Q1 2020 Earnings Call
[music].
Good day and welcome to the Cherry Hill Mortgage investment Corporation first quarter 2020, <unk> earnings Conference call.
All participants will be in listen only mode. So do you need assistance. Please take note conference specialist by pressing the star keep all advice Bureau.
After today's presentation, there will be an opportunity to ask questions.
Please note this event is being recorded.
I would probably could turn the conference over to worry rumor. Please go ahead.
We'd like to thank you for joining us today for Cherry Hill mortgage investment corporations first quarter 2020 conference call.
Additionally, this call we have filed a press release that was distributed earlier. This afternoon hooked up to the Investor Relations section of our website at Www Dot the H. I my read Dot com.
On today's call management's prepared remarks and answers to your question may contain forward looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today.
Examples of forward looking statements include those related to interest income financial guidance I ours future expected cash flows as well as prepayment and recapture rates delinquencies and non-GAAP financial measures such as corn comprehensive income.
Forward looking statements represent management's current estimate and Cherry Hill assumes no obligation to update any forward looking statements in the future.
We encourage listeners to review the more detailed discussions related to these forward looking statements campaign and the company's filings with the FCC and the definition is contained in the financial presentation available on the company's website.
Today's conference call. It did Vijay land President and CEO Julianna, then the Chief investment Officer, Michael Hutchby, Chief Financial Officer, now I will turn the call over today.
Thanks worry and welcome to todays call.
First and foremost we hope you and your families are remaining safe and healthy.
We would like to express our deepest gratitude to those on the front lines.
I worked tirelessly to keep us all healthy and safe.
In addition, we continue to work through our sub servicing partners.
To provide support to our borrowers who have been affected by to covert 19 pandemic.
And ensure that they are receiving the appropriate level of forbearance assistance that they need with respect to their mortgage payments during this difficult period.
These are unprecedented times for all of us and we very much appreciate that you were taking the time to be with us on this call.
I want to also want to give very special thanks to our entire Cherry Hill team.
Well I've been working tirelessly in terms of managing our portfolio when an operations.
The entire team has been working remotely since mid March and we'll continue to do so until state and federal authorities provide guidelines for people to safe we returned to our offices.
A few years ago, we made significant investments in our technology platform and move to a cloud based solution for computing needs.
This technology permitted the seamless transition to a work from home environment for the entire team with no loss of productivity and managing our portfolio.
Since our last earnings call in February.
We've seen a complete shift in the world.
At the time of our earnings call. We in the financial markets were watching the cobot 19 pandemic very closely.
As it pertains to global productivity and how it was impacting Asia and Europe.
A few short weeks later, the pandemic gripped the United States with ferocity.
And that's not really let go despite some states beginning to reopen for business.
Overnight fund rates were cut to zero by the fed.
The equity markets experienced a major correction and mortgage rates across the industry, where suddenly under siege as liquidity tightened and margin calls on all asset classes forced many to de lever their portfolios.
On top of that the government wavered regarding mortgage loan for Barents programs before the cares Act was signed into law.
Which exacerbated the fears of a mortgage collapse.
Unlike the 2008 2009, great recession, which saw the impact on markets gradually building overtime.
At Cherry Hill, we have always been proactive managers of our portfolio.
And it has served us well over the past six years in terms of our ability to generate core earnings and preserve book value. Despite some very volatile interest rate environments.
However, this was by far our biggest challenge to date.
One that's mad did use of every tool in our tool belt to navigate dislocated markets and respond to the liquidity squeeze.
Early on we knew that liquidity had become absolutely Paramount.
In March we acted quickly and decisively to de lever our company in an orderly manner, which enabled us to be well positioned following what we hope is the worst of the crisis.
We reduced the leverage on our aggregate portfolio from 6.1 times at December 30 Onest.
3.9 times at April Thirtyth.
We also reduced our investments and credit risk transfer bonds by 88% over the same period.
And as of April Thirtyth, we own 100% of the remaining position outright.
We met all of our advancing obligations and believe we did a good job managing through a very difficult period.
As we communicated in our update in mid April we anticipated pressure on book value.
For the first quarter of 2020 book value per common share was reduced to $13.73 as of March 30 Onest.
Well, we generated strong core earnings of 47 cents.
Drilling will talk more about the circumstances affecting our book value per common share in Q1.
We distributed 100% of our first quarter dividends declared on March 12 to both preferred and common shareholders.
With half of the first quarter common dividend paid and shares of common stock.
Since the end of the first quarter, we've continued to de lever our portfolio and build our liquidity position.
These steps will help us address the continued uncertainty regarding the timing and effectiveness of the country opening.
As well as the impact of the historic levels of unemployment on our servicing portfolio.
As a result, our aggregate portfolio as of April Thirtyth is smaller than on March 30 Onest.
Over the past two months, we've essentially recast our portfolio and as of April Thirtyth, we held approximately 90 million an unrestricted cash.
Although this strong cash position will negatively impact earnings in the near term.
We believe it is the wise and prudent approach until greater economic clarity emerges and then light of our expectation of the increased cost to service loans and forbearance due to covert 19 and elevated prepayment speeds on our RMBS portfolio.
Lastly, with historically low interest rates, an outsize origination volumes.
MSR is look compelling today.
And where we see select opportunities that meet our risk reward criteria, we will look to utilize our flow program to invest capital there.
With that I'll turn the call over to Julien, who will cover more details regarding our investment portfolio and its performance over the first quarter.
Thank you Jay.
The market disruption that occurred in the latter half of March was caused by a combination of events.
Increased mortgage supply limited bank credit availability at quarter end concerns all contributed to unforeseen market illiquidity increased volatility and credit spread widening centered around cobot 19.
As Jay mentioned, we're in an unprecedented times and we worked hard to proactively manage our portfolio preserve liquidity and reduce our leverage the de leveraging of the portfolio through asset sales contributed to the decline in book value per common share.
As shown on slide five servicing related investments comprised of full emmis ours, whether you PV of approximately 30 billion in a market value of approximately 223 million represented approximately 33% of our equity capital and approximately 11% of our investable assets excluding cash occur.
<unk>.
Servicing assets declined as a percentage of equity from the previous quarter as MSR valuations were significantly impacted by the decline in mortgage and interest rates throughout the quarter.
Lowering the portfolios market value.
Meanwhile, RMBS portfolio accounted for approximately 41% of our equity a significant decline from the previous quarter as we managed our RMBS portfolio to increase liquidity and to reduce leverage.
As a percentage of investable assets are RMBS represented approximately 89% excluding cash at quarter end.
A conventional and government MSR CPR averaged approximately 20% and 15% respectively for the first quarter a.
A significant increase in March as interest rates decline.
Quarter over quarter, our MSR speeds were better improvement in the first couple of months was partially offset by the rise in speeds in March driven by lower rates, we noticed a similar speed story in RMBS portfolio as well during the quarter.
The RMBS portfolio stood at approximately 1.7 billion as shown on slide seven.
As the latter part of March was focused on de leveraging our portfolio and preserving liquidity.
Quarter over quarter that 30 year securities position grew to 93% of the portfolio up from 87% as of December 31st and the remaining assets represented 7%.
The collateral composition of the RMBS portfolio posted a weighted average three months CPR <unk> approximately 10.2% in the first quarter.
Similar to our MSR portfolio prepayment speeds were lower in the first couple of months of the quarter, but rose in March as U.S. interest rates touched record lows as a result at the pandemic.
For the first quarter, we posted a 1.25% RMBS NIM versus 8.73 NIM.
For the fourth quarter.
The improvement in NIM was due to the lower amortization costs based on those little slower prepayment speeds and was also aided by lower repo costs as well as improved swap income in the quarter.
During the pandemic, we expect the NIM to remain volatile given the lower mortgage rates.
At quarter end, the aggregate portfolio operated with leverage of approximately five times.
From 6.1 times.
The previous quarter.
We ended the quarter with an aggregate portfolio duration gap of negative 0.1 years.
We will continue to evaluate and also the portfolio is necessary I'll now turn the call over to Mike for first quarter financial discussion.
Thank you Julien.
Our GAAP net loss applicable to common stockholders for the first quarter.
It was $46.4 million or $2.79 per weighted average share outstanding during the quarter, while comprehensive loss attributable to common stock holders, which includes the mark to market of our held for sale RMBS was $53.9 million or $3.24.
Per share.
Our core earnings attributable to common stockholders were $7.8 million or 47 cents per share.
As Jay mentioned, our book value per common share as of March 30, Onest 2020. This $13.73 a reduction of $3.62 per share from December 30, Onest 2019, net of the first quarter 2020 dividends.
As previously noted we paid half of our first quarter common dividend in shares of common stock while the impact on book value per common share will be recognized in the second quarter. When the shares were issued it relates to the first quarter dividend.
The effective price of $6 in 27 cents per share was determined in accordance with IRS regulations and resulted in a reduction in book value per common share of approximately 1.6%.
As of April Thirtyth, and after considering the dilutive effect of issuing common stock to pay half of the first quarter dividends.
We believe our book value per common share declined by approximately 0.9% from March 31st.
We use a variety of derivative instruments to mitigate the effects of increases in interest rates on a portion of our future repurchase borrowings.
At the end of the first quarter, we held interest rate swaps Swaptions TV A's and Treasury futures all of which had a combined notional amount of $2.7 billion.
For GAAP purposes, Weve elected not to apply hedge accounting for our interest rate derivatives and as a result, we record the change in estimated fair value as the component component of the net gain or loss on interest rate derivatives.
Operating expenses were four or $4.7 million for the quarter.
Of which approximately $757000 was related to our taxable REIT subsidiary.
On March 12, 2020, we declared a dividend of 40 cents per common share for the first quarter of 2020.
On March 27, due to the pandemic and rising economic volatility, we announced that the common dividends would be paid it in a combination of cash and common stock in order to preserve liquidity.
The dividend was paid 50% in cash and 50% in common stock on April 28 2020.
We also declared a dividend of 51.25 cents per share on our 8.2% series a cumulative redeemable preferred stock.
And a dividend of 51.56 to five cents on our 8.25% series b fixed to floating rate cumulative redeemable preferred stock.
Both of which were paid on April 15th 2020.
At this time, we will open up the call for questions operator.
Well now begin the question and answer session to ask a question you made press Star then one on your Touchtone phone. If you are using you speakerphone. Please pick up your handset therefore pressing the keys to withdraw your question. Please press Star then too.
The first question today comes from Tim Hayes of B. Riley FBR. Please go ahead.
Hey, guys. This is actually Mike Entre can have you doing long congrats on Sean quarter. Despite its going to macro headwinds. So my first question is on seven certain banks issue. It seems that people are banks asking it your ranging from 15% to 20%.
I'm, just wondering how far back how forbearances again trending relative to your initial expectations and then give a bear and a base case scenario for all capital commitments.
[noise] areas, it's Jay.
So as of April thirtyth or conventional portfolio was running.
Around mid eighties paper sense around EUR per barrel active advancements.
And on the Gennine portfolio, where it was lower by a percentage [noise].
So you know mid eights and mid Sevens.
Hasn't really moved since then.
We we ran our you know when they look at.
Yeah.
Cash and and requirements around that.
You know, it's it's it's not a simple answer I mean.
I think we looked at it too in two ways one related to the principal and interest in the other with respect to the to unite components. So [noise].
You know with the GRC is coming out around four months for depend I. Most of most of our analysis ends up focusing on the t. and a component.
And weeks, we've run you know the portfolio in the mid plus teams in terms of forbearance and you know the ginnies closer to 20%.
And you know given today.
We're comfortable with you know the amount of cash that we were we'd need to service that.
On a portfolio.
Through the year through the entity or sorry.
That's that's very helpful and just on a different note can you just provide some color on how you're thinking about kind of the balancing act between liquidity and capital deployment into Q.
The follow up to that given where the stock is trading how do you think about a additional repurchases versus versus investing in MSR Joe yes.
Sure.
So.
Over the last month and a half you know recorded he's been very important part of.
Our reality and I think that over the Nielsen near term, it's prudent for us to continue to think about having a strong.
Liquidity base to manage through the business.
As I think it's more as important in more important that as we get more clarity with respect to you know the country reopening unemployment per barrel active for Barents plans going up or down that will really kind of determine.
How we think about redeploying more capital versus holding cash and I would expect that you know as the country Reopens you know in June and forward.
There will be able to give some more clarity for that but in the near term I think you know we definitely thinking about liquidity.
More so than we are relative to the twin of that cat events that cash into other new.
Assets that you know will help the income stream.
Gotcha, that's that's very helpful and just one more question for me so on the dividend 50% of taking stock in the rest was in cash the board decided not to reduce it. So can you just provide some more color on the dividend dessert an expectation that a certain amount.
It will be deployed or or any other color here would be would be very helpful.
I'm not so you asked me question the dividend on your move to cash in the I'm not sure exactly what the question was.
Hi, I was just is he the decision to maintain the dividend at a time when a lot of peers have reduced their dividend is there any expectation that some percentage of that cash will be deployed over the quarter.
Yes in order to maintain are going to look the stuck answer.
The stuck answer.
Is that the board sets a dividend and at the appropriate time, when the board meets and and we kept the board information to make a an educated decision where to go from that and we'll definitely communicate that.
Got it. Thank you very much for taking my questions and congrats on a corridor.
Thanks, Thank you.
Your next question comes from Steve Delaney JMP Securities. Please go ahead.
Good evening, everyone and first and foremost I'm pleased to see that all you guys are safe and well doing well.
And.
It's been a challenging time and I think where we are today, we can we can be thankful, regardless of the the pain to get here.
Hey in response to Mikes question, you talked about preparing his question about forbearance and where that would go.
Obviously, you're in a cash build mode and we assume part of that is not just playing defense budget prepping for possible. It needs to cover advances are you in discussions about any specific credit facilities with financial institutions that might also you know assist you in that regard.
So Steve we by the way glad to see you're doing well too yes, thanks, very nice joining us today.
So we do have facilities in place today, we have three facilities in place.
For servicing we the the Ginnies.
Have a come a separate component for cnine for servicing advances.
And then with the Freddie line the servicing advances are part of the borrowing base. So <unk>. The only part of the MSR a portfolio that doesn't have a facility is Fannie Mae.
Okay and [noise].
75 of our Fannie Mae portfolio is actual actual.
So we're really talking about a facility you know when the Fannie Mae's for you know the Tonight.
Okay. You know it is definitely and it's definitely something that we're looking into.
Okay. Good so it sounds like there are some there are some things in place that you're not if you're already financing MSR is and you're saying it's part of the facility I guess that was on both the freddies that you're not starting from scratch on the financing standpoint, it sounds like.
Oh, that's that's correct the sort of the party line has always had as part of the borrowing base servicing advances and you know that's part of the total total milling and okay. Any side you know separate facility in tenant just for the servicing advances and as you can imagine you know we didn't have that in the first quarter.
Right.
Obviously sold CRT you disclose that can you just.
It was a general idea of what is left in the credit book.
So I think 12% of the CRT that you're carrying.
Carrying on your on balance sheet with no financing and certainly non agency RMBS or anything else left.
Yeah. So there is it's a small portion small portfolio of.
Crts owned outright.
As of April and <unk>.
Certain memory serves me correct is something a neighbor of 10 million.
And then on the jumbo side, it's predominantly.
Private label Jumbo took place HM Okay, you know.
It's pretty much.
Two issuers to large well known insurers yeah, I mean, we feel very good about.
Yes.
And those are like fairly recent last couple of years.
Current guideline current underwriting guidelines pretty much.
Yes.
We think we know that product pretty well, okay. And then the last thing for me I'm not at all surprise leverage went down in the first quarter and interesting you took it down further I mean.
Applaud I applaud conservatism in defense at this point in time I'm just curious as you as you move down you know a little over one turn of leverage can you talk about.
What you were were selling or how how did you accomplish that de levering.
Giving that book value was essentially essentially flat or down 1% over that period.
So it wasn't it wasn't the book value going up I guess is what I'm sorry.
So you mean over over the second quarter.
No from 331 to 430 your leverage went from 5.0 to 3.9.
I believe Rob yes, right. So yeah. So it was a combination of selling both agencies and continuing to sell securities.
And the you know the only other major component around book value for the for the second quarter through April was really related to MSR as the last two days of the month in April.
I don't know how many people really notice to pay attention, but the primary mortgage rate dropped approximately 20 basis points. So sure. We're very pretty conservative we think in terms of the MSR Mark and you know so that was a you know related to spreads.
And you we made some.
You know adjustments that portfolio, but we didn't so anything there. So you asked me about sales.
We continue to sell some RMBS and then we continued to sell.
Some synergies, we really haven't sold one of the jumbos.
Okay sounds sounds like you've got the balance you pretty much you know pretty much where it needs to be now given everything you've had to come through so okay listen thanks for the comments in every every Oh go ahead I didn't mean to control.
Oh, no sorry, I agree with you I think we're pretty well okay.
Alright, great well listen thanks to the comments everybody stay well.
You too Steve Thanks for calling.
Our next question comes from Kevin Barker of Piper Sandler. Please go ahead. Thank you. So you know, there's obviously been a lot of talking servicing market, where it's been very few bids were the bid in the ask is very wide within you know MSR is today and for good reason right. We don't know.
With the delinquency rates ultimately will be we don't know where mortgage rates are going to go just given where rates are in general but.
Maybe just give us your view on you know your expectations for you know the M.S. ours and weather.
You think that bid and ask will start to tighten here in the near term or you think it's gonna probably play out little bit longer.
Oh, Hey, Kevin or so [noise].
Broadly speaking.
You know dislocated markets.
For.
More off the run asset classes take longer to recover I think you probably agree with that.
I think that you know with respect to.
Things like.
The MSR is uneven crts. The you know it's it was interesting to see how quickly the MBS market snapped back.
The they see or TV market took you know.
<unk> much longer relatively speaking is still somewhat dislocated relative to what we think that ultimate performance will be.
And then you know around origination I think.
You know that's probably.
Most esoteric asset that we own and so I would expect that that takes longer to.
Come back relative to the other two assets but.
I think it's less related to performance and more related to just peoples lack of clarity into all things related to what's happening with respect to that.
Covert issuing forbearance as as you get more clarity into you know how many people in for Barents.
It does require cash requirements to service.
Yes, it relative to making the advances.
I expect to see.
People come back into the space I don't think that people are not buying assets today, because they don't see the value I think that you know when we look at.
Where things might be trading today relative to value to us it seems like a pretty good.
Investment.
And I would expect that you know as we get through the summer that you would see you know that asset return.
To more normal levels relative to where they were they price and where they trade will they get back to where they were I mean, that's a very.
And all things related to you know, what's a servicers responsibility versus the Geo cities versus you know anything the government provider I think that's just a matter of transparency.
Yeah, that's the that's helpful.
I think we all can have her own views on where it's going to go and how is going to play out, but it's certainly volatile certainly.
Quite a bit of things that need to be figured out before we get there.
So and then.
You know and obviously is going to be volatile going forward, but when we when you think about the biggest.
You know headwind or tailwind that you see within the asset yield going forward <unk>.
What's your biggest concern and what do you see you know so far this quarter that that's impacting that asset yield.
Jay you when we do you want to take that.
Yeah I'll take that.
I still think into its amortization I think you know I think in the early parts of other should see the latter part of March early parts of the April I think that the originators are still ramping up the capacity front.
So I still think you still got there's a lot it's still have to get through the the Python here and that will maybe take a little bit longer.
In terms of the repo cost were seeing improvements there I think you saw small portion of the improvement going from the fourth quarter to the first quarter.
I know, where our repo rates were being able to execute now on three month repo is close to close to 30 to 50 basis point.
That's it's a pretty much significant drop from where we currently quoted here in the in first quarter. So we'll see some significant improvement there.
In terms of swaps, obviously would live war coming down versus your fixed costs. If your resetting your swaps I think the advantage that you had between paying baked into sseven loading will be less.
I think are currently I think the the change in repo costs to be able to offset that so that's the case and it really just comes down to amortization, a coupon selection and amortization here by Pee paid so that's that's where my concern is here in terms of the RMBS is is putting together a portfolio.
That you think and pre pay a modestly you're not going to be able to avoid prepays, but prepay modestly and ask for what I've seen so far in the second quarter.
Unlike what I've seen a more collateral has been able to hold up knocking on wood and we'll continue to do that but it's the thing that I worry about them up.
And then there's been some increased discussions or at least chatter around.
Potential.
You know modification programs.
For potentially re Fi program similar to harp.
That could play out when this forbearance program and or at least.
Turning to solve you know the issues with.
Elevated elevated mountain forbearance, and then what would happen says learned to afterwards.
Is there anything you can do to try to protect the portfolio from you know.
Rabbit amortization, if one of those programs where to play out.
How do you view that.
Ray do you want to want to step in on this one.
[laughter].
Sorry, I missed the last part of your question there.
Yeah. So so there's a talk about I just you know significant amounts of it I mean, a potential for a re Fi program similar to harp or potentially a modification program that could occur or whether that FHLB or at the GE. As he is you know is there anything you do to protect your portfolio, if something were like that where to play out and if something were to play out I mean do you.
Do you think Derby.
<unk>, what would be the ramifications of or how do you think about the impact on the Buffalo.
So I mean, it's gonna be somewhat difficult depending on how it's implemented in you know if it's more of a.
You know call like a streamline modification Lake program, you know the impact from servicing standpoint could be minimal because the loan was still sit there its just been modified in a streamlined fashion.
The issue is whether or not this is going to cray buyouts on pools.
Typically with the modification, unlike a repayment plan or deferment, where the loan stays in the pool or if they were to create something more like a harp words, it's more of a true rifai.
And so the new loan has different characteristics and is taken out of the portfolio with where the pool.
And that may cause a prepayment event.
On the MBS.
However, you know it really depends how they enact add more as like a modification program, whereas a you know true harp type program.
Okay. All right. Thank you that's helpful. Thank you for taking my questions.
Sure.
The next question comes from Henry Coffey of Wedbush Securities. Please go ahead.
Yeah going back to Kevin's question.
We're all sort of picking up the same expectations.
There's stories, whatever you want to call them.
About how they're going to deal with forbearance.
For 12 months forward.
<unk>.
You are probably a little closer to the dialogue I mean, what of discussion what of substance is being suggest that.
And how does this affect the whole servicing advance equation.
Or are you just sort of where we are waiting and for details.
You know I guess, it's it's a.
We're I think everybody's waiting I think what what's happening now is.
The programs that have announced it they're waiting to see how things shake out a little bit relative to what happens with forbearance and how many people paying don't pay.
I can tell you that I think we saw you know approximate over 40% made their april payment for loans that were in for Barents.
And so far for May I think we've seen close to 20% make their payment.
So you know it's.
Oh, the only information you really truly get is by talking to some of the industry groups like the MBK and every every week they have a call but.
I think we're all waiting to see.
What's what's going to happen relative to how long some of this stuff persists.
You know again like I said, we feel pretty good that were good three ended the year once that country starts reopening you'll start to see people come off her parents and so really the question becomes how many these people do you think.
Stamford, Barents and ultimately come to become delinquent.
And I think that you know, we're still a little bit early.
In the game to kind of make those conclusions, but as we think about how we stress the portfolio again.
Statement remains the same but we don't get a ton of information from.
He the treasury or anything.
With respect to the geographies around.
What their plans are.
You know at least over the last couple of weeks since they came out with those statements. So you know we're doing what we're supposed to be doing relative to making sure that all borrowers get decisions they need.
And then you know will go from there.
The.
It doesn't sound and listening to you that servicer advance is a big point of anxiety at Cherry Hill.
That you you can readily carried into loans for you know you can do you can do the P. Eni advance for four months.
And then taxes and insurance is less of a burden.
And you also have some escarole your can eat up there and.
It just doesn't it and you have the available lines. It's it doesn't sound like you're talking about this is a crisis point in the organization.
More it's just something to be down again.
It's something to be dealt with it's it's a reason why we're holding you know a decent amount liquidity today and as we get more transparency into.
The absolute and overall numbers of people that.
Go into forbearance will meet the adjustments, but Pete.
I wouldn't say, that's not something that we're concerned about I just don't think it's something that we think is going to be.
Life threatening.
So in addition to your liquidity that you discussed and I know you went into your servicer advance lines, but I was wondering if we could go through those of US again, you have you have Fannie <unk> Freddie and then you had the Ginnie Mae business and those are all different products right.
I mean, the D. The service or at a advance they're all yes.
Yes, sure so its own accusing case, but [noise].
Broadly speaking, we we obviously on Fannie Mae Freddie Mac and Ginnie Mae servicing.
You know we have a ginnie Mae servicing facility, we refinanced the asset and we have a in a separate facility for the servicing advances.
And we believe that you know under the current.
Given the current dynamics that.
Those lines are enough to cover us through the time period I mentioned.
On the Freddie Mac side.
That is pardon me.
Oh I'm sorry, my side, all we have.
Sure Segun.
No I'm listening.
Oh on the Freddie Mac side, we have a.
Facility to finance MSR is as well and the servicing advances are part of the borrowing base. So we can borrow against those advances you know up to the limit of the line and the line and all the information as it was in the queues and okay. So with respect to Freddie those are scheduled actual.
So scheduled interest or actual principle.
And so we believe that you know we're in pretty good shape relative to the overall size a line versus the borrowings.
Barring base today against the assets.
So that ones for the Freddies and Fannies.
We have a separate line for that as well.
And that is only for the asset it doesn't cover the servicing advances and so that's you know something that we're thinking about I'm talking to people about now but to my earlier point, 75% of.
Our Fannie Mae servicing is actual actual versus schedules scheduled.
And you know for those without population, we don't have to advance piano.
So we're only on the hook for Tonight.
<unk>.
And.
And so in years ahead, and you're just discussions I know you know some of your sub servicers are banks and.
You, obviously have good relationships with the street, what what is the expectation that if you needed liquidity liquidity for this it'd be readily available.
If we needed liquidity in what sense that if you needed to add back at borrowing capacity above and beyond anything you haven't place.
What is the tone of your various counterparties.
What a forms of bank sure.
I think you know.
Well, that's right one of them as a bank Oh I'm. One of them is you know wall Street from I would say that you know we have.
Plenty of capacity for.
Fannie side relative to just.
Financing the asset, but again, we don't have a financing facility in place for the servicing advances.
The.
Freddie Mac line again, you know I think we have sufficient room.
Relative to.
The usage I think that usage for the Brady honest about 50%.
So we have a pretty good.
Cushion there and on the Ginnie side.
No that's very different facility and.
We feel that if we needed additional liquidity on the events I agree could have productive conversations with the bank.
So net net you ran okay position.
Does this affect your I know, but you said you were only buying flow MSR is right now.
You're not looking at any both portfolios.
That's right, we're not we're not doing any bulk purchases right now and over the last 45 days, we haven't really added anything in terms of flow either.
Isn't as the environment, if you have the resources in place.
Isn't this given all the volatility in the uncertainty in the anxiety isn't this a good time to be.
Buying I Miss ours.
I think it is that's that's essentially what I tried to saying you know when their prepared remarks, and what I, what I would say what I would say to you though is you know.
The previous 60 days weren't as transparent.
And so without some of that transparency about your responsibilities, we dialed that back a little bit and now we're getting ready to kind of.
Jump back in the water, but we just gave you that where the current level relative to be able to purchase it its a good risk return opportunity.
Great.
Oh and just the last question I don't think you brought this up at what is what is the size of your your agency book right now.
As of April.
Of the agency RMBS portfolio.
Yeah.
Yeah join in ticked up yeah. The purchase is a in the size of the proposed by 1.3 billion profit.
Okay. Thank you.
Thank you very much.
This concludes our question and answer session I would like to turn the conference back over to Jay long for any closing remarks.
Thanks.
Thanks, everybody for joining us in today's call and we look forward to updating you soon on our second quarter results and we hope you remain safe and healthy ever going to me.
The conference is now concluded. Thank you for attending today's presentation you may now disconnect.