Q1 2020 Earnings Call

[music].

Good day and welcome to the religious Central first quarter 2020 earnings call.

All participants will be able to show me.

[laughter], especially from person to start.

Yeah.

After todays presentation.

Last question.

Well ask a question about press Star then one on it.

Oh.

I would try to question. Please press Star then tests. Please note. This event is being recorded.

Now I'd like turn the conference Albert substantial Morris with Investor Relations. Please go ahead.

Yeah.

Thank you Rocco and good morning, everyone I'd like to welcome you today to new residential its first quarter 2020, I call and thank you for joining us.

Joining me here today, or Michael Nierenberg, our chairman CEO and President Nixon Toro, our Chief Financial Officer, and Jack Newbuild, President and CEO and the servicing division and you've got your rats.

The call. This morning, we are going to reference the earnings supplement that was posted to the new residential website. This morning, if you've not already done so I'd encourage you to download the presentation now.

I turn the call over to Michael I'd like to point out that certain statements today, well before looking trait.

These statements by their nature are uncertain and they differ materially from actual there's ups I encourage you to review the just <unk>.

Our press release earnings supplement regarding forward looking statements and review the risk factors contained in our annual and quarterly reports filed with the FCC <unk>.

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

Thanks, Kate Thanks, Thanks, everyone for joining us this morning.

You know our earnings today are truly a tale of two quarters. As we entered March were on target for a great quarter core earnings were slated to be 65 cents.

Book value was modestly lower despite the fall we saw in rates in overall liquidity for the company was saying yeah very good shape, then Kate coping 19, the past 16 weeks had been some of the topics markets or many of us have seen in our careers. I mean, it's been you know very challenging as everybody knows.

Our own portfolio, you know just to give you a little bit ever refresher. We were always long M.S. ours are we owned MSR as we had non agency bonds and loans against that as a hedge as well, it's amazing to see securities or what happened was correlated hedging strategies you don't after.

The world shut down broke down on everything we saw all asset classes fall in price and what happened is created liquidity issues not only for mortgage rates quite frankly, but even long only investors as falling prices caused redemptions, which put extreme pressure on a on the system.

So what did we do we went out and said Okay. We got to take action. We sold 27.9 billion of assets, we raise liquidity, we paid down debt and we extended our lending facilities, while we're reducing our overall short term repo agreements overall leverage got reduce total to 1.5 to 1.7 times, we reduced our bompas there.

Decisions by 85%, we reduced our loan positions by 45%.

And today are blowing in bond positions are at the lowest levels. We've had a years from a balance sheet perspective, we reduced our overall balance sheet by over 60% since the end of 2019.

We increased liquidity today, our cash position a significantly higher while our balance sheet as a fraction of what it was our cash position as a poor 30 was $517 billion with unencumbered assets, just under $400 million, our mortgage company, which continue to Eric which continued and still continues to support homeowners sort of Stifel.

Oh period work with borrowers had forbearance programs and agreements to help alleviate the hardship caused by cold at 19, we're really proud of their hard work that the company has done in light of these difficult circumstances in our origination business as prices fell on non QM and prime jumbo loans, we stopped originating all non agency products.

Our focus today and going forward in the near term will be on Fannie Mae Freddie Mac and Ginnie Mae loans, we will continue to provide a credit to homeowners and focused on supporting our customers, while folk while increasing our bar or retention efforts.

On the ancillary business side Koby S Avenue 365 E Street, and Guardian continue to support our origination and servicing business, we expect to see a growth in those divisions as weak as we enter into a more normalized state as we go forward our advanced business.

We've increased our advanced capacity and commitment by $1.8 billion raising our total financing lies the $5.25 billion, which we believe gives us plenty capacity to fund advances as we go forward keep in mind in 2015, we had over $11 billion of advanced capacity and at that time or a funding $8 billion up.

Advances our team as it kind of experience in this business that we're highly confident in our ability to deal with higher advances.

In some of the government programs that had been rolled out the Ginnie Mae P. Pep program helps to support the mortgage servicing community by providing financing up to 100% for principal and interest that is a good thing for mortgage servicers to the extent that you wanted to use it FHLB recently announced that servicer obligations will be cap.

Opted for months during the forbearance period for P. at night again, another positive developments as we go forward, we'll maintain disciplined focus on assets, which are low leveraged term financing as well as service by our new residents shell point partners will maintain higher levels of liquidity than you've seen in the past well focus on their operating business an opportunity.

As thick investments that we see we look forward to growing our book value once again and providing terrific an investment returns for our shareholders. Finally, I want to wish everybody well and a big thanks to our team for all their hard work. During these difficult times, because I will tell you that we've been working 24 seven to do all we can you get back to where we believe we should be.

With that I'm going to refer to the supplement which has been posted online and I will begin with page paid for actually we're gonna go right to our company to Q2 Q1 company in financial highlights.

For the quarter, we had a GAAP net loss of $1.6 billion or $3.86 per diluted share. This includes mark to market and impairment of two hours in 24 cents and realized losses of $1.92.

Our core earnings were $198.4 million or 48 cents per diluted share.

First quarter common stock dividend of five cents per common share, which correlated to a 4% dividend yield as of March 31, 2020 cash on hand as of March 31 was $360 million I guess alluded to the fact that today or at 430, we had 517 million of cash again build.

<unk>, our our liquidity position unencumbered assets were $390 million, our net equity as a 331 is $5.2 billion book value per a book value per common share as of 331 was $10.71.

Our book value during the quarter decreased by about 34% from 16 21.

Say again 10 71 from December to the end of March.

Page five.

Going back to my earlier comments. This really was a tale of two quarters for us prior to the 13th of March we were on track.

For a great quarter core earnings were slated to be 65 cents. Our book value was between 15 72 in 15 89 or mortgage company was going to make between 125 and $150 million origination volumes $12 billion and are over us overall leverage was three and a half times as we fast forward and you can see the impact.

But as a result that coded we lost 17 cents in core earnings our book value went down by $5 as we had some large sales of assets origination and servicing.

Income went down by $67 million and origination volumes tailed off the drop as we pulled in the range overall reduction in in leverage 1.7 times as a total company.

Through 331 [noise].

Page six.

As we put this slide and last time and I just want to illustrate what we think a theoretical book value could be for us as we think about the growth in our operating business and if you go to the left side of the page if our if our operating businesses make it lets take the low at $300 million somebody say those companies trade at a five.

<unk> P E that would create enterprise value of 1.5 billion to ours are current book equity on the on our operating businesses or about $400 million off balance sheet value of $1.1 billion, which would create an extra $2.73 per diluted share or an implied book value of 13 44.

So if you looked at the right side of the page you can see on balance books on balance sheet value four and a half a billion dollars and the total would be something around <unk>, either give or take $6 billion. So again I just want to illustrate why we think the value of our operating companies could be as we go forward [noise].

Page seven.

As we adapted to coded and the macro environment, we sold $27.9 billion of assets through the end of April reducing our investment portfolio to $12.7 billion reduced our mark to market exposure dramatically, we reduced our total leverage in our investment portfolio to 1.5 times and that's down.

From three and a half times when you looked at the right side of the slide we executed on our liquidity plan cash on hand, now again $517 million and as we pointed out earlier, we added financing capacity of $1.8 billion in our advanced business.

Page eight as we repositioned the company today, and we think about the go forward again, we sold $27.9 billion that securities that includes non agency Securities Agency Securities and loans, our Mark to Mark and once again, it's been decreased dramatically, we reduced our repo exposure and even in the height of the crisis, we priced.

$450 million season, a non agency deal.

If you looked at the right side of the page. Our go forward, we expect by the end to me that 75% of our non agency loans and securities will be more term financed with limited or no mark to market exposure, our investment strategies going forward will be driven by term financing solutions and focus on assets, which are truly compromise complimentary towards.

Our nation in servicing businesses and 85% to today, 85% of our loans and securities at currently service by either new rates are show point.

Page nine is our typical call rights Ah slide I'm not going to spend a lot of time on this today, we continue to control $80 billion of call rights. If recall, we in that we announced during Q1 that we made a large sale of nine agency securities, including in that words were roughly $17 billion of call rights and will come.

Continue to work with our partners on not only the 80 billion, but also to 17 billion that that was sold during the quarter.

Servicer advances page 10.

Our team has an unparalleled experience in managing large large portfolios of advance balances advances or one of the highest quality assets you can get in the mortgage market. They are the top of the waterfall. Since 2015, we have recovered 100% of the advances on our portfolio following the acquisition.

Hey till Esas in 2015, we had peak advance balances of 8.7 billion and that was funded would over $11 billion a debt. Since then weve success, we've successfully manage these balances down through servicing.

And term financing, we've completed 15 advanced Securitizations for $6.1 billion, and we believe by working with our Servicers I'm not only a show point in your rents, but other servicers Cooper and I pointed out there as well continue to manage these balances down and then she can see on the bottom part of this bottom part of the slide.

You can see the 8.7 billion going to three and a half billion today.

Page 11 [noise].

But the slide Backout servicer advance balances.

Today, our $3.5 billion, that's down from 3.8 billion in 2000 at the end of 2019, Oh, That's finance with $3 billion had that 1.9 of which is in the capital markets. The LTV of 86% includes at eight no advancing on.

And or no advance facilities on Ginnie Maes at this time, we expect that to come online and I'll talk to that a little bit.

Our advance balances as of March 2020, or 11%.

Fannie and Freddie, 3%, Ginny and 86% Pls again, the Ginny advances are not financed on any lines. After March 30, Onest I'd pointed out earlier, we increased our advanced capacity by $1.8 billion, we've extended some of our maturities there.

Page 12, total advance capacity $5.25 billion.

A couple of things to point out on this slide we're currently working with Ginnie Mae on some advanced financing, which will result in an extra $75 million to $100 million of additional liquidity and in a stress case that would create an extra $300 million to $350 million. We expect this advanced financing to come online hopefully in the next 30 to 60 days.

Today based on the new Ginnie programs as I pointed out earlier do you need provides 100% financing on p. Eni for loans and forbearance and on FHLB, They announced last week that they're going to limit service or obligations to advance p. and I. The four months, while the loans during the forbearance.

Couple of things to point out here that I think are very important in a base case scenario. We project that we will only need an extra $120 million in equity to fund servicer advances in a stress case scenario that goes out many many months, we believed that the amount could increased to $390 million.

Page 13.

Our MSR business MSR is I wanted a few fix things few fixed income assets that will rise in value when interest rates rise.

To talk to that when you look at when we need that when you think about yesterday's announcement from the fed and treasury that they're going to issue three trillion dollars of debt. This quarter, we do believe with rates at historical lows that it's probably it is a great time to think about MSR investments. We have obviously, we have a large portfolio there he took.

We took a reasonable reasonably large size markdown in the quarter, a as a result of our or faster long term speed projections and wider discount rates as well as some higher delinquencies on the right. When you think about our MSR strategy. We continue to work on recapture that is very very big thing, we're working on right.

Capture with Cooper work in a recapture with new Raz and we have some subservicing agreement agreements, where we already where we're gonna be lead generators and work on recapture with them. We have a lot of upside there from current levels. As you think about the current market roughly 70% of the market today is a refi market.

Recaptured percentages on rifai should be significantly higher than than that on a new purchase a loan in the market in the market.

[noise] page 14, why every different.

On the left side of the page a couple of things to point out one on our MSR financing, 50% of our MSR financing its in capital markets term notes limited Mark.

To market exposure. The other 47% is on bank with banks and variable funding notes with again limited mark to market exposure. So really nice term structure as we continue to work with our banks on extending some of that some of those facilities. The bottom part of the page I think really what differentiates our.

Our MSR as from the industry or average loan size, it's 140000 versus an industry have to 12, we're very seasoned loans and more credit impaired loans in the industry 81 month season versus 39, or Ficos are 719 versus 748 and the refinancing population, we think is give or take about 30%.

One other thing to point out today is when you think about the credit box with you know virtually no nonqm production origination today, the jumbo market pulling back banks, a couple of the large money center banks announcing that they're getting out of the origination business around he locks I do think that credit.

Boxes tightening what does that mean, obviously will be there to provide credit for our for our customers, but what I do believe it's going to mean and slower speeds as we go forward.

Page 15, our mortgage origination and servicing business that is under the brand of new Raz as well as show point.

He origination business today, as well capitalized and the margins in the origination business or some of the widest margins we've seen in years.

I think it out we shipped we shifted our production to this Fannie Freddie Ginnie loans, we've exited non agency and non QM and our multichannel approach provides flexibility. So we can take it to take advantage of various rate environments.

Most importantly, we continue to focus on helping homeowners navigate through this crisis.

We are experiencing special servicing.

Second to none.

We continue to work with homeowners, we continue to input implement new forbearance programs and we continue to work on creating digital funds functionality in our online portal portals to educate and helping them homeowners.

Finally during the quarter, we had a very good profit as I pointed up $90 million that is down from 150, we think that the run rate there will be significantly higher today, 95% of our employees are working from home and doing a great job and we're currently in the in the process a process of adding another 500 jobs as we navigate through it.

This crisis Pete 16, just a couple of quick things here. One is we estimate production to be something between 40 and $50 billion for 2020, and as I pointed out earlier a gain on sale margin for error at some at a recent wides that we've seen in a long time.

Page 17, when we think about the direct to consumer origination business. This is where we're going to be spending a lot of a time and continue to add resources, we need to be better at recapture we think we will be better recapture there's channel it's going to help us do that and we're very excited to see the growth here. If you look at the end of Q.

Q3, we had $1.2 billion of a of of quarterly funding. We expect by the end of Q3, we're going to be at 4.6, a lot of that is going to be around or recapture business.

[noise] page 18, I do think we have a best in class servicing operations, we have Jack Navarro, who runs that business is who's on the phone him and his team do a fabulous job keep in mind again, 95% of our employees are working from home.

And it's very difficult in that environment is doing a great job working with homeowners to provide comfort and get them through these difficult times.

Our pretax net income for the quarter was $30 million and we estimate or servicing portfolio to be something between 300 300 billion at year end.

And the special servicing side. This is something we're very proud out we have 40 different.

Over 40 different institutional clients. This includes the GE as sees this includes the money center banks. This includes whole loan investors deck and his team are very well regarded in the industry again, they do a great job as delinquencies rise SMS is well positioned to work with customers through its special servicing expertise.

We work closely with Fhm Fey, Ginnie Mae and other regulators to provide positive outcomes for borrowers that have been affected by cobot 19, and quite frankly, even before coven 19.

We we've implemented online digital tools to support our forbearance request and we continue to expand capacity as we manage.

Post forbearance solutions [noise].

Couple of more slides on page 20, or just a quick update on Cove, It and how we think about forbearance as of April Thirtyth 2020, 200000 borrowers in our portfolios have been granted forbearance.

Over those 200000 borrowers 60% that recurring in March had made their April payment are still current and have they have all the loan 7% of all the borrowers in our in our portfolio were granted forbearance through April 2020.

On the ancillary service business I alluded to this before I'm not going to spend a lot of time on it as a as you may recall from prior earnings calls we have an investment in koby us that's run by Rob Clements and John surface.

And basically it's an origination and servicing solution company that provides all kinds of different services to or mortgage company as well as third party mortgage companies, we have a title and appraisal business and then we own a company called Guardian, which does field services and provides property pres and Oreo management services the banks in service.

Finally page 22 are focused I think the one thing to take out of at of this is we want to get back to where we were before we want to grow better get our book value back to you know you are 16 or $17. I gave you an illustration before why we think that our book value is understated, we'll continue to do anything.

And all we can to protect and grow booked value couple other things the bond portfolio to loan portfolio. In this environment. We remain much smaller we're going to be opportunistic where we can and risk management remains job number one.

With that I'll turn it back to the operator, and we could open up the line for questions.

Thank you Sir well now begin the question answer session.

Ask the question Im and press Star then one on the touched on phone.

If there isn't a speaker phone, we asked nucleus recover handsets were pressing the keys to answer your question. Please press Star then too.

Today's first question comes from Tim has moved B. Riley FBR. Please go ahead.

Hey, good morning, my Thanks for taking my question, Oh Hope you're doing well, but my first question you know before the pandemic hit you were already in the process of transitioning to more of an operating company versus a re portfolio and you highlighted Gan flurry services on.

Page 21, there and in most of them are are performing better in this type of environment.

Just just given the disruption in the portfolio transformation went during the first quarter does this maybe accelerate your your timeline or increase your interest to maybe internalized. Some of these companies and you know further bolster kind of the operating platform at NRG.

Yeah, you know we've been pretty vocal the past couple of quarters or how important the operating businesses to our company not only to grow the operating business, but really to support that portfolio retention part of our portfolio is something that's very important to us when you think about the mortgage servicing and origination business and if you're if you recall.

When we first acquired show point or new Pan back in that back last year that that was a pretty strategic acquisition for a number reasons. One is obviously to grow earnings but two is can make sure that we continued to increase our portfolio retention.

Capabilities than the other thing and quite frankly in the operating business will treat higher than just a typical asset value. So I think.

I didn't know if it's going to accelerate clearly to the two weeks in March we're absolutely horrific for us a we need attack fast the team did a good job I hate to lose money, we hate to lose money, but we thought it was something that we needed to do at that point to create more liquidity more liquidity for a company. So I think they go.

Forward is gonna be continued focus on operating business there will be opportunistic investments I don't know you know what the next six or 12 months are going to bring for US I will tell you that we'll have more liquidity our maintain a smaller investment portfolio and again I do think we're going to have some good results in our operating business.

The loan that helped long winded answer is probably a us.

[laughter] got it Okay. And then you know just just kind of piggybacking on that and you've done a lot clearly to de leverage at this point and had a lot more liquidity on hand relative to the size your portfolio than many generally do so just curious how you prioritize <unk> maintaining liquidity here versus putting.

Capital to work or further de leveraging and or buybacks at current levels.

I would say buybacks I can't really comment that's kind of a board decision dislike the dividend stuff will be a board decisions as we go forward I think having more capital today is essential we're not going to go out and go back and reinvest in any kind of non agency bonds Eva.

No our leverage as we as we pointed out was extremely modest you can see what happens when.

The markets get into this you know there's freefall and it is it just crushed us so we're going to have more liquidity than we probably ever had before we want to navigate through this we do think again there'll be opportunities you know where I think our history has demonstrated our ability to be opportunistic in nature and and.

We're going to grow and get back to where we belong and hopefully grow book value and Craig you know great returns for shareholders.

Mhm.

And I guess, just maybe specifying that a little bit more do you feel that you need to further de leverage at this point or is that you know a top priority or do you feel that you know the balance sheet is at a good spot right now and you know your you'd rather kind of and just a hoard cash rather than you know de leverage given where your multiples right now.

Yeah, I think I think what you'll see in our kind of our short term financing books those those books will be.

You know hopefully give or take a billion to a billion and a half by the end of may.

Maybe into early June when you think about just real repo exposure that is down significantly.

From a from a de leveraging standpoint.

Smaller and the team even you know today and and everyday we're working on terming out as much of our.

And.

Yeah.

GAAP baseline.

Yep.

Limited.

Hi, good exposure so from a leveraging standpoint, you know when I'd point out our leverage at one and a half time I don't know that there's any other companies are very few companies that had leverage likely do and if we can continue to generate you know good operating earnings.

I think we'll be back to where we belong in.

You know.

In the near future.

Mhm got it that's helpful.

And then my last question just you know if you could provide a little bit more context around the capital needs that you highlighted in your your base and stress scenario of like a 120 million between 190 million does that you know for pretty advanced does that assume that.

Or does that have any implied assumption that you're able to securitize. Your agency advances or does that assume you can't do that and this is just based on your available capacity on facilities and and is there any implied assumption that you'd be cat tapping the t. tap facility or that you do secure this journey facility you talked about.

Any more context around that would be helpful.

Yeah I. It. These are just equity numbers as I pointed out earlier, we have five in a quarter billion of total debt available to us on the on the advance lines.

This is just an equity component you know to the extent that rail, but improved financing rates or and do more term, which will happen over time right. When we get back into the capital markets I did point out in the height of all this we did at $450 million non agency securitization. So I would expect he advance markets for securitization.

That come back overtime.

But these are just equity numbers in a down came in a downside scenario as we go forward and the question is I think for all of us quite frankly, how long we stay in this in the state where people are not working in and you see more and more jobless claims. So we are expecting the worst overtime and I think the numbers.

You know to the extent that they get better I think it's only going to be a positive from a capital perspective from where we are.

Mhm.

Okay, that's helpful and I'll leave it there, but that thanks again for taking my questions and stay well.

All right. Thanks, you to Tim.

Our next question today comes from Bose George with KBW. Please go ahead.

Oh I suppose is your line is perhaps.

Hi, guys, sorry, say, Mike sorry, My line they voted good morning.

Good morning, everyone, saying say actually person I mean, I wanted to just asked about the credit costs. The credit assets would you continue to sell that portfolio that if you're able to just get can you comment on that so the outlook for doing though.

Yeah, I think the loan and and first of all the credit book, we have a lot of investment grade Securities left there.

It's relatively small it's I think its give or take a couple billion dollars.

As we go forward I think we feel very comfortable with where we are on that book you know, it's down dramatically from where it was and keep in mind our strategy of of having non agency bonds, where we own call rights that was hedging or MSR as you know.

Again going back to my earlier remarks that broke down you know in that week in March agency mortgages got crushed you know bonds got crushed loans got crushed MSR has got crushed all of that created you know liquidity needs for us and I think that the broader market quite frankly.

We're not going to get back into a position, where where we're buying a lot of bonds with repo and this can to it.

I think we're comfortable with the size of that book you know, there's some AAA Iows for example, there I do think as I pointed out with the fed announcing.

The government announcing that they're going to issue three trillion of government bonds, there will be huge needs for for the government to issue debt in these markets and I think for US as a result, I'm I'd like the way that were position I think about the bump up because small on the loan side again that that book will be something give or take 2 billion.

Finish and I think both of those could come down over time, you know the one thing to point out there is our realized loss for the quarter in selling assets.

I think was $1.92, there's a bunch of a number a large number away from that in that $3 and 86 number a were truly mark to market to the extent to markets recover I do but I do believe we can see that come back because where you look at marks and you look we're asset yields are today, where they're given their give.

It takes 6% to 8% on Levered in a covert scenario when I think about that.

The risk the the asset returns are very very attractive, while saying that they need to be term finance. So we don't get into a mark to market issue as we go forward. So I think we're comfortable overall with the size of the portfolio.

Okay. That's helpful. Thanks, and then that just switching to the servicer advance the slide you showed where.

You know you show distressed days delinquency, but you could get too.

Sort of assume the forbearances or delinquencies and is that across the older three big percentage any pls buckets.

Yeah, well the second part of your question, it's across all of our buckets distressed scenario. We you know we run this out six plus months and I think the delinquency numbers are that's where bears numbers go to like 30 odd that delinquency numbers go to like 30% 30 days.

Or something like that so the numbers go up.

Substantially and I think in those stress case scenario. That's why we wanted to illustrate the the amount of potential equity that we would need to do that.

HM.

And again, we feel that's extremely manageable for our company. Okay. Yeah that makes sense and action is a lot of the.

Prepayments, playing a big part as well in terms of you know offsetting the advance needs. During those periods just given that Prepays are high right now.

Yeah, I mean, we're running we do think overtime, obviously as delinquencies pick up I do think with a credit box.

Tighter or that you're going to see slower speeds, and I think or read and to the extent that you don't and we're good at our direct to consumer.

Vertical and origination remains robust we think that were going to be in a very good place should speeds get fast as you pointed out Bose that creates less needs on the advance side as you get more more principal back in so we'll have you know it's like.

Hey, it's like a catch 22, if speeds are fast you have more money to it to fund your advantage of speeds are slow the value of our assets go up pretty dramatically. So that's a good point.

Yes.

And then just one last one since quarter end has there been much change and the in the book value.

No no every I mean, I would argue that prices in general or are much more stable you know we've had a number of our read.

No riets and other folks that got liquidated during the quarter.

Today, I do think that asset prices, a more stable than where they've been in in a long time, if not higher and our book value is Ah I think it's it's something consistent with where we were.

Okay, great. Thanks.

I don't have to listen to it comes from drilling I'm, a little or no.

Please go ahead.

Good morning, and Oh, I guess, well, it's unfortunate that though but if I just so it's a great to see some outperformance on the operating business sorry.

Yes.

Extending a little more on the operating side just put out the 45 billion dollar origination volume estimate is there a good way to think about what kind of margin you can generate oh. This year at 120 Bips in April which is great is there any visibility from going forward on the margins are there.

You know Mart margins today trying to find one of my sheets are as wide as as wide as we've seen in a long long time and I think as we as we go forward I do think they'll compress and quite frankly, but I think for right now the gain on sale margins in all channels.

Our extremely robust and we'll continue to focus on that I can add up to tell you aware I think they're going to though I think if we get into normalized state and people are back at work.

I think margins could come in quite a bit but for now the gain on sale.

Margins are extremely attractive.

Got it makes most sense I'm a little bit a two part follow up work from when I look speaking about the servicing side of the business. You. Obviously have show point, which has probably doesn't enormous opportunity going forward on the specialty sub servicing side of the world.

And you also have a fair amount of loans or service internally I guess is there any sense of what kind of operating earnings or benefit you can generate with shell point and then I guess the part two it'd be is there is there a sense of how many are what number of loans that are in forbearance, you're currently servicing and have an opportunity to generate some performances from modifier doing things of that nature.

Going forward.

Well why don't I haven't Hey, Jack you want to jump in on this.

Sure be happy too so or a couple of different questions. You asked first of all great to be would you guys. This morning.

On the forbearance side, a you know Fannie and Freddie are currently planning for a program, where we we get paid to a 500 dollar a incentive fee for Forbearances. So that will certainly benefit us as we work through the long term solutions with these.

For balances.

But it will also have significant increase cost so while I think it's a positive it's a the jury's outturn exactly exactly how much of a positive or on our in our inside our self service platform. Today, we've done a 140000 forbearances. So it's pretty easy to do the math, although it's important to note that.

60% of those people paid in a in April and about so far that trends continuing for me. So again, if you if you're doing the math on the potential incentive fees you need to sort of look at the number of people that are paying what was the other what was the other question you asked about the surface or.

The other one was more so on the specialty service show point is there an opportunity to expand that business in the near term obviously other things you're doing a little more volatile in the market and others.

Well you can do in terms of earnings are generally more yeah there.

Yeah. There there definitely is if you were to look at our margins today that are that are published for the first quarter in for the end of last year, you would see that our margins are higher than a typical servicer or somewhere in the 2020 plus percent range up to 30% or I think we'll see a little downturn in that a in the second.

Quarter, just as it nature of the nature of the increase volume in the increase costs and I think you'll you'll see a sort of return to those margins in the third and fourth and maybe even a little bit better I think the issue for US right. Now is 100% focused on the homeowner and the existing clients and how can we help these homeowners through their sure a difficult times.

We know at the end of the day, that's the key so when we service for other geographies, which we do directly on the special servicing side, they're looking for us to make sure. We take care of those homeowners, which is our first priority in terms of the expansion of the business, there's definitely an opportunity our first priority to existing portfolio second is the needs of the existing.

Science, but we've had a lot of inquiries both from the existing clients as well as new clients for how much capacity do we have and how much we could do we're gonna be really again, we're going to prioritize the existing clients and we're going to be really thoughtful about the expansion of the business, but there's definitely an opportunity definitely an opportunity to expand.

That's great. Thanks for taking my questions on the I will jump back and as you.

Thank you.

I don't know its wasn't good assumption Stephen laws with Raymond James. Please go ahead.

Morning, Good morning.

Good morning, Mike [noise].

Couple of follow ups and a couple other questions. So first I want to.

Follow up on the balance sheet, I think down 61% end of April versus year end that puts it at about six and a half to 7 billion a sales.

You know or decrease and.

In April do you think that's where it needs to be do you expect more of a decline in may kind of where where do you expect the trough or bottom to be from a portfolio size or maybe other ways just.

We feel comfortable to current size or you feel like me to keep keep getting smaller.

From a term financing perspective, it eliminates or reduces your mark to market exposure. Our overall leverage again is one and a half time one one after 1.7 times. If you include the mortgage company. We will continue to run a very very low levered business I think we're comfortable with our portfolio size now I did.

Point out that you know we did have a a realize loss of $1.92. I think the number was per per diluted share and I think our ability to get back some of the money that we lost and mark to market could be pretty significant stuff you'd think about it if we lost give or take you know I'll use around number four dollar.

Hours per diluted share and half of that let's say was from actual sales.

Term out our assets and they are yielding six to eight per cent in a covert scenario I could see based on his zero percent interest rate, which is kind of where we are in the marketplace that we could see recovery of I don't forget to see recovery of $2, but eight weeks ago. You know that $2 was was in book value. So overall portfolio.

Size, we're comfortable with term financing continues with the with the hard work, that's going on with our team and and and our accountant parties, whether it be the banks are insurance companies were worker with so we're comfortable where we are.

Great to to touch on the origination 45 billion was mentioned as the the new goal in I think that the way out of page 13 has changed slightly so the.

Have it looks in the queue that apologized, but agency is in government can can you reference that government category I think in the new to actually talk about continuing to do agencies, but not nonqm and not agency government loans, which side does that fall into that fall into the.

The agency bucket or how do we think about that looking at your historical origination byproduct overtime up charts.

<unk>, well, we already Fannie Freddie Ginny originator right now, but what we saw and in the you know as a result of.

The downward pressure an answer prices me. So nonqm loans go down you know 10 to 15 points.

And you can't originate alone at par and sell it at 90.

That.

That may have doesn't work. So we are added that space at this point, so you'll see Fannie Freddie and Ginny origination and she I pointed out will focus on or existing portfolios will focus on recapture and that's where we're going to end the direct to consumer channels and that's where we think we're going to get some lift be a great service provider to customers and hopefully it originates.

<unk> margins remain where they are we should have we should have a good good quarter and see a further growth in or operating business.

Yeah, and the follow up on that and I I don't need specific but maybe general commentary.

On the assumption behind that forecasts I know you know some some entities. The N.B.A. for one is you know their forecasts includes the unemployment thing and single digits and and the Treasury mortgage mortgage treasury spread back to February levels by the third quarter, <unk>, which which certainly could be optimistic.

You know what what type of assumptions are underlying 45 billion. A I was a little surprised that guidance wasn't down from 50 billion by more than it was I I know you mentioned arrange I think or 40 to 50, or so 40, fives and midpoint, but can you give us a little bit of the assumptions you have for the the agency mortgage market that that underlies that that forecasts.

You know I I think as we turned back on certain channels wholesale we grow our direct to consumer.

Possibly doing a little bit more in correspond in as long as margins are there. That's why we feel pretty competent or ability to to do 40 Park. It's a projection, though I mean that just to be honest I mean.

Could it be 60 billion could it be 35 or 40 billion. It to me it's not about the number it's not about the absolute number it's about making money for shareholders and and supporting a homeowner. So I do feel pretty good about the 45, but again is it is a projection that projection comes from our mortgage company or mortgage company currently has.

Give or take 4200 people as I pointed out earlier, we are hiring another 500 people right now so we feel good about it but again, it's and Stephen it's just purely a projection.

Sure and and along with that can you talk about approval times I mean, one.

You know from from here a lot of commentary I know, we solve from extensions in in in loans. During the <unk> going forward you know a lot of agency applications, especially rifai or or largely automated can you talk about what the pipeline or the how much it's going to links and if a bar where they used to be kind of instant auto approve.

Oh now try had to go on unemployment for six weeks due to co bit or has some covert impact that was very unique and short term and they go back but now they've got a blip in their credit history.

That get kicked out of your system. If so how will those type of application handled and what type of lengthening should we expect to see in a in closing of a low.

Bruce Bruce Williams is on as well <unk> I don't know up here. If you have an answer to that or or if we want to come back to that.

No I [noise] microphone to morning, everyone.

[noise] basically.

In a whole set of.

But I'll call them redo all the process.

So really what we were originating now.

Very close close to closing we have a process in place basically people attest to that they are not.

You know thinking about going to go into four events of the quality is Michael indicators.

The little origination processes has improved dramatically and you're right into it basically you know we were multi channel each of the channels are different.

But effectively.

Kind of the online ability retention and all that we don't we don't expect time lines to.

To increase dramatically things are turning it's surprising.

But things are turning turning over a relatively quickly.

Right.

That color and and lastly for me my fold up the operating business you know.

It's a lot of defraying flurry services that are provided across your sweet of of investment companies, I guess or or you know across your platform.

You know which of those currently or or the most impacted I mean, if you've been able to move inspections and things of that to to virtual do you have issues with.

Title verification or any type of access to government buildings, where employees still may not be back at work Yeah. How do we how do we think about of the different pieces of those are the different services that are being dramatically impacted in kind of how the timeline of windows may get back to normal, which which ranted, maybe a county by county situation.

<unk> the way I would think about it Kobe is is you know as I pointed out earlier, we have a an investment in in Kobe as they are truly eight third party to us and everybody else.

Yeah. They they everybody has limitations on on.

Are in their business right now as everybody's still working from home or wherever everybody is.

You think about title and appraise I I don't think there's issues around title I think the appraisal stuff. It's something when you win intuitively if you take a step back or are people going into other folks homes to appraise something and I think the answer is probably not so I think all these businesses are are impacted I think as a result, you will see.

Until until we get back to eight quite as a normal state I think all these business lines will be impacted one thing I do want to emphasize is the actual contribution from these businesses to our overall earnings is very very small at this point Kobe. It's his A.C.O. box those earning stay in that system. So it's just really.

Value of that asset.

Oh and appraisal as we do loans, it's good to have a captive a captive title and appraisal company on the field service inside you know the preservation of properties keeping people in their homes I think that business will continue to grow into folks according to a great job there.

Great. Thank you very much the color and I appreciate the the disclosure you guys provide in your investor Dot going to work you put into that thanks for work, but even.

<unk> <unk> Securities. Please go.

[noise] wherever x.

And I hope you're well.

You two and a couple more question a couple more questions on the the service or advances.

The first one.

Think about how you guys are sort of forming your expectations around what the timeline is going to be in terms of.

<unk> ultimately recover advances after the forbearance period.

And then the second question on the on the financing you haven't played so it's curious.

Particularly like on the capacity you've added since the end of March. So there are any material differences in terms of the the terms of the financing you've been able to add in in in the sense of L.T.V. or or the or the cost of the fencer Bucks.

Sure Andrew you want to you want to take this one.

Oh sure <unk> nice to speak with you. So the first question regarding when we're able to recover and servicing advances after the deferment Oh, we've been in dialogue with the G.S.A.T.'s and there's some discussion about putting into place.

Department program, which would enable us to recover advances.

Shortly or immediately after the foreground programs.

So our expectation is that.

Across we've asked majority of our portfolio should be able to pretty quickly recover the out the city events was and how about pounds.

Normalize as long as come off before their programs.

In terms of the cost of the servicing events financing yes.

It's been incremental increasing the cost of the service <unk>. This additional service events in this thing, but we think that it's it's a prudent in a worthwhile expense to put that in place. So that we have more than sufficient advanced capacity across a range of.

Of scenarios.

And then.

I get sick 'cause to follow up on that you know advance rates are give or take 90% to 95% and the cost of funds is Ah I I believe is about <unk> 275 is that right Andrew.

Yeah, that's correct.

Yeah.

<unk>.

And then in terms of servicing expense. So I think you mentioned that you know it's reasonable to expect the costs are going to go up to service near term in light of everything you're dealing with <unk> can you just help us think about you know what to expect in terms of the service finger expense.

Weiner them for the next couple of quarters, and how much would like to increase versus the first quarter.

Yeah.

Yeah.

The easiest way to think about servicing expenses is really in two ways. One is mix. So how many more delinquent loans do we have and those are obviously more expensive to service and so we you know we think them just as a result of Forbearances a natural increases increases in delinquency, we're gonna see the mix change.

We've had in really terrific track record inside this the the own servicing business that reducing costs by about 37% year over year in the <unk> you know as of the first quarter of this year. So you know, we're we're down to direct costs. The service on a current loan below six.

Dollars, which is is really has been a feat of technology and people are really thanks. Thanks to the team. The other factor is how much costs goes into servicing each loan and the you know the mix is an issue the the the cost of service in each phone is really all about the fact that [noise] you know.

On the underperforming side, we've got to talk to more borrowers you've got to interact with more borrowers and on the delinquent side, we've got to talk to more bars and interact with more of hours you know for certainly the first two to four weeks of this whole event was was a very difficult time for the service or in the call centres and that was partially driven by the fact that may.

Many of these forbearance situations were from new new borrowers to the delinquent process. So bar wish we had been current all of their lives and expected to be current all their lives. We're faced with this crisis and we really had people who wanted to you know rate us email us call us and it kind of overlap.

The call centres in the short term, we mostly corrected that we still have some high call rates in the in the last midsized, but most of the customer service side is sort of back to normal and so those are simply going to increase costs. So that's really what's gonna happen in the second quarter will still be profitable, we'll still have decent.

Margins Ah, but we'll see we'll see both mix increase a little bit and cost a service in each category increased a little bit we may I'll just make one last comment on this and then have been answering the questions, but we we've also been really good it being able to bring our our proprietary default technology to bear so.

We we we we within 24 hours had a system to allow the bars to identify that they were cove. It affected in about another 24 hours, we had a way that they could there forbearance could be finalized online cooperation with the G.S.A.T.'s and we expect to use the same approach when we get to resolving.

Those forbearances through that affirmative program that we hope Fannie and Freddie will offer and and and we were hoping to do a lot through automation rather than a normal sort of a long term very interactive a modification sort of approach will still have borrowed we'll have to deal with that on but the but the technology will definitely help save a significantly.

I think that's sort of the cost of service picture.

Okay <unk>. Thank you.

Yep.

[noise] anyone else.

I'm sure harder.

I'm sorry.

Thanks.

I'm, just hoping could give us any update or color on this kind of how the early days of May have gone in terms of forbearance and whether we've seen you know that the daily counter forbearance increase you know as the next payments to.

<unk> you'd probably want that one I think that the E.V. actually would perhaps have gone down I believe right yes.

Yes, yeah to <unk>, the trends had been pretty clear with Forbearances in the early days, we were at as many as five to 10000 forbearance requests a day in the in the late days a merchant early days of April we're we're down inside to own servicing business at around 2000 additions a day and for the.

Entire enterprise you know, we're probably double that but but definitely the trend of forbearance requests had been a steady decline.

And if you could just sort of contrast that way. That's you know kind of the the base case and and the stressed case.

Scenarios you laid out on the you know on I'm, not slide and I'm kind of what what you're assuming and you know how you know how would you would say things are trending versus those expectations.

[noise] [noise] my <unk> <unk>, Yeah, Yeah, sure yeah, you're you're referring to her advances right.

Yeah.

Yeah, Okay, yeah from from an overall from an overall delinquency standpoint, maybe I'll comment on that and Andrew can comment on events, but <unk> were.

We're we are basically where we had sort of plan to be from it for an overall for bounce request standpoint. The thing. That's that's changing that is the number of people that are on forbearances in our paying it's very clear that a certain number of hours are using this program. That's more of an insurance policy and so the percentage of.

Borrowers that are on Forbearances, but paying is is is coloring the data a little bit in terms of well forbearance requests are consistent with what we had forecasted the number of people who are paying is more than four cats. So the over impact is less.

Great. Thank you.

[noise] anyone else guys gals.

Any other questions.

Operator.

Hello.

Oh holidays are next question today.

Worker or sampler. Please go ahead.

Thank you the morning, Michael Kevin too [laughter] <unk> allergy Forever Your house.

I I I don't know what happened there but.

[noise] on tangible book value, you know, where we saw significant spread tightening in April I know you made some comments about you don't realize for us realize but it could you estimate were tangible book value is today.

Off of what you've seen in the market.

Yeah, I think we think you know I think someone else asked that question earlier, we believe it's pretty close to where we where we were at the end up Q1, Okay, sorry, I missed that and then yeah. That's okay.

And then you know given to disruption that we've seen an original origination market you know there and late March with the fed buying assets.

And then where you see it going forward.

Think about where the margins are on correspondent versus retail and what's the major drivers are of the increase in margins on originations thus far in April.

Yeah, I think I think he you know the latter part of your question. I think is is due to quite frankly to markets being you know people working from home limit more limited capacity.

30 to get things through the pipes that banks pulling back.

In general right. When you think and if you really think about the credit box. So I think all those contribute to the margins. When you look at the correspond then we haven't done a lot of correspondent quite frankly, yet in a normalize market I think that you know the gross numbers could be anywhere from you know 50 to 60 basis points today, I think the margins could be.

You know double that.

It remains to be seen as we as really turned on our origination machine, but I do think that the gain on sale margins are actually very attractive right now.

So.

Assuming that correspond to remains.

Subdued for the foreseeable future.

No I I <unk>, we're <unk>, we're actually going to start doing more as I pointed out earlier, our our main focus is really the direct to consumer channel.

Because that's where we feel like we're going to get the most lift that of our out of our existing customers in or existing portfolio and the gain on sale. There is is is obviously very good because it's it's a retention tool for us the corresponding stuff wholesale third party origination.

We're turning that on more and more you know quite frankly in the Middle March we pulled back on everything as we were seeing you know as the markets were extremely difficult and not just quite frankly, the non agency market. The I mean, the agency mortgage market until the fed came in you know which trading in a five point range.

I mean, it was you know crazy so as we go forward I think you'll see these different channels turn on and we'll evaluate the profitability of each one.

So I'm assuming that turning on the correspond channels a big portion of the.

Guidance for $40 billion to $50 billion originations. This this <unk> this year.

Yeah, I think it's a mix of everything but yeah. It's bad it's wholesale again growing D.T.C. I put in we put a slide you know showing from the third quarter in 19, which was a billion unchanged to the third quarter I think in 20, where we had that going up three times. So I I take all these are going to contribute and again, it's a it's to me it's it's not.

About the sheer volume the 40 to 45 to 50 or whatever number. It is it's about how do we create value per customers and make money for shareholders obvious.

And then.

And according to your balance you you have 10.8 billion repurchase agreements remaining on the balance sheet.

Or liabilities against your asset base, which is equal to a little over 70% of your investment <unk> 15.2 billion dollar investment portfolio.

Which is slightly lower than what it wasn't a third quarter, where do you see that the repurchase.

Amount versus your total asset base.

As we look out the next one or two quarters as you start to reposition you know the.

What the balance sheet looks like and the finance their structure.

I think you'll see total repo on bonds and loans that I'll be I pointed that out earlier about it give or take about a billion and a half dollars.

You know depending upon what we do and agencies and things like that I think away from that everything will be either termed or limited mark to market around or exposure on on <unk>. Today. When you look at the bond and loan Bucks, there give or take about $2 billion. Each are actually the bond, but could even be smaller.

Than that by the end of May and no later than June I think most of the portfolios both bonds and Lois will be termed out.

Okay. So when you envision that scenario and you see the term, which is obviously a little bit more expensive than repo or what it was in the past.

And you think about the pro forma balance sheet.

As as you make these restructurings, where do you think you return on equity could be or where the normalize return on equity could be just giving the disruption in the market.

I think it will be significant because as the operating companies continue to do better the return on equity and those businesses as as capital turn over quicker will be I'm hopeful well north of 20%.

So you're saying that you think you can get 20% return on equity on a pro forma basis. Following the whole restructuring and okay. Yeah. That's important than portfolio is gonna be small right I mean, the way that the way that we think about it as I pointed out we took we've had realized losses of whatever you know $1.92 and.

<unk>.

As you think about the marks we took which were pretty significant those come back in a reasonable period of time.

That return on equity or that game really comes out to a very large return on equity. When you think about the actual size of that portfolio, it's going to be much much smaller on the bond and loan sites that it's not going to be that material I think the operating businesses are where you're going to get lifted it up gain on sale margin stay where they are the return on equity is going to be great.

Now you see that as normal or is that something that's just a near term.

<unk> the the world. The World is shut down that's not normal if I can't tell you what's normal anymore [laughter] right I mean that of course, but I, but I I do I do think in the near term I think are operating businesses are gonna hopefully make a lot of money and whether that continues you know to the third quarter I'm not I'm not sure what those.

Margins are going to look like because I can't predict that the until we know what's gonna happen with labor and people going back to work it and as I pointed out we're hiring 500 people right now it's hard to tell but I do think overall I return on equity should be good in our in our track record. It's been very good I mean quite frankly, we all and every one of us add.

You know at the company, they get to heart, where a stock prices and what's happened. Unfortunately couldn't control those one or two weeks as much as we would've liked to but I think we did what we needed to do to get to the other side and now it's we're back in a place where liquidity is is terrific. The operating businesses are are continuing to do.

Extremely well the portfolio is much much smaller or repo and mark to market exposure is is you know very very low and that'll continue to get smaller and I'm looking forward to actually you know growing book value back to where we get a 14 15 $16 a share so.

Yeah.

I'm one last one.

<unk> was a major portion of your hedging for the M.S.R. portfolio.

And you had to sell that down significantly.

How are you hedging the M.S.R. now given at the the agency RMBS portfolio is small fraction what it wasn't previously.

Right now we.

It'll bit biased I think of the short side that's of when I think about the you know the state of where we are at some point, we let agency mortgages, if if and when they cheap and up or you know we did add some swaps and we got longer that way during the crisis or through those last couple of weeks in March and will continue to evaluate all hedges whether it.

Being in swap swaptions options as well as agency M.B.S.

So we continue to monitor that I mean agent you know agency M.B.S. is where it is because the feds bought a ton of.

We we continue to monitor that in the in early this week. They came out and said they'll buy as needed. So I think you'll and you should see that soften up a little bit and I think with three trillion ambitions. I think you could see rates go up and the value of her Emmett Sars go up.

Yeah, Thanks to take my question.

Thanks again.

You are next question today comes from Matthew Holland with Memorial. Please go ahead.

<unk> <unk> appreciate taking a question and certainly appreciate all her work with the team Hey, Matt during this March like the Big Picture question. You know, we're hearing a lot of reports with the the state of the non banking industry, which nations servicing yet they today's been local about pulling servicing from people can just give us.

You know at the top down view what are your conversations like what regulators, where do you where do you see the industry head.

I think the team has a lot of R.T. and has a lot of dialog whether it be with S.H. Cafe, Ginny, Fannie and Freddie way up wonderful relationships with everybody.

You know the.

The the Genie May program will help Servicers B.S.H.S.A. announcement recently about them for a month limitation on on P.I. advances on loans in forbearance should help I think overall I mean, you know I pointed out we have more liquidity today than we've had a long time and I take maintaining higher levels of liquidity, it's essential right now.

I do think the Nonbanks when you think about the amount of whether it be origination and servicing that the nonbanks do it's greater than 50% of the overall market are really really important to the overall housing market and the system and and and a homeowner community and you know.

Hope as we go forward is these continued support of the Nonbanks I think for US personally will continue to maintain whatever levels of liquidity that we need to in this environment. As we go forward to take care of our customers to make money in the origination and servicing business, but I think there's there's a lotta.

Good constructive dialogue I think a lot depends on what happens as you go forward and think about the state of the economy and people getting back to work and what happens with forbearance claims and you know everybody has models and thinks that delinquencies are going to do this or forbearance numbers are going to do that and I think until we actually see the real numbers that's why.

We're going to continue to build liquidity when we when we think we need to but I think you know hopefully there's support I think they their posts at at the at the agencies get it.

<unk> is your appetite to take on Subservicing, let's sit there are transfers to Jesse do is your appetite for big book and the sort of package of that comes out.

Let's and everything is about [laughter] balance right. Now you know this to be clear, we're not going to go out and and step up and and do something unless we thinking makes tremendous sense for shareholders.

You know that the cost of capital right now as we pointed out even on on certain things is a little bit higher so I think retaining that capitals important unless you think your return inequity you know to take some of Kevin's questions are gonna be you know 15 20, 25%.

Got it an industrial <unk> <unk> you said you did an <unk> an M.P.L.

What's the state of that and then the call rights are you still retaining the what's you're looking at this study billions you still you didn't some away all your call Optionality right students no. So the securitization. We did was a seasoned arm deal that we had called clearly the the overall <unk>.

Seats were lower than where we would have been it if it we were in a normalize state.

I those markets will come back at some point you know we have to be prudent about how we think about our call business as we go forward you know.

You know another. Another example is we don't have enough balances now to do Securitizations on advances as we go forward and knows balance is built if in fact, they do then we'll look to do Securitizations any advance Marquette as we go forward on the call business, we retain $80 billion a call rates that we currently own.

And they sit in the large scale that we did the 6.1 billion that we did in March we gave up 17 billion of call rights, but we'll work with our partners there on on potentially executing those call right. So we still control a lot of collateral we're gonna be smart, though how we could play capital and how.

We add to our balance sheet here.

<unk> that would be cheaper than what you're getting on a bank light so.

<unk>, you know depends where you're going to execute and where rating agencies come out that that markets been extremely efficient over the years. When you think about advance rates and and that AAA nature of of those of those assets.

So I would expect us to get back you know in a more normal life state and I think that'll happen at some point.

Great. Thanks, Mike.

Thanks, Matt.

That's the question is a follow from bows George W.

The guys. Thanks for taking all the questions. They actually wanted to go back to the comment that some admitted with Kevin about 500 dollar forbearance either the G.S. he's bite started offering.

What the timing for that was then also or is there a day contemplating any other changes in terms of their modification programs and the other fees.

That could help as this process continues.

<unk> so you.

Yeah, <unk> I was the one that mention it it's a $500 to fuhrman fee. They have they've basically put a draft out to the various advisory boards, we participate in that we've been able to review.

It's not supposed to be up and running until July 1st, but again, let's just I just wanted to be clear it has not been announced yet.

<unk>, we we we thought we might hear about it last week, there now, saying maybe this week. So I think they've got to get a true they're final approval traps, both Fannie and Freddie are working on it together and and and and it's I don't know exactly where it stands between them and F.S.U.S.A., but that is the program. It basically the idea would be.

To allow borrowers to very quickly go from the forbearance process to current loan with payments deferred to the end of the mortgage minimize disruption maximize the speed the process and so that's the idea to program. They've you know there. They they they are also acknowledging that.

A certain number the borrowers are going to need full modifications, where they can't pay the existing payment because in that scenario. They would basically be on the the basically the loan was just be brought current and the end to end the payments would be rolled to the to the end of the mortgage and there were really be no impact in terms of the the the loan to be same payments Saint <unk>, but.

Certain bars are going to need a full modifications. So there were also talking about what they might do or facilitate in that process, but without again any specific direction. So that's where we stand today.

Oh, okay.

And then action when it's also have the comment you made about you know a percentage of borrowers who are going to forbearance, but continuing to pay or they you know, making partial payments and you know keeping that as kind of optionality, they needed and and how big is that percentage.

Yeah. The there there's a there's a statement of the document that for the enterprise as of April 30th I'm, sorry as of the end of the first quarter.

That it was 60% and just want to get a copy of that.

And so so that was those were the numbers [noise].

Those were the numbers as of you know most recently.

As of April 30th there. It was it was it was 60% had pay their payment so far in the month of May we we have a continuation of borrowers paying your payment. It's certainly not 60 per cent yet we're very early in the month or so it's hard to predict exactly where that's going to go and I'd be I'd be.

Tend to leave anybody with the impression that there was a guarantee their there are some partial payments being made were encouraging a bar rest of both pay any payment amount as well as the full payment amount, but but but I think we've is a very fluid situation. The trends are what exists today and it's a little hard to.

Predict what exactly is going to happen going forward.

So okay, great. Thanks again.

I suppose that our next question today as a follow from today's would be rather F.B.R. Please go ahead.

Aim I just wanted one quick follow up you know I know right now liquidity is top of mind, but you know just based off of the the earning power from the origination platform you know it seems like I.

I guess I'm just wondering how you think about the the level, where the given n. is set and if you see it kinda staying at a lower level then maybe core earnings could support at this point given kind of the preference for liquidity or you know what point do you start seeing and scale up and Kinda then dividend coverage.

Or or the pale ratio increase Tibet.

I <unk> <unk> 10, that'll be you know obviously up to the board you know the the largest companies in the world of as cut dividends or will continue to cut dividends. I think you know our focus obviously, we'd like to pay a bigger dividend my our main thing coming off probably.

You know the the most horrific markets that quite frankly, I've dealt with and I've been doing it. So long longtime is such that will continue to evaluate you know the earnings power the company or a dividend policy, but clearly if we can get our book value back to A.A. when normalize.

State with where we've been.

You know, there's the balance right in the in how we think about it so it'll be a board decision, but I think for now you know there's not much more I can say about that.

Sure things like.

Thanks.

The next person comes from Kevin Barker plan for San Francisco.

<unk> in regards to the consumer loans I know if they were change from equity method to help for investment was there chain <unk> did you take on the consumer loans on your balance sheet or are these continued to be angry man.

[noise] so the the change Kevin has to do what the adoption, let's see so so we brought them on as far as <unk>.

Okay alright, thank you.

Yeah listen settlements includes the question answer session.

<unk> back over to Mr near versus pretty close in worse. Thanks. Thanks, operator <unk>. Thanks for your support you know I take or you know and we all do like I mentioned earlier start praise to hard we want to perform for all of our shareholders and and the work that's been done.

I think on our team you know I opened up and said. Thank you has been something that second to none in something that I haven't seen in a long long time. So thanks to thanks to the team and into all of you better shareholders and all the analysts and our banking partner type. We really appreciate it look forward to growing or books out you're getting back to.

Where I think we belong.

And hopefully a updating you on a more positive results as we get through the quarter and get into next quarter would that be safe and and hopefully we get to a normal life state sometime soon thanks, everyone.

Thank you Sir today's conference has no concluded we thank you all sort of planning today's presentation, you may notice lecture lines.

[laughter].

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