Q3 2021 Home Point Capital Inc Earnings Call
Thank you operator.
Welcome to our third quarter, 20th 21 earnings call. Joining me. This morning are willing to him and President and Chief Executive Officer, and Mark, Alabama, Chief Financial Officer.
During our prepared remarks, we will be referring to a slide presentation, which is available in the events section of the home point Investor Relations website.
Before we begin I'd like to remind you. This call may include forward looking statements, which do not guarantee future events or performance.
Please refer to home points, most recent S. T C filings, including the company's annual report on Form 10-K, which was filed on March 12th 2021 for factors, which could cause the actual results to differ materially from these statements.
We may be discussing certain non-GAAP measures on this call, which management believes irrelevant and assessing the financial performance of the business.
He's not GAAP measures are reconciled to the nearest gas figures and all points earnings release, which is available on the company's website.
I'd now like to turn the call over to willing to him and President and Chief Executive Officer.
Thanks, Gary and good morning, everyone, they're not prepared remarks, I'm going to briefly review our third quarter results and they'll discuss how we are adapting and evolving in a challenging operating environment.
After that Mark will provide more details on the results for the third quarter and chairs. Some initial insights into our fourth quarter performance well then opened up the call to take your questions.
Starting with the third quarter results from an operational perspective, we had another solid quarter in terms of funded origination volume, which total of nearly 21 billion.
I'd also like to highlight that for the last 12 months and it's September 30th are totally funded volume reached $100 billion, which is a significant milestone for home point is just a six year old company.
We ended the third quarter of 2021 with more than 7400 broker partners and 650 corresponded partners in.
In total are third party partner relationships have increased by almost 50% year over year and by 10% since last quarter as I've noted previously the significant shifting competitive dynamics in the wholesale channel, which began earlier. This year is created a strategic opportunity for home point to accelerate our engagement brokers and attract them to our platform.
We have added more than 2500 broker partners and she ended the third quarter of 2020 and over 700 brokers since the end of the second quarter of 2021.
Looking at our mortgage servicing portfolio. We ended the third quarter with nearly 429000 customer which is up 40% year over year are total bounces in the portfolio grew by 70% from the end of the third quarter of 2022, each 126 billion.
From a financial perspective, we bounce back from a challenging second quarter, we generate a total revenue in the third quarter of 275 million and they didn't come up $71 million or 51 cents per share as we have discussed previously a unique set of circumstances in the wholesale channel has created a historic pricing dislocation, resulting in significant pressure on her.
Arjun.
Since we cannot predict when this dynamic may change, we have been taking aggressive action to scale and optimize our business.
Some of the key areas. We had been targeting include more rapidly growing a broker network accelerating productivity and efficiency initiatives across our business continue.
Continuing to enhance our partnering customer experience and diversifying or capital markets execution alternative.
I'm pleased to note we have made meaningful progress in all of these areas during the third quarter.
Starting with our broker partners one of the cornerstones of our business model. So you said and market highly experienced market sales leaders to acquire and build relationships with brokers across the country.
During this approach, we're able to optimize their relationships with our broker partners, while ensuring the end customer has the best possible mortgage experience.
While a differentiated model has enabled us to perform well in a variety of interest rate environment. We believe we are well positioned to gain market share as rates rise and purchase transactions outpaced the growth of mortgage refinancings.
Purchased transactions typically require far more customer interaction then refinancing.
And they are particularly well suited to our customer friendly broker partner model.
From an execution standpoint during the third quarter, we continued to grow our broker partner network and based on the current pace. We're on track to exceed our enhanced target of partnering with more than 8000 brokerages by the end of this year.
In addition, during the quarter, we made significant progress in our implementation of home point amplified.
We introduced this new and innovative service model for the wholesale channel at the end of the second quarter and we expect to complete the rollout by the end of this year.
Amplified combines locally focused support with home points national platform to help them mortgage brokers maximize efficiency and deliver a faster more personalized customer experience.
From a process and technology perspective, and home point, we had built a flexible infrastructure that is highly componentized integrating both best in class third party and proprietary solutions to maximize our flexibility inefficiency, while optimizing partner in customer satisfaction.
In response to the changing competitive dynamic than the wholesale channel, we had been accelerating our efforts and build process improvement and technology implementation and we have made great progress in pulling forward a number of longer term initiatives.
As a result during the third quarter, we were able to drive down our direct loan costs by approximately 10%.
As we continue to move closer to a longterm direct cost per loan targeted in wholesale of $900 per loan by the end of 2022.
Turning to servicing is discussed last quarter, we were focusing in an agency centric platform strategy this'll.
This will give us the ability to lower costs and at the same time enhance the customer experience driving greater lifetime value.
As Michael discuss shortly during the third quarter, we sold an 11 billion dollar G. D me servicing portfolio, which is the fact that where we had Benny subscale servicer.
This sale, which had strong execution has enabled us to further streamliner servicing operation.
The execution level also demonstrates the value we are creating through originations as we noted last quarter. We continued to build a high quality servicing portfolio with very low delinquencies.
These factors combined with slowing prepayment rates I driving improve return.
Finally, I wanted to call out a successful and ongoing efforts to diversify capital market execution alternative.
During the third quarter, we took several notable steps towards enhancing our execution, including accelerating our transition to N. B S delay resources cash sales and trading nearly 1 billion an agency product into nine agency execution or third quarter results demonstrate that these actions have helped both enhance revenues and reduce execution rat.
In addition, just last week, a private and I don't know occupied securitization composed entirely of home point originated loans successfully close.
As we continue to navigate through the current market and competitive environment, we remain intently focused on executing our business plan managing those elements within our control.
We are building on the strengths of our flexible business model to continue to drive home point towards the baseline return on equity of at least 15%.
With that I'd like to turn the call over to Mark.
Thanks, Willie good morning, everyone.
I'd like to spend a few minutes discussing our financial results for the third quarter of 2021 as well as our financial outlook.
Starting with slight five of the earnings presentation, It's really noted notwithstanding.
Notwithstanding the challenging environment, we encountered during the third quarter, we continued to deliver strong performance across some of our key origination servicing metrics.
Turning to slide six we've provided a summary of our financial results for the third quarter of 2021.
Total revenue in the third quarter of 275 million compared with $511 million in the third quarter of 20th once he and $84 million in the second quarter of 2021.
A total expenses of 175 million for the third quarter of 2021 or up slightly versus the year ago quarter, but our expenses were down $23 million or 11% compared to the second quarter of this year as a result of our firm wide cost savings and efficiency initiatives.
Sequential quarter decrease in total expenses was driven by a 16% decline in originations segment direct expenses and a 7% decline in the servicing segments erect expenses or corporate expenses were held slack.
We generated net income of $71 million in the third quarter of 2021, which compared to net income was 264 million in the third quarter of 2020, and a net loss of 73 million in the second quarter of 2021.
On slide seven we have included a quarterly breakdown of are funded origination volume by channel for the last five quarters.
In aggregate, we generated nearly $21 billion a volume in the third quarter of 2021 and $100 billion for the last 12 months ended September 30th.
Consistent with our overall strategy the wholesale channel was the primary driver of our origination volume this quarter, while we scaled back our correspondent activity based on the capital intensive nature of this channel as well as the compressed correspondent margin environment persisted throughout the quarter.
Slide eight includes a snapshot of a R origination segment results.
Origination segment revenue of $184 million in the third quarter of 2021 compared to 532 million year over year in 117 million in the second quarter of 2021.
Gain on sale margin attributable to the channels before giving effect to the impact of capital markets activity was seventy-three basis points in the third quarter versus 233 basis points in the third quarter of 2020 and flat versus 74 basis points in the prior quarter.
Gain on sale margin for the third quarter includes a positive contribution approximately $23 million related to capital markets activity during the quarter, which is reflective of the concerted effort Willy describe that we've been making to diversify and enhance our execution alternatives.
The origination segment contribution margin $67 million in the third quarter of 2021 compared to $424 million in the third quarter of 2020 and negative $21 million in the second quarter of 2021.
At the end of the third quarter of 2021 or total third party partner relationships grew by nearly 50% year over year to over 8100, which represents an increase of almost 2600 net new relationships over the last 12 months 724, new relationships in the last quarter.
On slide nine we have provided a snapshot of are surfacing segments financial results.
The number of customers and are servicing portfolio was nearly 429000, but at the end of the third quarter of 2021.
Which increased 40% from the year ago quarter and decreased 5% from the second quarter of 2021.
The sequential quarter decline was due to the sale of Virginia may servicing portfolio I will discuss any moment.
The servicing portfolio U P. B reached 126 billion at the end of the third quarter of 2021, which was up 70% year over year and up 1% compared to the second quarter of 2021.
Similar to last quarter, besides slowdown in prepayments during the third quarter, which is reflected in the decline in the change in MSR fair value from amortization from the second quarter.
Loan servicing fees of 92 million in the second quarter of 2021, nearly doubled from the year ago period, driven by the growth and are servicing portfolio and grew 7% from the second quarter of 2021.
Before including the impact of the Mark to market fair value of our MSR asset net of hedging the surface. Some segment generated what we refer to as an adjusted contribution margin a positive $9 million, which was up from negative $20 million in the year ago quarter and negative $10 million and the prior four.
Servicing second one contribution margin for the third quarter was positive $86 million, which compared to a negative 32 million in the year ago quarter and negative $40 million in the prior quarter.
Our third quarter contribution margin benefited from a 78 million dollar increase in the mark to market fair value net of hedge of our MSR asset due primarily to an increase in interest rates during the Florida.
During the third quarter, we completed the sale of an MSR portfolio, a single family mortgage loan service, Virginia may with an aggregate U P. P of approximately $11 billion, which represented approximately 41% of Virginia may MSR portfolio as of June 30th.
The total purchase price for the servicing rights was approximately $122 million and we recorded the gain of 7.4 million connection with the sale, which was included in the other income line within our surfacing segment.
We're very pleased with the results of the sale, which is consistent with our strategy to become a more efficient and scaled agency focused service or like driving down our overall servicing costs and also reducing our delinquency, which were less than 1% at the end of the third quarter.
In addition sale provided us with incremental liquidity that we used to reduce our outstanding debt.
Based on a strong execution of our third quarter Jenny May Msr's sale, where you are in the market with an additional Ginnie Mae M. S. R portfolio we.
We expect a sale for clothes in the fourth quarter subject of customary closing conditions.
Turning to slide 10, we have included a summary balance sheet, which highlights are capitalization and liquidity profile.
At the end of the third quarter of 2021, we had a $550 million of liquidity.
While our total assets stood at $9 billion in our book value of 761 million.
During the third quarter, we increased our total warehouse capacity by $400 million from 7.1 billion. The 7.5 billion as of September 30th.
Before I finish my prepared remarks, I would like to briefly discuss our financial outlook.
As we looked at the fourth quarter, we anticipate funded volumes will again be within a range of $18 billion to $22 billion for the quarter.
The competitive pressures, we experienced in the second and third quarters have continued to persist so far in the fourth quarter and these pressures have been exacerbated by higher interest rates and a seasonal decline and purchase activity.
Consequently, we expect our operating results in the fourth quarter to remain under pressure.
This supports are continuing focus on efficiency across the business and also highlights the benefit from the value creation associated with a high quality MSR assets, which we believe will continue to enhance some points book value going forward.
That concludes our prepared remarks for this one we are now ready to turn the call back to the operator to take your questions operator.
Thank you well.
He will not be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad, a confirmation gentleman indicate your lines and the question queue. You may perhaps dark too if you would like to remove your question from the Q.
Four participants using speaker equipment and may be necessary to pick up your handset before pressing the snarky.
Our first question comes from the line of Johnson Daddy with Wells Fargo. Please proceed with your question.
Mark can you talk a little bit about the October keen on sale Martin trend and.
And then my second question is to sort of a broader.
Market remained where we are on margin you know you're sexually kind of breakeven amount of profitability perspective, you know do you look at alternative whether it felt the company or something more for teacher.
Thanks done, let's start with the October numbers as I mentioned in the.
In my prepared remarks.
We were still sitting wholesale margins in the 70 low seventies area and in the fourth quarter, we're seeing additional pressures beyond the competitive pressure. So I would expect to see at least what we're seeing so far is a downward trend on that.
Having said that the focus of the company continues to be to work on our customer experience genetic brokers are the best woman reducing expenses.
So that's what we're gonna be focusing on and continuing to focus on.
Couple that with we've demonstrated that the servicing us that we're creating is also a a high quality.
You put all of that together, we still expect to be profitable in the fourth quarter, but we'll be focused on reducing expenses as well as creating a high value servicing assets yeah.
Yeah. He died so as it relates to the latter part of the question.
We do believe that we're in a in a cycle where things do start to consolidate obviously as a public company we have to be receptive to anything that comes to us. So we suddenly weird listen, but we're also looking at opportunities.
Ways in which we can grow so, but but we do think scales important as you know and we do believe we're at a point in the cycle, where things will start to consolidate.
Okay.
Our next question comes from the line of rock band nearly with you B S. Please proceed with your question.
Oh, Thanks, good morning, guys.
If you could just.
Can you expand upon that began on snail guidance in terms of what.
What you said in your prepared remarks also in terms of how it's trendy.
Wholesale versus correspondent.
And how that May change your perspective on the channel you.
You originated.
Yeah, Hey, good morning, Brock says well they all start so as it relates to the channels.
I imagine.
I think overall the market's under pressure we're hearing.
Specifically on to distribute the retail side of March is coming down pretty materially obviously, that's anecdotal as well as as well as on a direct site, we've seen a little better margin pressure on a direct but not that significant and I think as you know we we do calibrate our revenue with our wholesale kind of a price and it goes out from a wholesale standpoint as well we.
Have seen a correspondent margins level off and we are starting to change our mix slightly as it relates to correspond it because we do see the opportunity there.
So it it's a it's an interesting dynamic because it it feels like in every channel there's a there's a different set of.
Kind of use cases going on.
Got it okay and the could you help us kind of benchmark the 900.
Cost per loan for.
Example.
Getting traction and origination cost reduction service and cost reduction where was that number say.
Last quarter, whereas it now and you know how do we look at the trend through the end of 22 is that kind of a steady reduction to the endpoint or their Stefan.
Step function along the way.
Yeah. He broke I would Ah. This is mark I would I would expect more of a step function.
And the reason for that and it's a nice improvements in the third quarter relative to the second quarter largely as a result of US right sizing the organization. So the new volume levels that we're looking at this 18 to 22 billion versus where we were before which was you know.
It is a $25 billion and we took and actually doing it to get us there.
During the second and third and continuing to the fourth quarter, we're going to continue to invest in technology improvements, that's going to enable us to create a better customer experience as well as automate some of the functions that will then reduce headcount going forward and reduce costs going forward, but that's gonna be more of a step function because above all else, we want to make sure that we're creating a good customer.
<unk> for our brokers and our our our our consumer customers. So as we test and learn and recognize.
That that our technology.
Fixes and improvements are taking we'll be seeing more a step function. So looking into the fourth quarter I would expect to see a continued improvement.
Would expect it to be of a lesser magnitude and we saw going from Q2 Q3, but I would expect to see there's a steady improvement with some step function improvements going out as of 2022 to eventually get us to that $900 per loan.
Okay have you disclose to the current cost for one.
We have not we don't have those those disclosures.
Materials.
Okay. Okay. Good enough thanks for the questions.
Our next question comes from the line of Doug harder with Credit Suisse. Please proceed with your question.
Thanks can can you talk about kind of how you reviewing your balance sheet today kind of the the leopard levels. Following the the first piece to be MSR sale.
And then in that context, you know, having having thought about the the new dividend level.
Ooh, yeah. So on the on the leveraged question.
[noise] leverage.
That we're looking at is or non funded leverage you might've noticed on the balance sheet you saw an increase in our leverage associated with their loans held for sale and that's because we increase the amount of loans held for sale, which is consistent with some of the capital markets activities that we are engaged in holding bone spur M. B S players get a hold more loans accumulating loans.
For non agency types of sales things like that will cause you to have to hold more loans on your balance sheet.
But but those are highly liquid and those loans are will be sold in there that day.
Pay down if you look at the non funded dead or the non warehouse that.
As a percentage of our tangible network that number went from 1.7 times in the second quarter to 1.4 times in the in the third quarter and we see that continuing to improve with a ultimate target of getting that down to one times overtime. So that's what we're targeting as far as the <unk>.
Dividend well not really sure. So as you know at that time, they ipi, we indicated we would pay quarterly dividend.
We had got last quarter that we had made a commitment to a to a specific amount in reviewing the dividend for this quarter of the board determined that recalibrating to yield.
Consistent with our feo disclosure and commensurate with our market capitalization was reasonable.
Mark highlighting we're in a very strong liquidity position.
The Amazons say it really does demonstrate the value that has been created through our origination. So yeah. That's how we got to that.
Level, we got two dug in the dividend.
I appreciate that thank you.
Our next question comes from the line of James lawsuit with Morgan Stanley. Please proceed with your question.
Hi, This is blinking that are on James are fine.
One question, that's a quick follow up on the topic of expenses can you give us any color on your six versus variable cosmetics and hide her focused on reducing fixed costs in particular.
And secondly industry forecasts are kind of predicting a contraction and refi volumes over the next year are there any initiatives that you're working on to.
Kind of mean and so the purchase market.
Thanks.
Okay. So.
Yeah on the expense question.
We have a fair amount of variable expense built and given that our volumes are expected to be relatively flat. However, most of the savings that I'm expecting to see at least in the near term, we're gonna come from fixed cost improvements and that's gonna have to come from efficiency and ultimately.
<unk> head counts as one that volume as I mentioned earlier that efficiency is gonna come as a result of technology improvements that's going to make it easier for us to fund loans and an easier experience for our customers as well. So I would expect to see some of that from happening over time and it'll be a reduction mostly head count there'll be some.
Burial costs, a reduction as we're able to make our our salespeople more efficient, but having said that most of it will come out of a fix.
Fixed cost reductions is what I would expect yeah, hey, black twilley, so as it relates to the to the shift tomorrow or a purchase market first and foremost we feel that we're very well positioned because of our concentration and the broker segment, but.
Brokers being in market and really tied into their communities being able to support brokers as they go out and source more purchase transactions is really our primary focus the second part is is really.
[noise] relates to new product and so as you know we have.
The best in class outside market sales executives and the ability to add additional products to the to both their arsenal and the relationships with our broker partners and not only will impact.
Impact the relationship positively overall, but we think especially relevant for a purchase markets are will be entering the jumbo market starting in the fourth quarter and and then we're looking at some non agency product as well. So there's really really significant opportunity for us and we do think that that both of those products and especially the jumbo product or purchase centric.
Great. Thank you.
Our next question comes from the line of Kevin Barker with Piper Sandler. Please proceed with your question.
Good morning, I, just want to follow up on the leverage question.
Okay could you detail a little bit more about what you're doing from a capital markets perspective, and what assets you're holding on the balance sheet.
Uhm.
A little bit longer than you typically would versus agency loans.
And is that driving most of the $23 million additional gain on sale that you generated during the third quarter.
Hey, Kevin So and we are actually holding agency lungs on the balance sheet in.
If you'll recall prior to the second quarter, we were mostly a cash window cellar, which means that you bold loans for a matter of days and then use themselves with the cash window. So it enables you to be very capital age.
Small amount of loans at any given time, but you don't necessarily get the best execution like going to the M. B S window, we're able to improve our execution, but it requires us to hold loans for.
Like weeks, so so you're accumulating more loans, but they're still agency as long as it's still the same types of loans that we were carrying before.
In addition to that will he was mentioning some of our diversification away from agency sales that tends to also require you to accumulate loans overtime. So that you can have an efficient securitization or or other form of non agency type of sale. So so those so well the the types of loans were pulled into the same loans that we've always been originating.
We're holding them longer to benefit from different types of execution.
The last time I would say is we've always had some type of capital markets gains embedded in that number I know you didn't see that last quarter, because we have some offsetting issues. This quarter was greater because of our ability to take advantage of some of those alternative execution.
So would there be.
Some capital markets.
Additional ravioli interesting calm.
As it related to the 23 million or something similar going forward when you think about.
You know other gain on sale revenue.
I would expect to see that keep in mind that is.
There's a lot that goes into that instead of 23 million it's Ah.
The way the way to think of it as of the time, we lock alone. That's are attributed to the channels and everything that happens after that is what goes through the capital markets line that could include hedge effectiveness changes and pull through right and other things. So I can't say that it will always be positive, but I can say that our capital markets.
Execution gains, which I do expect to continue will go through that line and I expect those to be positive in a in a positive contributor.
Okay. Thank you very much.
Our next question comes from the lineup brick Shane with J P. Morgan. Please proceed with your question.
Hey, guys. Thanks for taking my question with this morning, I just want to be clear was the Uhm times, what we got for the fourth quarter unfunded volume or on pull through adjusted lock.
It was unfunded billing.
Okay. So I guess the question I have this last quarter you provided.
That metric on a pole through basis.
<unk> get that number for this quarter, because I I think I tend to think of funded it a little bit of a lagging indicator versus pull through.
Is a leading indicator I'm curious.
Where we are for the fourth quarter.
Here.
Yeah, I think we're gonna be in a in a similar place.
I I think I.
Gave the guidance there was a funded volume, but I think I don't think it's going to be that much different.
Yeah, we saw it.
So if you look at our third quarter I think are Ah fall out adjusted loss was a little bit over 21 billion funded long is a little bit under 21 billion. So it might be you know that kind of thing it won't be exact but it'll be hopefully pretty close.
Got it and when we think about the hedge on the pipeline.
And this is this is really the heart of the question.
<unk>.
The wholesale channel because you have an intermediary who is working on behalf of the bar or.
When rates fall.
You have the dynamic of the broker going out when we shopping alone and so your fall out east versus other channels are likely higher.
And in environments, where rates rise.
You're you have sort of be expected or perhaps even lower fallout I'm curious how you think about touching the wholesale channel given those dynamics.
In terms of broke her behavior.
Yeah, Hey, Hey, Rex Willie So I mean, we we do a ton of analysis related to the far behavior and there's all kinds of variables that go into that not the least of which is the status of alone itself and I think that the the ability to swear once the phone is in process the ability to switch it.
<unk>.
To make that a little more fungible, it's it's much lower especially as you know versus historically and so we don't have very wide swings in fallout based on Ah right moves are.
Capital markets moves.
What we do is we we monitor it very closely read back test all of our assumptions will make adjustments. If it is necessary to those we have we haven't seen a wide variation call out.
Yeah since I'd say since mid last year when I.
It was much more a function of.
Some of the process challenges and just the overall volatility of the market so our thoughts within Ah.
5% to 10% range like in any cycle.
Got it and actually will eat that brings me to my next question, which is that as the supply demand in Dallas in the industry.
[noise] reaches a newly.
Equilibrium not easy to stay at six in the morning I apologize.
And reports from a more normal level are you seeing the time between the lock in funding revert to the normal timeframe that actually make highflying hygiene easier.
I'd say, yes, and yes. Some of that is due to our own process improvement. So we are very focused on continuing to reduce that cycle time for you know the reasons. You mentioned in addition to that the customer and our partner experience.
But they sort of you can make the cycle time the last.
Exposed you are the potential fallout and we are starting to see that happen I I wouldn't say, it's a meaningful part of the Delta I'd say more of it is due to our own.
Improvements, but were intently focused on that for the multiple reasons that I mentioned.
Yeah, Okay, and then I apologize for one last question having done this long enough to have lived through a couple of cycles in this industry.
I'm curious how you think about your migration into jumbo enter into some nonconforming loan.
Changing your capital markets execution left.
Well I think.
The good news on that is that because we started diversifying our execution on on the agency product we have both the plumbing in place to be able to to do the loans as quickly as as the counterparty will allow us to and to be able to extend out the hedging associated with those lines. So I feel I feel like we've already we already have the components in place to be able to mitigate.
That risk, but the other thing that we're really doing with both the jumbo and the non agencies he rolled them as as they will be in separate process past. So in other words, we won't be commingling that the processes associated with those loans with.
That the.
Agency loans, there that government loans that we do now so because we do we look at the defect Deepak risk associate with those loans is higher obviously, so the design is really to ensure that that we can mitigate the risk that you talked about.
Okay, great. Thank you got.
Our last question comes from the line of Mirror sat down with Bank of America. Please proceed with your question.
Good morning.
Q.
Woot.
Maybe just the stuff with all I wanted to clarify the comments on margin expectations for the fourth quarter. Thank you.
Thank you said that you're still so you can go see it in the low seventies, you're seeing some Christians almost although.
Channels do and did you did you also see that there's a bit of a dull pain.
Cool gentle luggage.
I guess, there's a downward okay, what we are seeing.
The same competitive pressures exacerbated by you know we got higher rates now you are entering the purchase season, which are you're entering and exiting the purchase season, So there's a little bit of.
Not as much purchase business to go around so.
Additional pressure on margins.
But and then I wanted to talk about the.
And the solar sail and.
Selling the Genie portfolio.
E E.
It is the idea here.
You don't want to be a junior so the sofa the most bumps to the ideas to just so the rest of you.
Julie.
So let's see.
[noise], Yeah, it's way that's right. So we looked at it we really liked it had to optimize our operation.
And looking at that Ginny segment of the portfolio. We determined that we were simply sub scale and there are obviously several are very large scale servicers out there that that frankly proceed greater value and that servicing that then we could ascribe to it. So so as a result, we went out and executed on a transaction is mark mentioned.
We have a second transaction and market. We were really pleased with the execution, we got and we think we think not only does it validates the strategy I guess the premise behind the strategy.
It really demonstrates to value that we're creating to originations sometimes isn't fully recognized until you monetize the asset.
So that's it and then because he was pleased with the execution is it fair to assume that.
No change on the origination.
Appetite Virginia.
Cause you know, it's 20% both I think you do it with like 20 plus percent in Lafayette was probably 30 plus percent of in Virginia.
I just wanted to any change in your life.
I appreciate you asking that because I do want to clarify and it sure everybody knows that we continue to originate.
And the Ginny in.
<unk> USDA markets and you.
We will continue to do so it's an important part of what we do from at origination in a partner standpoint, and we're getting we're very pleased with the values that we're creating through that so we will stay on that origination market absolutely.
Okay, Great and then just one last question is look we.
We understand.
Dividend you'd probably needed to be Scott just given the market cap can the way.
And and the stock, but what are they doing it.
Kind of felt a little bit on that is that also a reflection of yoga you that this challenging operating environment will speak for a little while.
Should we not be too much into that dividends.
I.
Yeah, I think we we have we have a number of constituents and we look at all of them and we tried to balance out.
What we think makes sense and.
It is a reflection more of what we think is appropriate based on.
What we've committed to you at the time of the IPO, but it is also somewhat reflective of what's happening in the market absolutely.
Okay, well those are all my questions. Thank you.
Yeah.
That concludes our question and answer session and I'd like to hand, the call back to Gary sign for closing remarks.
Great. Thanks, operator, thanks, everyone for joining us this morning for the quarterly earnings call. Please feel free to give me a call. If you have any follow up questions and we look forward to speaking with you again next what.
Ladies and gentlemen discuss.
Today's teleconference. Thank you for your participation you may disconnect your lines at the time and have a wonderful day.
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