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Home Point Capital (HMPT)

Participants
Willie Newman President and Chief Executive Officer
Mark Elbaum Chief Financial Officer
Ginger Wilcox Head of Investor Relations
John Kilichowski Credit Suisse
Steve Delaney JMP Securities
Kevin Barker Piper Sandler
Blake Netter Morgan Stanley
Mihir Bhatia Bank of America
Call transcript
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Operator

Greetings, and welcome to Home Point Capital's First Quarter 2022 Financial Results Call. [Operator instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ginger Wilcox.

Ginger Wilcox

Thank you, operator. quarter call. first our to XXXX earnings Welcome

Joining Chief Chief Executive morning are Financial President and Willie Newman, Officer; me this Officer. and Mark Elbaum,

a available During presentation investor of relations prepared remarks, will Point referring our we the Home which the in to is website. events section be slide

the company's call filings, non-GAAP discussing business. Home Chief guarantee measures for turn are report to we or future on non-GAAP the call March annual may Before this release, the performance. I'd on including Point's reconciled now statements which and forward-looking Please certain measures to on materially in actual We to website. Officer. like These these include begin, Newman, to available is to believes from earnings nearest most the factors Home be results events Point's assessing company's SEC President recent and which the Executive performance I'd Willie you GAAP financial refer which figures the XX-K, statements. filed Form which remind may do of cause call, on differ management this which not are to over was relevant XXXX, like XX,

Willie Newman

everyone. morning, good and Ginger, Thanks,

our channel source Well, to time, invest share market I we which the our why Home believe During we wholesale decision brokers and we also many support the I'm XXXX, we win optimized now the success of less had a that, way the through our that a efficient wholesale will when years. sustainable the discuss made by to XXXX's. the our be We navigate the most discuss post-crisis data deployed of and the channel. in Select are version more was this. that to loans will Point this at as partners, how challenging in XXXX in-depth to benefit remarks, An analysis wholesale for HMDA heights average brokers prepared wholesale mortgage could resulted XXXX participants broker ahead going have provided evolved early positioning increasing X,XXX through prove originated future to strategy, broker most other primary reached the data was industry cycle. and consumers through how market for the commitment channel strategic originations. for our in shows to in obtain to It channel In materially loan. a of an over than lifetime in mortgage consumer evident to

Point, on lenders time, intend I'll several at experience. wholesale support of experiencing the same more where the moderate and effective focused are offerings into communities. strongly income the every consumers, In severe continuing which is matter, and At wholesale lending. leading an we greatest wholesale being a the efficient we this to in discuss Home that participants. and opportunity dollar upside will Loan minority provide every addition, officers, brokers all reaching at are efficiency low industry believe substantially invest shortly. dislocation. in customer in environment At In position every to edge loan, we that of savings

all pressure the experienced $X X.X of as coupled trillion, last to origination channel wholesale record specific Over to the the market. up on built forecasts with are The dislocations the rates, low year. dramatic have competitive interest industry been inventories Because purchase in increase further with two landscape. lowered capacity handle origination last putting originations the production trillion, years has refinances the exceeding disappearing to from but

in are the corresponded enhances to we We quarter. divesting those of to provides planned opportunity business. in announced large The an sale wholesale actions allows additional reallocation the select others. this and have quarter. expect reduce sale second this Longbridge, sale The expense sale our having as through This in footprint, industry our resources as our operations division, of of us this and navigate in non-core actions both a an the in including completed recently investment liquidity transaction to have and process sale MSRs, sale we our for our quarter well also our on been wide of of to assets. taking months first in we leverage positions. leverage The second for advance corporate and dislocation focus taken, of close Recent on

our operational consolidations. and platform Next,

We for of the consolidation ServiceMac. servicing are on task on and time our platform into

cost. a variable fixed a cost As into convert discussed this lower previously, will

we direct business. addition, within our a our wholesale recently segment of of unit originations In redeployed line

us team portfolio, we market coupled direct to allows. the retain size this footprint. servicing that well opportunities reduced times high our also of we our executed reduced with demonstrates as are during reduce of operational extremely as to commitment dictated the partners ability help our While dramatically in This customers fully that their the invested broker a refinance, now

launched in investing progress the appraisals. initiatives making partner partner our that broker it for and easier we for made quarter In experience. to of platform several new the partners, our our streamlines order Finally, enhance them a We process first XXXX, manage in will that experience. appraisal

and underwriters. These process We partners. our efficient create will turn more office launched enhancements for for significant to enhancements also technology back faster times a underwriting our

jumbo our adding We addition also The and mortgages, product with solutions for market locks. partners. expanded addressable broker mortgages, rate our TBD programs adjustable offerings, these of our expands

for program, of In the against to we designed in consumers. broker market this small help summary, to in through by result wholesale function is offer Home provide brokers our of Compete resource that is deals focus financing launched a win home share independent these issue enhancements, home innovative the Build, partner With partnership for that the Home with both program Cash broker New shop their win we impacting by solutions Compete, all-cash enhance we the we're through a better our the like homebuyers. the available elevating is competition, built. addition cash address To to to Point To are launched wholesale. demonstrates should are agents mortgage data with supply, issues lenders our we offers. to and we construction and powered program Level Capital. for our will as offer Home brokers as This bringing Ultimately, homebuyers partners one-stop mortgage helping go-to a Point, in to with by partners more the and continue potential attack Home Point program Level In loan offering connect this traditional Capital, estate end are have most medium-sized we that builders. issue real we to housing presence address their a scaled a believe first and channel increasing Cash fair Point Accept. channel. originators, brokers, growth cash enabled program investment The the after

growth. like we to everyone industry, in At a positioned challenged that the the are drive same significantly by are environment. changed time, We

Fortunately, been have we since taking actions through navigate mid-XXXX. to

are over With Mark. staying to seeing upside and take that, on as now to current focused future call capacity, a operate to the is and reduce the While cycle. push to in we turn what revenue required which industry based actions for opportunity the get environment, are continue this through I'd we costs, greatest is like to liquidity, others on we conditions to more normalized back

Mark Elbaum

broker and margin I'm included XX and first funded the in We've quarterly period-over-period good basis morning, the in handful fourth happy we quarter X,XXX. by partners XXX volume first quarter standard from generated on origination results in markets and sale the results. number to versus XXXX, in XX% was other following represented in a financial Point our to on and In prior earnings Home active the the partner metrics. focus of reporting XXXX, XXXX. financial from presentation will Willie, going the activation the before points X,XXX over of of our my of broker points X.X% active remarks. of you effect quarter XX quarter an the We'll new of of quarter our begin to broker quarter, partners release, the the prepared answer regarding XXX channels any Thanks, basis base a XX.X of first XXXX, we of the year. partners, this had growing alone. we locking to key partner wholesale questions giving first be on and activity of up Starting everyone. of discussion In the XXXX, quarter fourth quarter impact had attributable the to as first increase basis XXXX. Gain points capital billion have

we've expenses fourth improved the quarter up to measures on by Total and of XXX quarter million to quarter XX% primarily XXXX. of business As in segment. a and mentioned, XXXX, reduction the were quarter-over-quarter of Willie cut be lower our first XX% the aggressive XX% costs. This on the first continued were to expenses XXXX compare in origination was driven of versus shore

to quarter, announced servicing of number the to quarter quarter the price declined and assets, purchase at compared million. X.X% sale completed of The the portfolio the Home approximately rights Servicing over of of was year, principal mortgage MSR the portfolio During servicing XXXX, of sale the of end first was approximately Point balance XXXX rights. UPB the total the declining the total in of unpaid billion, sales first quarter of XXX $XX.X XXXX, fourth to for customers XX.X% aggregate billion due and XX% XXXX. the quarter compared the of to of $XXX the previously was MSR assets. servicing year Due fourth down

million to May for Capital's per quarter a our and shareholders As record billion XXXX. was directors of as assets we declared of of Home the our $X.X share has March million. while of had $X.XX XXXX, total of board first $XXX available XXXX, dividend to of XX, cash of total equity XX, payable liquidity, Point $XXX

outstanding of a December previously $X Point repurchase to where on company of its and repurchase authorized program we XXXX. a the of and stock total may of directors up program As repurchase Capital's common Home million stock, XX expires issued discussed, the board

first XXX,XXX over $X.X shares million for under During quarter, repurchased the program. we repurchase the

our I to discuss briefly finished my I remarks, Before prepared like outlook. financial would

at of XXXX, faced As second the volatility industry pressure first we the the and in quarter market has look the quarter persisted. competitive

difficult our combination our to For to strong on be to further and proactive position, prepared Because that our business what it We reduce to continue quarter level consistent expect well-positioned predict will and discussed, for costs. of capacity of when the optimize that are our quarter. it. believe navigate liquidity we Willie the That concludes the and the this we will morning. sale we remarks first is the and strength partner network, margins volume XXXX, be gain in capital saw excess measures we removed, second relatively our with of

Operator? questions. your turn are now to to the the operator take ready back We call to

Operator

Thank time, this you. our Instructions]. session. be conducting we [Operator At will question-and-answer

comes your first from Douglas Suisse. The Harter proceed Credit Please question from with Doug. question

John Kilichowski

for Hi. This John Kilichowski is Doug. on

the thoughts the buybacks and a back questions. to I of could of the dividend then get And Just talk few forward. sort lastly, around your debt health going of the of MSR maybe versus would pacing about also like continuation of sales. if we buying then between decision stock sort

Willie Newman

Mark, do you want to with that? start

Mark Elbaum

on The declared quarter, for a coming the dividend that. that's board and are has where we

of versus repurchase, authorized stock to stock In been the up terms buyback $X buyback, debt million. we've

So modest number. pretty it's a

so as overall we'll in position. and liquidity a the our of And where is, look debt be we that that's evaluating context buyback

market position we'll and On in at to portfolio strategically the we opportunity MSRs, and the the liquidity the appropriate. look our question MSR and market think be is in of our as continue

we the So last said strategies those quarter. really, what different have none than are of in

John Kilichowski

Got it. you. Thank

Operator

you do further any have John, questions?

John Kilichowski

I do not.

Operator

Thank Okay. you.

comes next JMP Steve from the Delaney proceed question with Please, Your from Steve. Securities. question

Steve Delaney

Good morning, everyone. tough Look, markets.

to a of have posting we regardless profit So these on do how days. congrats it

in forward, you. balance onetime Thank I'm Was there almost at quarter, Willie, quarter So, it Mark very XX XX there? million quarter. maybe that you up item sure the the year? the doing expenses expenses, see went of the in about seemed where down fourth quarterly by versus corporate the and line over are looking looking do $X which items closely, you any And settling to

Willie Newman

Sure, Steve. morning, Yes.

I'll So start.

difference primary accruing that So bonus. is we the for started

future was standpoint organizational some about an Mark out felt from incentive of talk trends. let important have that bit level a compensation there. we I'll So to little

Mark Elbaum

Yes. Sure.

be with we've So, base, our of corporate ServiceMac, viewed the difference the what of to well, Steve, context there's said. in outsourcing opportunity primary at to of because and there's look the will the amount you and our course, and a doing in less I said look of certain with market correspondent be the that, be having do. is we things not to sale on corporate entirety that. opportunities of have operation with There's focus Willie is of corporate flexibility, going that's differently. servicing expense partnership it the got to would with any going But as at to

on So I expense well. would expect the line downward trends as corporate

Steve Delaney

segment volume that Mark, And at the a was expect origination percentage of that expenses XX.X but of from to points? basis expenses have down we Do of you on terms XX billion. run to your direct origination range origination a a down, mind, just volume sort segment obviously, could of in billion in

Mark Elbaum

than We points at were basis this like it Yes. to that. about lower XX I'd quarter. see

with you the to it that was, we it is that happen challenge, what capacity drops. Steve, XX-basis-point of system, level. course, the with out as volume at Of dropping doesn't The volume were instantaneously try get

on loans and you the compromise close to the board want never on partner personnel the need experience. to existing customer You and

will coming they lag. with to expenses lower market But expense always see where our it, having we're we and concert said right now want that, than where the out we the on get So in focused are opportunity.

Steve Delaney

Great. upcoming active you disclosure for about and basis. we new the on quarterly the brokers a Thanks. Thank appreciate both comments,

Operator

Kevin comes with next Sandler. Barker question, The question you. Please from Kevin. Piper proceed Thank your from

Kevin Barker

want of incremental in the the move should year? our could correspondent what just third outsourcing we rate of we expense servicing. we channel, as there the the expenses follow -- But I operating second how expenses and run quarter decline into consider given the the Is exit this on in expense. just side. some maybe corporate you. up to Thank see Obviously, other decline

Willie Newman

Do you start want that, with Mark? to

Mark Elbaum

Sure. Glad to.

start with let's expenses. So servicing the

the overall. to be size lower said the expect past, I've variable more the portfolio in servicing I As well the expenses with of as as

as level would thought servicing quarter, even was of down that the declines. proxy the to I quarter come number expect portfolio So a the I expenses fourth reasonable first

we happened did a very pretty the notice the of at that quarter. sale, You'll that substantial end

but it So was our in was was quarter, our fourth lower. average UPB the pretty to flat where ending

size So you just I a similar the going and the going mirror can portfolio of to expect forward see think with decrease forward. that

Again, On going and lag dollar see there to the the of because volume than out side, that as segment to but was than origination it time dollar again, be takes you point, lower close sort moving an my of the to we're won't to as quarter, were have a we with for like getting see expense thing origination move out, goal the those it where though, earlier to we it will drops the XX on we'd expenses this be drop, pipeline, it expenses of to tends out be that. as well. lower which basis points,

Kevin Barker

or or MSRs, your Is in in your on And place do discussed a there you're to around attempting continue capital put or dividend the stock counterintuitive regards to initiatives to continuing call? the delever, increasing you've route. cash why go and down that any increase raising given Okay. beyond potentially flow already discussions cash, this increase if to selling then to cash you're buybacks pay little seems

Willie Newman

Thanks, Yes. Kevin.

discussed reduction impact this time, we've doing discussion continue liquidity available back stock of balance on to at have you dividend, can we out, sufficient basis, the to the in this the continue about like and we it to buy debt. access debt some been at same sufficient of or of what to the in So liquidity. pay look the point, able and, be how a in our sources ratio obviously increase to buying and at feel liquidity, back we the constant regular see

the from But going various So a between to to things. we're expect all be you it's above see I think us. going can of those balance -- to balancing

Kevin Barker

think was them you're corporate of I when you goals dropped bit you And ratio I the Do state and recently Okay. out? XX%. I TCE less to you lay the little believe X.X% today? a to debt-to-equity market ratio and then nearly incrementally your have this believe trying believe you reach can that get specific And discussed there. given you'll leverage

Willie Newman

start that, You Mark? with want to

Mark Elbaum

Sure.

X.X X.X the to went this one times So debt common We quarter. goal times. is our from stated times on tangible to

So important we're which to you thing the given is times. the very goal said made. pleased that, to environment. we've there, market is The one most Having said progress with get the

over get and one be how long-term evolves goal but we'll to that goal MSR, times, the on direction. more our focused to variable still that time, is that moving one The is is be to sell get going So the equation, times. our in market, we'll to toward to the opportunity to E see to opportunity create

Kevin Barker

it. Got

portion from are to or gain really below flow other see your mean, initiatives the But on from I slightly initiatives that good there able drive any in of can pricing competitors. then a And perspective? tweak what running margins be that cash or observe is we to competitive pricing from market? sale is you very the channel there in to given a place any wholesale market Do what Okay. increase maybe higher can you opportunity the

Willie Newman

Yes.

quarter, the that think MSRs differentiated I and hedge do not So first in between hedge it that those was MSRs. those Kevin, obviously

So of to between -- your being extends also and closed in to that not pipeline portfolio MSR and but originations and process itself, sold. being kind loans the only

is time, that margins hedging who hard in risk, it's quarter. notably competitive XX are now in relative I dramatic times our not have MSRs which the know, have about are which us observed a now first So we the periodically our in ex others opportunity and to of strategy the first recorded a neighborhood sorry, as gives hedging a strategy, the in tell that others think I'm of days, very is deliberate cycle movement the But marketplace. the we are the reduces think some most as you talked upside say to were quarter. but -- we of do our in said, are same I'd times initiatives, hedging That remarks, what at number turn MSR

experience drive focused I'd So try to the in the that to and are we're two partner on very order things margin. say up that

Kevin Barker

Mark. Willie. you, Thank Thank Okay. you,

Operator

Instructions]. your next The with James [Operator question from Please from Faucette proceed question, James. comes Stanley. Morgan

Blake Netter

This migration how by on was mentioned for going developments wondering was And active Earlier, terms things the here? partners retail the some you channel? the of number James. to loan positive broker Netter of Blake the broker you growth do on that where see I your of from platform. of is much in line driven officers

Willie Newman

Yes. The of from existing growth the the It's retail a in that broker officers have the partners good question. of are was migration been segment loan from officers channel. loan into majority and seeing increasing an wholesale vast channel and quarter-over-quarter said, channel. we That broker the

activation We are associated refining and see to from an publish of in standpoint, discrete initial the hope a that, analysis at with minimum we're and that. we our starting numbers. anecdotally more process But more of to certainly

will that, do us remarks. an the provide especially that brokers So benefit upside our we to we believe that additional consumers as for in stated clearer, it be that becomes opportunity

Blake Netter

your That's mentioned, And times as days are earlier, Got helpful. cycle it. or around so. you down to XX

of shared recent and to Just trending originate how costs in that's curious, quarters? anything terms to your share how in are

Willie Newman

to Mark. Sure. give I'll that

Mark Elbaum

Sure.

said you The quarter. which And to a does more course. does origination enable cycle reduction nothing I create costs than by So that, more what XX% the previously volume we dropped efficiency. lower reduction customer did does see cost. is and this improve of it experience, times It of more than that in

at and workforce to the points our optimized. So that's we to sure continue to have our are we make why need and look productivity leverage improvements that higher, basis

our But to cycle the some what in I around momentum more said expenses closely point as is terms volumes component productivity. So see that of further certainly to like. key overall times the made downward look I a of Willie mirror expect earlier,

Blake Netter

That's helpful. And more it. then one Got question.

purchase As whether places? thinking in new talk the about other you're about into, become the non-agency any heavy, in that that's other market space more or leaning you to verticals turns potential can

Willie Newman

Sure.

announce did we're little a two really think programs it -- we So bit we differently. that at the looking

to is kind non-agency next a our be of doesn't think the challenges place. we kind directly product appropriate the the of seem attacking But facing. lender what an more set versus of in broker have for make partners sense non-QM that are or We to us lot

of that. So Home is builders one Capital partnership with for another Cash of that. we example Point Level The Compete is example have

facing trying those really ways So out and two we're get true edge the that driving are on -- of activity addressing issues broker our which in leading really are the there. to partners

Blake Netter

for Great. my Thanks taking Okay. questions.

Operator

question America. your The Bank comes Bhatia with Mihir. of Mihir Thank question, you. Please next from proceed from

Mihir Bhatia

Good some your of of questions. for wanted my about Kevin and just go talking Thank questions I you to to morning. terms the liquidity equity. managing Hi. in back I taking your think to was debt

morning. taking? back double other wondering, I Your debt think, of of versus some actions buying just was to any is yielding, I maybe you've as digits have debt consideration this been the you

Willie Newman

Yes, Willie. it's

are So considering buying currently we back well. debt as

So with now. on mentioned, that all table is Kevin's as to the I us, question, of

are So all those in now. us whether buyback, things it's for we of our debt equity scope buyback, and dividend feel

Mihir Bhatia

Okay.

to is good that a consideration. It's So know.

a the terms MSR weeds in on saw there I your bit? question, since other I terms just mark since the But a little books of issue? little gone -- maybe the can And in there this only marked MSR you in sales just about here. up loss mean a was I XX quarter. maybe the think December. Was that million of last In talk you sale, -- have one rates

exactly understand there. trying on I'm what's going So to just

Willie Newman

Do take you Mark? want to that,

Mark Elbaum

liquidity And are of I'm rates and book, the it our and we monetized up, took where up But sold that instead we prices the they what is MSR seen to your of marking point, with we sure opportunity. it are, Sure. with sale values are we not where that a have loss. advantage being higher. would good did saw

that our but as book. So because, number people, substantial high we two, maybe of strategy; and not that the were that's fact one, as amount sold other our marks largely, hedge number a

a loss on the there. wasn't It that's we So what saw sale.

have up that, the our we it after we fact, sale, If gotten wasn't that sold our mark. time of ran In frankly, the wouldn't strategy. but parts the at

the to and now Our capitalize where values asset. strategy are was on monetize that

Mihir Bhatia

it Okay. was at looking offline. I But about just can on it. that That's summary the why I segment could was two about we the talk at we looking results. talk I footnote offline. guess

had, going -- terms in the QX, cost once structure, of is thinking out -- in The subservicing back you've is maybe about just anything us can to I sold there other What anything like of question you've right, does with you overall the help the us with cost like a place QX? help that? the QX, segment. look structure sold can little correspondent bit But like I with when moves to we around get you it on understand volume.

Mark Elbaum

Sure.

as downward be segment momentum operation smaller there'll streamlining about. we a servicing as we overhead toward servicing both segment more the on variable that and the corporate again, a on simplify And because move structure of book. the So the talked we've

should of In terms guidance general be that but those, of kind to give prepared specific that's helpful. numbers, some hopefully I'm not

sure, I XX previously to to points. we'd the segment, we quarter like than number we third not, there can originations around by are not the I'm Whether that On basis a at striving said XX%. have but have lower or get

whatever if Or we production go to expense volume, levels it down be will similar. volume the expect similar So accordingly. are, have your

Willie Newman

to last if opportunity year, believe at the is. very the Hopefully, we're what and scoping from Yes. us mentioned what what look operation my that prepared seen we that scaling you remarks happened I proactive in is set you've in

shock you've general a look where last say, we're demand have had at a of We've I even the And year. responded incrementally. significant there it and ahead aggressively out that market more more so would starting shock, most companies what demand responded we

our calibrate believe we indicated, the some have to that Mark will And of expense as the to and expect because And kind set where next of place expense natural our our we that divested this over businesses, will that, opportunity is. several take you component a can months. both so operational corporate of we

Mihir Bhatia

you for taking Thank my Understood. questions.

Operator

your proceed Piper follow-up from Sandler. The with from is Thank question Kevin you. Please Barker question, next Kevin. question a

Kevin Barker

Thank wanted up you. just side on business. the I to the of cash follow

to cash with decline. sales to to today a MSRs, income When continue released you on slight investment close through option this You've is doing outlay do obviously quite a raised to generate And see of order cash you as better that potentially sales. do you of of lot then in rest Or MSR see the look year, a your maybe to bit origination the would require originations a MSR continue cash? increase in and cash? servicing breakeven,

Willie Newman

Yes.

So I can expect in to Kevin, you MSRs. of is to as be MSRs, do think to be to, want indicated, sell Mark don't market foreseller a us we what the

liquidity So leverage, will we of sales we have for the as both opportunity and the to dictates our market ample as MSR have access through a we in and move and and the leverage out as need dictates liquidity.

all of again, So I be in the above. think, you can expect active us to

Kevin Barker

partners a little believe, quarters seen coming rates estimates seeing into where you some better you mix. volume the the to then have purchase at mix bit funded And Or guided you of relative the over Are volume? quarter. or purchase significant that's was origination industry in least more it refi refi flat for last leans with your And I higher? refi Okay. two more broker second on your traction purchase like trends with place moving generating to,

Willie Newman

We're far kind this certainly trend at example, but a of as forward as the in as as rate forward I definitely it. we're with flows. purchase, market more as increased like what for is everyone's seeing look, the the we're line toward point much as far locks, far new seeing it mean

Kevin Barker

for you my Thank taking Okay. questions.

Operator

Please I and like turn closing for proceed, would to you. the gentlemen, Ladies session. of back we to remarks. Thank question-and-answer have reached the the call Ginger Wilcox ma'am. end And

Ginger Wilcox

for with Operator? speaking you us quarterly questions, to quarter. Thanks, earnings our feel me operator, to if and again look you joining we next for forward have call. and this contact thanks any Please everyone, free morning

Operator

today’s conference. concludes This you. Thank

You disconnect for time. your may thank your at And you this lines very much participation.