and the If business. about investment an our a vehicle you company, that have portfolio investment operating then have investments,

you billion in where for we unlocking go give with Xx the $X and at business Now whether would XX that example, if a value was XXX, operating it you trade XX number.

price. captured know is you one or the is whether And $X, in thing that think of operating of that $X, we not So equity are business we the sum what the our is $XX whole. we $X, products believe our greater the the than value

Kevin Barker

value? amount if was the a tremendous it Yes, of that upside would realized to be

Michael Nierenberg

Yes.

Kevin Barker

Yes. your on And the on have the How were as against portfolio securities of the portfolio the in agency quick change the a if backup? the which hedging about the were MSR. between point, play MSR value same the to or been the multiples do also then increasing you to of just you the value think time, follow-up traditionally at your was MSR rates

Michael Nierenberg

question. great So,

pretty I loan time. think been my belief mortgage is on has on that resilient. over other the own the, rates will basis personal The rise side

prices mortgages. You are seeing lower in

I a total, I example, XXX believe as pools want going have in on we here. of [ph] for the interest to And some bias interest long maintain of nimble portfolio compliance, had shorter were that bias specified and we billion rate we longer as run were our need to to be than a example we offsetting a are have swaps. we for against well receiving We where $X rate think MSR swaps that

some you have We which on or payers, short. means other long are the side either

against well as what using essentially the to will side. and there that interest are shorter we rate getting are the think hedge risk we out be agency we So,

able want the upside the be rates So, portfolio we rise. to capture when to in MSR

to other agency have side mortgages are billion MSR. We place I the are want on $XX to risk and other we no than long – to don’t of where here a rate we get the hedge not

MSR relates the would this under to noted, fully that point it our in So, to but pass-through we for still hedged we hedged be and think as are of portfolio extremely we amount us, need environment.

Kevin Barker

Okay. Thank you very much.

Michael Nierenberg

Thank you.

Operator

question from with Laws Stephen Next comes Raymond go James. Please ahead.

Stephen Laws

Hi, good morning.

Michael Nierenberg

morning. Good

Stephen Laws

a I on and you given would impacts we from different MBS loans is they you for well loans the your currently how leaving and where you it people of are possibly how adverse then business, rate MSRs we after Michael, purchased? market you X, after you much volume now sell goes refinance impact as has of unlock did do change that as the take or think number on as are refi think blocking that be about the December origination parts, effect, And assume mortgage goes will funded, on the purchase? prices which into of loans it gain-on-sale just refis to agency fee versus about moving mark-to-market that I expression into a the on just that

Michael Nierenberg

Why take don’t first of? the or think you I Baron delivery Cathy about let question the as

Baron Silverstein

Right.

are has a in tell understanding securities, this locking effect fee it market incorporating time come the how effect well XX/XX, completely are people have would we period to It’s fee our until market pricing otherwise as put in we them or is put if cost time when that we into market the is of kind into At daily fee otherwise from the market hard in really us. So, for time, our the is the their to but to borrower the delivering go into time there are in that fee doesn’t of and as the to adverse pricing. they demand consumers squeezing that you the to continuing borrower pack suit. constrained down but partially be that squeezing capacity the our to I extent I remain for somewhere of amount of – dynamics gut continue with are will to middle in it even rates passed are as the there partially elevated do refinance. will My around that to in looking it’s in as the the for margins. think from see me there My that consumer, and being being to industry rise, think and long the and rates tells the – middle the follow just to margins ability

Michael Nierenberg

about MSRs, Stephen, what second and your And was is refi that was? that question

Stephen Laws

think headwind prepayments the mean, that certainly slows be benefit rates goes values, would different try they mortgage about a right, I I to that your you I a valuation, as and the of MSR that through book if because on that but – and maybe when to the marked higher effect? I fee flow all and have partial business this be if passed am fee segments Yes, is would a bar, thinking would that agency to of down into and

Cathy Dondzila

basis You are, is points. but fee the XX

So, approximately a basis rate. XX.X even points in in XX points it be rate basis little or would over

it’s So, and X my maybe to basis X, either about talking side. be assumption XX-XX, is you on going if be would points

of refinance interest market where it’s impact the interest an rates the amount today’s think aggregate amount any given the really in amount has rates, of from for volume. of where perspective, it we impact don’t material So are, absolute

Michael Nierenberg

a MSR side, XX% that to are about on the servicer, $X.XX adds to that with earnings we in recapture approximately $XXX think our XX%, And overall or side Stephen per to to capturing the our are is on ability all of – to we about point, every all recapturing this you our framework, XX% X% you to NewRez when increase and share rate refinances, recapture on refinancing million. borrowers give XX%

that’s to the on borrower it’s point by companies, better have eaten side side or recapture rates it to we that recapture, some we you this of share. whether and mortgage and So, going earnings real to to higher million lead as increase we theoretically – or the be that believe in when are see going to going X% – passed $XXX harp the direct-to-consumer is while do at one the $X.XX you be on per it’s per

offset think of the at way that get is our side. don’t operating MSR think in large ton are point. this I with some up set So of we will upside pinched business ton is portfolio But a will that is we the which place. volumes Origination company there the this a growth forever. a great MSR think sustainable our I in in cash,

Stephen Laws

or non XXXX what for with looked of something origination one on as refi to for shifting origination opportunity know, you Great. the at guys an question so thought you continue conforming what’s revisiting is at conforming the originations simply outlook COVID, you last backup your any non-conforming side And on next of do rates then kind loans up be refi, just year? to as mix until or running depending on or off look and eligible originations eventually, start those

Michael Nierenberg

channels into Yes, markets credit we direct-to-consumer the our we that small that going want of is thing we quite turning origination mindful to are non-QM. back, frankly saying in getting be grow capacity have to bank that our our to shortly. start roaring doing flowed jumbo is on a all we of to segment agency non-QM being we the can need the that Again, come space, while be of some amount today are here of ready – that one the the Non-QM we gets some friends. are

Stephen Laws

you. Right. this Appreciate Thank the morning. comments

Operator

comes The KBW. go from Please Bose next George question of ahead.

Bose George

Hey, all. and that to another recapture that morning. well? recapture guys first is I don’t gave Good is rate as or wanted you the it where ask, where just think Actually, to the and the actually do just number there to all go I you confirm is piece could think direct-to-consumer

Michael Nierenberg

XX%, which Cooper the are type, are now, was rates think to XX% about and days, if XX%. upon depending around we product you going hovering between right early recapture around even historically it XX% the give-or-take Our back

areas mean amortization for improve our We our is, So, will things to I to, right give to earnings, need growing this now, recapture, I I significantly higher. recapture take – rates. is bigger company the about drive would of add give core obviously about XX% assume this slowdown us and or talk and which one when

Bose George

the of mean, way some is the sort high there you next and range I where a in obviously think And some reasonable would what’s of years? have given the XX, been about guys a recapture to companies go couple of could are have that very rates

Michael Nierenberg

go struggling is the the capacity. volumes. one on depends Obviously, with volumes, it’s harder to it the I back is industry to, recapture, because higher

the there and right. So, there the is – really the is pros cons,

that higher you are means lower speeds what if you means have does slower potentially That rates that origination. may about that you have recapture, mean? So means think that higher,

right business, So, of MSR you be. reasons is about the with a one love now it’s origination sit in think that fantastic where conjunction we we why to when the place

in the Ginnie and I we in on are think probably to products. and think products be will that into we I on Mae segments FHA certain the conventional XXs mid-XXs will we the get back

think So that, every share. X% – when is you really or we about That’s in and again, what for $X.XX right now. $XXX of worth are the per context million playing

Bose George

obviously normalized do ROEs Thanks. sense. speak time, the that a there, because And like moment? of a run-rate And prepays will at makes the you normalized, of where terms do then what to as fair And need for also, whole, about business slower from in of sort cash, ROE much little should standpoint, the think Okay, you you just deployment but a capital how that help, what get reducing the originations amount like probably that bit? you the slowed you? is noted a at have

Michael Nierenberg

as we me take probably with coupled core part. have in loan the is core. out term you the reducing $X.XX The per let by amount cash earnings our of probably latter So, to quarter $X.XX

you cash, about, $X.XXish on we steady in a now. reported refinanced run-rate when probably of that’s standpoint So, a loan right September, sitting term $X.XX from got core think the

normalize did securities. are going to have $XXX mentioned which ROEs comments about in that bonds, sold that frankly out early we quite forward, and the COVID. think we that buy recovered I the could more non-agency non-agency go We days million credit earlier rooting we on and related and seeing in As ago, of do hiring buying etcetera? a think – changed obviously, some vaccine and is shareholders for I investment get quite you is different to And from hire open start cash drive we once and something and think fiscally to fiduciary up My to, just earnings a may a possibilities. a retaining road create for perspective not down go extremely is or credit cure, because do a having I better point. X months point basis we a it we this a higher are little our think and cash I to that we single-digit we all head think earlier levered rates bit which do. think frankly earnings, core on irresponsible, do things risk piece deploy The agency than world dramatically, cash, need at reduce going obviously, I where retaining a) drive produce important. results we levered to the mortgage mid an opportunistic from that’s is

something at mid-teens, COVID, probably our to since ROEs, around when we ROE, something close the have – COVID to period including in been inception, that, I some I when XX%. it numbers looked have up was we think through talk So the

kind So, loans to there as out well. at pre-COVID I I environment come loans is attractive stand, or the some are of where don’t they buy and like and investing to think levels non-agency we trading that that are continue bonds

So, with cost single-digits you work it financing, in are you when right doesn’t about think our now. for the just of and capital that

Bose George

sense… That Okay, makes great.

Michael Nierenberg

is point going of they now, that use from to MSR portfolio. have because return best you are lot are going up to some at right unlevered income our capital and rise go a do more rates take or lot products, that has production look are you we X.Xx start both upside anywhere new they on conventional – we them X.Xx, when think of and creating that When you at a that values when Xx to a from to be your when the that return a think on about levered MSR and or going give

Bose George

just sheet less have just Okay just mortgage the and companies that one, one X, have – makes balance set think valuation differential, typical the guys potential separate last that value to like to other on banks and over structures you the the PennyMac the sense. Thanks. mortgage sort that where value market over structure way extent you time? and a its of you one you are than the to give going doesn’t that time, And a bank back a of of Slide REITs just debt could realize you

Michael Nierenberg

in and – our said what evaluate my equity to opening we price is in way I what Yes, think I a create our remarks, to continue value. drive for I closed higher shareholders

I table. the So, would is everything say on

Bose George

Okay, great.

Michael Nierenberg

you. Thank

Operator

The ahead. Wedbush Securities. next Coffey from go of Henry question comes Please

Henry Coffey

thanks and for my morning call. good taking Yes,

this, a this business of knows on least call pick very well. the institutional the helpful of probably at we understand lot and but the your mortgage into as really Now, investors business everybody is all kind the investors information

the view like from would model, would If the would you that be company MSRs, of looking equation? how the the what that you held be PennyMac suggested yet? split your the mortgage investment or – would the portfolio company that the about in How the haven’t role in at refi it that play Bose out thought really

Michael Nierenberg

No.

– $XX started quite work we about the it business, continue up great a billion loans. we on So take have we we the market, do bonds give of $XXX a to do MSR MSRs investment billion currently have of have today. and and for have We $XXX have non-agency to portfolio Listen, we or billion that some sits at all time. our bit calls

left your operating investment business you portfolio. road, about your big say split the and the – the if the and on from about is OpCo down about how companies, would the we what’s two get, business the of does what As how balance standpoint think think sheet big is go I operating think a things one of

The important on So, a the very go investment very, I MSR we significant there are because think playing around with future is holdings. our we as portfolio be investment those do to numbers. will side, forward, portfolio part

a the we are our level. to in it we X, going how this unlock higher peers way price show there how we out equity as where a could used Page value on why unlock hopefully to some that’s our value an illustration to and book unlock is to maybe there Xx, are seeing idea value, Xx at public of you So, is that book drive

us. good continue and is we to where price night work get remains implied rises and the think we we and be huge we book that on get it result hopefully for our win that to would a the to So this share closer value what day

Henry Coffey

smart note holding a you cash have. mean, over is too is kind technical find This report that? I thing On stupid is to get are am right obviously your does you Page investment for term is a that? question. of I where XX, it to opportunities the now, hard looking where excited to of because through it, on just the did the where numbers, write-off discount, you add-back trying just I am the I can’t

Michael Nierenberg

through discount. a come There would charge are on there is related million That gain, approximately of write-off of loss investments. $XX settlement in on these the to

Henry Coffey

Thank much. you. Thank very you

Michael Nierenberg

Bose. Thanks,

Operator

Securities. of The next question Please JMP comes Cranston ahead. go Trevor from

Trevor Cranston

comment ability you do your in are much maybe about your that early how Alright, you buyouts thanks. of attractive terms was the Most curious, now opportunistic some that how earlier loans you the Ginnie been Can on some have eligible place answered. of opportunity capital? I that But a of my questions space. have you mentioned of, utilize in remarks and doing to right in see for buyout as scale to

Michael Nierenberg

MSR The Ginnie So we or business. one good is the on servicer other we are side not opportunity we is Mae think in would it’s I the the largest the a one. thing don’t caution

I there. So FHA, ton, don’t but not cede we Ginnie it we are have largest have would a Mae we exposure or the to

we delinquent, lowest and what is mortgage. see mod of as you to opportunity around are it’s forward, Ginnie because because buying think delinquency are cost opportunity it, a a So, the will able we our me the larger out, happens we as we about them as perform it that not grows, the funds see homeowners the on you we are obviously and will it the see see side get with trends as plays giving want that, an but for for go be all portfolio if we how you time. everybody out And, today, to borrower clearly, MSR we routing opportunity an routing potentially could

be to Genie short the it player remains not answer it the are So, an think but opportunity is largest we though. I is there us for seen,

Trevor Cranston

that got trend in has margin, to in expect it term. has I elevated the what some it. we on into obviously, there you how have know in then gain into sale terms of near said, Okay, Can during further compression third to compress fourth remain XQ, XQ? to continued continued was And the comment versus quarter. But, sort of the number you you somewhat saw that quarter on

Michael Nierenberg

changes just, either but will would have just we quarter, margins, the due the into margins of So be meaningful well. interest demand demand, there origination, to you as see fourth corresponding see agency the don’t fourth consumer for to amount going would unless the would And is capacity, the upon say expectation that change quarter. rates. the margins which level remain that steady which or the cash continue the be obviously remaining And windows. embedded But be the three aggregate of the the in up. think depend channel, I channels that And channel upon as then floor based competition margins we elevated on continues to build of you through to have I going of are materially, seen

Trevor Cranston

was refi last all versus percentage Okay, of volume can got And total in your Thanks. can across you XQ channels? it. the origination what purchased then say, you one,

Michael Nierenberg

are Across all in third about the the channels, we quarter.

XX% purchase. We XX% about and refi and are XX%

Trevor Cranston

great. Okay,

Michael Nierenberg

Trevor. Thanks,

Trevor Cranston

Thank you.

Operator

Securities. comes Riley ahead. question next Smith of Mike Please from B. go The

Mike Smith

Hey, Mike.

month October? on Just value Could question the to just book for commentary performance any a quarter date of give on you – during book and me. quick provide performance

Michael Nierenberg

I at this Mike. would point. essentially give-or-take we It’s are early, unchanged say

I net between, $XX, that so number guess reported something So and our $XX.XX in range. probably of

Mike Smith

taking for me. question. all Thanks That’s for the

Michael Nierenberg

you. Thank

Operator

Bologna ahead. Compass of Point. go Giuliano from is question next The Please

Giuliano Bologna

amortization about assumptions morning. of in I there was different obviously in $X.X am volumes speeds I guess around last fourth third Good to quarter. the is of looks you But the DTC prepayment trends are give really trying fourth what sure like discussion monthly in were billion I what what environment that some third Obviously, because there $X to next the have I side? the that, moment? the flowing figure of you expense you runway about billion. getting significant the of beyond going part kind the back of was on increase out last to quarter to kind you And about trying target And kind the quarter. given But in that’s quarter. some and to there, was the stabilizing DTC terms quarter then is that. huge into really, guess quarter, some growth discussion question volumes factor DTC obviously going a what portfolio, the at of through potential because

Nick Santoro

locks, that is sector So, people is had across ourselves issue just just we realized into able the on be for $X.X have you to look people fourth market the on the of either million to third quarter. we just we And able a entire to we we that bring system to to going to fund enough about having catch industry talked view we in we how we that place. be better hiring much that a what to technological point that we able capacity, in the month, we bit able enough people a to capacity Slide loans And I entire about should the put were where time. of to to close the talk loans In XXX loans. enough, XX, be that in to have the dynamic And particular month believe moves the biggest as capacity if from in little really a fast able before, which should not up are well quarter as have to at took get system. north and put just as to a the is we order made perspective meet through through at be this

MSR can the changes that recapture amount talks have on to on is that we the where versus we driven basis a mean is ‘XX. that going current business go does improve of and about by think to lot believe recapture, the XX% size of the of our that get market there can to size rates the just going take activity refinance continue we into thoughts headroom origination a forward our a lot up, portfolio be of our of size and the ourselves the opportunities, given we to XXXX given in MSR Michael advantage is incremental recapture, Given come portfolio of go to XX% a going into do

Michael Nierenberg

for of long And equity the build been marketing continues the resources company can do the that And technology want we we that growth to to we with we again, continue branding really, head that’s in tremendous think grow, frankly, where think has when we the is the this as run. much investments and is possibly and and is making amount handle you as we I as kind are can quite of about know have we what something that want this channel amount company it’s that and this. that of in we to the that will

Giuliano Bologna

servicing it and many kind there I times second think in the of I if was about I is What curious in what that like, businesses and I think makes where the That that keep of getting between lot I spending originations to was different be, goes a first you is amortization of that interesting. would is any and those you was was actual you the the unlocking businesses originations different along value as fall? kind kind of the get the early of And with kind pieces of that value and what but am question thinking about with have the DGC few of think the up curious sense operating fourth you assets that questions, question, if referring call, part really the width the of have, you and shaping And the sense would keep you and two the sense. consider how forward this that the then the transition that up of a get in the or am back about answering the would part would shares, the platform to from of where to interplay consider in type let’s of ways quarter? of also business you trying would can’t amortization. is addressed keep on the would you then in MSRs a sense originations brought how say

Michael Nierenberg

We on that either between portfolio the versus pointed on to – working business a both the how different have we our are operating the we price. I out is continue and get investment about I for think think iterations the which will we of shareholders, right I think all and stock or Kevin higher results somebody, interplay until kinds to

Giuliano Bologna

That thanks makes answering my will back queue. into Well, a for lot of questions and jump sense. I

Michael Nierenberg

you. Thank

Operator

is Jason question from Stewart next JonesTrading. The with go Please ahead.

Jason Stewart

X-month took morning. large a of April, are good that and mark. Hey, Thanks. forbearance in May lot we Obviously, – a back we the population hitting had customers

ended have some that Can You mit, you in contact, are mean for given those then give more some two is active us us more Does disclosure population looking just of mean you XX% does forbearance. current? And buckets? roughly that loss around that? some around Thanks. that context good color

Michael Nierenberg

Sure. to you Jack, that? want do take

Jack Navarro

morning, one that. I Michael refer that’s the requests XX,XXX stated. on most I chart in chart XXX,XXX only think fact dramatic. quarter, the to everybody. quarter would is that versus would the pretty statistic just take the Michael. XX to Sure, And you Good in I – Happy third like interesting repeat already second Page forbearance to new that and the

requested have people forbearances. addition a those So, have seen that, in to into between transition active forbearance who we

no of that’s see, they longer just are number than have those the the have forbearances, the of people delinquent the transitioned transitioned in the who have Of now XX,XXXish good act they protection. paying set forbearances. because current and into it’s So, customers from original you portion resolution of that higher a second said bars, percentage forbearance about that number of need and a those were

fact just reinstate of and either to active discussions a And today. some modify people about terms are delinquent. with mitigation, that are or in percentage active we those in And so of those high discussions loss of them then so are XX% in that in defer active cases or those in forbearances means

Jason Stewart

color. the Appreciate thanks Okay, for it.

Jack Navarro

Yes.

Michael Nierenberg

Thanks.

Operator

The next Barker question is go Kevin from Please a follow-up of ahead. Piper Sandler.

Kevin Barker

follow-up correspondent still elevated third quarter come your steady fourth levels Thanks. levels? saw and to margins I from pre-COVID pre-COVID margins, the you margins the have compared hence the elevated they that to quarter about just or the where correspondent down wanted in in comments are about on to comments

Michael Nierenberg

upon definitely buying that are then locks or are even the also are whether not elevated you pre-COVID They so you are in whether few and what correspondent correspondent, locks. purchase efforts would Mae’s Right. versus really or mix Ginnie or is, say ways non-delegated mandatory are a you depending whether I levels. to different buying buying best there agencies

that seeing versus So a that elevated impacts basis margins margins. pre-COVID basis we what XX all-in around correspondent on across the are are on margins board pre-tax are points and still correspondent we

Kevin Barker

some are you that have strong still competition as said certain others not as their is to… just can there saying So are channels or continue

Michael Nierenberg

continue – example are I are cash on window Ginnie margins. certain Mae. There is no elevate for certain can think there channels to correspondent there that within

– continue really It the So your within continuing – an that with can able mix buy channel. having to Ginnie that that or are you extent in Mae interest help within to to margins. on the product out you are channel the that mix depends

Kevin Barker

Okay. Thank you very much.

Operator

Nierenberg question-and-answer Michael back the our over would session. remarks. concludes I for any This closing to to turn conference like

Michael Nierenberg

great week. this Thank thanks and a and updating to great support. We call your the you. QX. the and in for Well, you day Have morning look throughout forward quarter a

Operator

The Thank presentation. attending conference has concluded. today’s you for now

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