Q4 2021 Redwood Trust Inc Earnings Call

Okay.

[music].

Speaker 1: Good afternoon and welcome to the Redwood Trust fourth quarter 2021 Financial Results Conference call. Today's conference...

Good afternoon, and welcome to the Redwood Trust fourth quarter 2021 financial results Conference call.

Today's conference is being recorded.

Speaker 1: I will now turn the call over to Kaitlin Mollritz, Redwoods Senior Vice President of Investor Relations. Please go ahead.

I will now turn the call over to Kaitlyn Mauritz Redwood Senior Vice President of Investor Relations. Please go ahead Caitlin.

Speaker 2: Thank you, operator. Hello, everyone, and thank you for joining us for Redwood's fourth quarter 2021 earnings conference call. With me on today's call are Chris Abate, Redwood's CEO , Dash Robinson, Redwood's president, and Brooke Corrillo, Redwood's chief financial officer. Before we begin, I want to remind you that certain statements made during management's presentation today with respect to future financial or business performance may constitute forward-looking statements.

Thank you operator, Hello, everyone and thank you for joining us for Redwoods fourth quarter 2021 earnings conference call with me on today's call are Chris about day, but would CEO Dash Robinson, <unk>, President and Brookfield Chief.

Chief Financial Officer before we begin I want to remind you that certain statements made during management's presentation today with respect to future financial or business performance may constitute forward looking statements forward looking statements are based on current expectations forecasts and assumptions that involve risks and uncertainties that could cause actual results to differ materially.

Speaker 2: Forward-looking statements are based on current expectations, forecasts, and assumptions that involve risks and uncertainties that could cause actual results to differ materially.

Speaker 2: We encourage you to read the company's annual report on Form 10-K , which provides a description of some of the factors that could have a material impact on the company's performance and could cause actual results to differ from those that may be expressed and forward-looking.

We encourage you to read the company's annual report on Form 10-K , which provides a description of some of the factors that could have a material impact on the company's performance and could cause actual results to differ from those that maybe expressed in forward looking statements.

Speaker 2: On this call, we may also refer to both GAAP and non-GAAP financial measures.

On this call. We may also refer to both GAAP and non-GAAP financial measures the.

Speaker 2: The non-GAF financial measures provided should not be utilized in isolation or considered as a substitute for measures of financial performance prepared in accordance with the

The non-GAAP financial measures provided should not be utilized in isolation or considered as a substitute for measures of financial performance prepared in accordance with GAAP a reconciliation.

Speaker 2: Our reconciliation between GAAP and non-GAAP financial measures are provided in our fourth quarter Redwood Review and investor presentation, both of which are available on our website at redwoodtrust.com.

Liaison between GAAP and non-GAAP financial measures are provided in our fourth quarter Redwood review and Investor presentation, both of which are available on our website at Redwood trusts Dotcom also note that the content of this conference call contains time sensitive information that is only accurate as of today.

Speaker 2: Also note that the content of this conference call contains time-sensitive information that is only accurate as a...

Speaker 2: Redwood does not intend and make undertakes no obligation to update this information to reflect subsequent events or circumstances.

Who does not intend and undertakes no obligation to update this information to reflect subsequent events or circumstances. Finally, today's call is being recorded and will be available on our website. Later today I will now turn the call over to Chris about Jake Bartlett Chief Executive Officer for opening remarks.

Speaker 2: Finally, today's call is being recorded and will be available on our website later.

Speaker 2: I will now turn the call over to Crystal Batte, Redwoods Chief Executive Officer for opening remarks.

Speaker 3: Thank you, Kate, and good afternoon, everyone. Thank you for joining us here today. 2021 was a truly...

Thank you Kate and good afternoon, everyone. Thank you for joining us here today.

2021 was a truly transformative year for Redwood.

Speaker 3: In reflection, we are extremely proud of our team and the continued progress we made throughout the year.

In reflection, we were extremely proud of our team and the continued progress we made throughout the year.

Speaker 3: We generated record performance within our operating companies as they continue to properly scale.

We generated record performance within our operating companies as they continued to profitably scale.

Speaker 3: In addition, we executed on our capital deployment strategies, while also advancing key strategic objectives in technology and product development.

In addition, we executed on our capital deployment strategies.

So advancing key strategic objectives in technology and product development.

Speaker 3: Our performance reflected dedication, discipline, and great collaboration across our inner-

Our performance reflected dedication discipline, great collaboration across our enterprise in.

Speaker 3: This is only possible because of our people. I'm proud to say we've maintained a retention rate for employees that have significantly outpaced published averages for the financial services sector in 2020.

And this is only possible because of our people and I'm proud to say we've maintained our retention rate for employees that have significantly outpaced published averages for the financial services sector in 2021.

Speaker 3: And all of this helped us establish ourselves as the leading operator and strategic capital provider in housing finance, the heart of our corporate vision.

And all of this helped us establish ourselves as the leading operator in strategic capital provider and housing finance part of our corporate vision.

Speaker 3: Quickly recap our quarterly performance for the 4th quarter, which Brooke will cover in much greater detail. We generated gap earnings of 34 cents per diluted share. And book value increase to 12 dollars and 6 cents at December 31st. A marginal increase over the 3rd quarter.

Quickly recap of our quarterly performance for the fourth quarter, which broke will cover in much greater detail.

We generated GAAP earnings of <unk> 34 cents per diluted share and book value increased to $12 six at December 31st.

Marginal increase over the third quarter.

Speaker 3: We increased our dividend to 23 cents per share in Q4, up 9.5% from the third quarter. This is our fifth dividend raise over the last six quarter.

We increased our dividend 23 per share in Q4 of nine 5% from third quarter. This was our fifth dividend raise over the last six quarters.

Speaker 3: On the year, we delivered a 25% return on equity, a 30% economic return, and a 60% total shareholder.

On the year, we delivered a 25% return on equity of 30% economic return and a 60% total shareholder return.

Speaker 3: These numbers do not exist in isolation and are a clear reflection of our potential to generate durable earnings through complementary operating businesses and our investment portfolio.

These numbers do not exist in isolation and are a clear reflection of our potential to generate durable earnings through complementary operating businesses and our investment portfolio.

Speaker 3: We have long positioned our platform to be flexible as the interest rate environment evolves, and this readiness positions us well to navigate the current.

We have long positioned our platform to be flexible as the interest rate environment evolves and.

And this readiness positions us well to navigate the current market.

Speaker 3: The country is still struggling to turn the page on the COVID-19 pandemic. The broad-based economic recovery many had expected by now has been a loose.

But the countries still struggling to turn the page on the COVID-19 pandemic the broad based economic recovery money had expected by now has been elusive.

Speaker 3: Meanwhile, inflation has reached a 40-year high, and an aggressive response by the Fed signals the end of a decade plus of accommodation.

Meanwhile, inflation has reached 40 year high and an aggressive response by the fed signaled at the end of the decade plus of accommodation.

Speaker 3: Higher benchmark interest rates are no longer a prospect or probability, but a reality as yields recently reached their highest levels since 2019.

Higher benchmark interest rates are no longer a prospect of a probability but a reality as yields recently reached their highest level since 2019.

Speaker 3: Markets have been volatile to start the year and we expect that to continue as the Fed embarks upon a series of anticipated rate.

Markets have been volatile to start the year and we expect that to continue as the fed embarks upon a series of anticipated rate hikes.

Speaker 3: The housing finance company, we incur many of the same challenges as other market participants. The Redwoods Business Model has never been beholden to low-bench market interest rates, government subsidies, quantitative easing, or a steep yield.

As the housing finance company, we incur or many of the same challenges as other market participants, but redwoods business model has never been beholden to low benchmark interest rates government subsidies quantitative easing, whereas steep yield curve.

Speaker 3: In fact, the last time the Fed began a rate hiking cycle in late 2015, Redwood's book value grew and we delivered a total economic return of 35% as long-term rates rose and yield curve compressed.

In fact, the last time, the fed began a rate hiking cycle in late 2015 Redwoods book value grew and we delivered a total economic return of 35%.

Long term rates rose and yield curve compressed.

Speaker 3: Today, our model has evolved even further to include revenue streams less correlated with the past events.

Today, our model has evolved even further to include revenue streams less correlated with a passive benchmark rates.

Speaker 3: Great example of this was our expansion into business purpose lending in 2019, where we gained access to a growing cohort of housing investors, taking to refurbish and stabilize antiquated houses.

Great example of this was our expansion into business purpose lending in 2019, where we gained access to a growing cohort of housing investors seeking to refurbish and stabilized antiquated housing stock.

Speaker 3: Our BPL business provided immediate balance and depth to us across a variety of interest rate and credit scenarios, depth that has only expanded since we first entered this business.

Our BPL business provided immediate balancing debt to us across a variety of interest rate and credit scenarios depth. It is only expanded since we first entered this business.

Speaker 3: As our shareholders have grown to know, business purpose loans are primarily either floating rate for the life of the loan or rate locked just ahead of their funding, effectively eliminating the interest rate exposure many mortgage businesses incur in managing a pipeline of consumer residential loans.

As our shareholders have grown to know business purpose loans are primarily either floating rate for the life of the loan or rate locked just ahead of their funding effectively eliminating the interest rate exposure many mortgage businesses incur in managing a pipeline of consumer residential loans.

Speaker 3: Given the outlook for housing, including rising home prices, falling inventory, and increased demand for us of our products, we are very optimistic about the outlook to this business, including volumes in our ways for this segment, even as rates rise.

Given the outlook for housing, including rising home prices falling inventory and increased demand for us if our products. We are very optimistic about the outlook for this business, including volumes in Roe's for this segment, even as rates rise.

Speaker 3: Complimenting our BPL team's performance in the fourth quarter with that of our investment portfolio team, which also took advantage of rising rates and wider credit spreads to deploy capital strategically at a track dimension.

Complementing our BPL team's performance in the fourth quarter was that of our investment portfolio team, which also took advantage of rising rates and wider credit spreads to deploy capital strategically at attractive entry points.

Speaker 3: We deploy 222 million of capital and the new investments in the fourth quarter, but far the mastery of deployments is the pandemic began.

We deployed $222 million of capital into new investments in the fourth quarter by far the most we have deployed since the pandemic began.

Speaker 3: This included approximately 130 million in third party investments, an important validation of our team's ability to flip the script on challenging market conditions by acquiring bonds at sale price.

This included approximately $130 million in third party investments an important validation of our team's ability to flip the script on challenging market conditions by acquiring bonds at sale prices.

Speaker 3: importantly and fundamentally, our portfolio remains strong. And credit performance in our assets continue to improve as indicated by flattening or declining delinquencies across the portfolio.

Lee and fundamentally our portfolio remains strong and credit performance and our assets continue to improve as indicated by flattening or declining delinquencies across the portfolio.

Speaker 3: Our residential business faced the brunt of broader market headwinds in the fourth quarter.

Our residential business faced the brunt of broader market headwinds in the fourth quarter.

Speaker 3: but in a testament to the team, still managed to outperform most, if not all in a second.

But in a testament to the team still managed to outperform most if not all in this sector.

Speaker 3: We took a conservative posture to risk management late in the year, prioritizing healthy margins to high end of our historical range over higher volumes, as we observe a glut of lone inventory of pressuring credit spreads and margins heading into Europe .

We took a conservative posture to risk management late in the year prioritizing healthy margins at the high end of our historical range over higher volumes as we observed a lots of loan inventory pressure in credit spreads and margins heading into year end.

Speaker 3: Certainly 2021 witnessed some of the highest origination volumes that the market has experienced in decades, and our platform kept up with this demand, while also avoiding overhiring that it's typical of the mortgage.

Certainly 2021 witness some of the highest origination volumes that the market has experienced in decades and our platform kept up with this demand while also avoiding the over hiring that is typical of the mortgage industry.

Speaker 3: During the year, we locked a record number of loans as well as distributed them quickly and efficiently into the market for a best in class, curitization and whole loan sale platforms, something dash will elaborate on further. But the headwinds we faced in Q4 were an only market related. The headwinds we faced in Q4 were an only market related.

During the year, we locked a record number of loans as well as distributed them quickly and efficiently into the market through our best in class securitization and whole loan sale platforms.

Dash will elaborate on further.

But the headwinds we faced in Q4 were only market related.

He was out of Washington created some noise as well.

Speaker 3: The recent LOPA increases in high balance loans, loans in second homes, but fourth, by FHFA Acting Director Sandra Thompson, were bold move following the forming woman that changes at the end of the event.

<unk> increases and high balance loans and loans and second homes put forth by FHFA acting director Sandra Thompson for a bold move following the performing loan limit changes at the end of November .

Speaker 3: These fee increases are the clearest acknowledgement yet that government subsidies for certain parts of the mortgage market are unnecessary when the private market continues to serve the...

Fee increases are the clearest acknowledgement yet the government subsidies for certain parts of the mortgage market are unnecessary when the private market continues to serve them efficiently.

Speaker 3: focusing GSE capital and resources where they are needed most. The average of A is achieving some very important objectives.

But focusing GSV capital and resources, where they're needed. Most yeah. Good debate is achieving some very important objectives, one greater support the Gse's mission driven activities to increase safety and soundness and three the continued crowding in private capital, particularly in areas, where our specialized underwriting and loan.

Speaker 3: One, greater support for the GSE's mission driven activity.

Administration expertise more effectively serve homebuyers.

Speaker 3: as a leading partner to the GSEs and a leading voice for quality and innovation in housing finance. We applaud this move by the epic.

A leading partner to the Gse's and a leading voice for quality and innovation in housing finance, we applaud this move by the FHFA.

Finally, I would be remiss not to highlight the continued progress from our <unk> Horizons initiative.

Speaker 3: Finally, I would be remiss not to highlight the continued progress from our RWT Horizon's

Speaker 3: We're quickly nearing the one-year anniversary of launching horizons, which most of you know by now is our homegrown venture investment strategy, which is geared at investing in early-stage financial and real estate technology.

Quickly nearing the one year anniversary of launching Horizons, which most of you know by now is our homegrown venture investment strategy, which is geared at investing in early stage financial and real estate technology companies.

Speaker 3: We believe this business is poised off or meaningful output in 2022 as our portfolio of companies advanced their strategic goals with our support and grow enterprise.

We believe this business is poised to offer meaningful alpha in 2022, as our portfolio of companies advance their strategic goals with our support and grow enterprise value.

Speaker 3: From day one, Horizons has demonstrated redwood's firm commitment to supporting technology that enhances the housing finance industry's ability to serve consumers.

From day, one horizons as demonstrated redwoods firm commitment to supporting technology that enhances the housing finance industry its ability to serve consumers and investors.

Speaker 3: Before I hand the call over to Dash, I want to reiterate the unique positioning that Redwood is in, not just in today's markets, but going forward.

Before I hand, the call over to Dash I want to reiterate the unique positioning that redwood as in not just in today's markets, but going forward.

Speaker 3: Certainly, volatility will persist, but we see a number of supportive tailwinds for our business.

Certainly volatility will persist, but we see a number of supportive tailwind for our business, but I consider our strategies our operating companies in our investment portfolio. We are excited about our ability to navigate and perform through these markets to deliver for our shareholders.

Speaker 3: When I consider our strategies, our operating companies, and our investment portfolio, we're excited about our ability to navigate and perform through these markets to deliver for us.

Speaker 3: And with that, I'll turn the call over to Dash Robinson, Redwood's president, to discuss our operating results. Let's talk to lighters and officers , please.

With that I'll turn the call over to Dash Robinson Redwoods, President discuss our operating results.

Thank you, Chris and good afternoon, everyone.

Speaker 4: As Chris mentioned, the fourth quarter rounded out a very impressive year for Redwood, and I will focus my remarks on framing our recent performance in the context of current market conditions.

As Chris mentioned in the fourth quarter rounded out a very impressive year for Redwood and I will focus my remarks on framing our recent performance in the context of current market conditions.

Speaker 4: and how we believe our balanced business model will continue to create value for Cheryl.

And how we believe our balanced business model will continue to create value for shareholders.

Speaker 4: As interest rates rise in volatility, such as more segments of the market, it is natural to think back to the last time we were in this part of the cycle. Namely from late 2015.

As interest rates rise in volatility touches more segments of the market. It is natural to think back to the last time, we were in this part of the cycle.

Namely from late 2015 through the middle of 2019.

Speaker 4: period during which the fed last hike rates witnessed the zone bouts of volatility. In some cases backdrop by significant geopolitical

The period during which the fed last hike rates witnessed its own bouts of volatility.

In some cases backdrop by significant geopolitical conflict.

Speaker 4: 10-year treasury yield crap north of 3% in late 28.

10 year Treasury yield crap north of 3% in late 2018 impacting mortgage production volumes and leaving the industry with substantial excess capacity.

Speaker 4: impacting mortgage production volumes and leaving the industry with substantial access.

Speaker 4: The tenure, of course, hasn't been close to 3% since, but as policymakers once again grapple with inflation, now emits an ongoing health pandemic. It's helpful to ask what's changed since the last time.

The 10 year of course, hasnt been close to 3%, but as policymakers once again grapple with inflation now amidst an ongoing health pandemic.

It's helpful to ask what's changed since the last time.

For Redwood the answer is quite a bit.

Speaker 4: While our operating model and investment portfolio have always been designed to outperform through a full interest rate cycle, our business model now covers a much broader length.

While our operating model and investment portfolio have always been designed to outperform through a full interest rate cycle are.

Our business model now covers a much broader landscape of housing finance.

Speaker 4: We have products suited for owner occupants and housing investors alike. The critical balance given the path of home prices and persistence applied to man.

We have products suited for owner occupants and housing investors alike are critical balanced given the path of home prices and persistent supply demand dynamics.

Speaker 4: We are also emerging as a leading innovator and finding new ways to help consumers tap into the equity.

We are also emerging as a leading innovator in finding new ways to help consumers tap into the equity in their homes.

Speaker 4: As Chris mentioned, key to our diversification strategy has been our entry into the business purpose lending.

As Chris mentioned key to our diversification strategy has been our entry into the business purpose lending space and core vest. Our BPL platform continues to raise the bar recently setting a series of funding records in quick succession $340 million in December $733 million in the fourth quarter and $2 3 billion.

Speaker 4: And Corvests, our BPL platform, continues to raise the bar. Recently setting a series of funding records and quick succession. $340 million in December , $733 million in the fourth quarter, and $2.3 billion in 2021 overall.

In 2021 overall.

Speaker 4: Full year funded volumes rub over 60% versus 2020. And as year end approach, we began to see further balance in our production.

Full year funded volumes were up over 60% versus 2020 and as year end approached we began to see further balancing our production mix.

Speaker 4: Funded volume during Q4 was split evenly between single family rental and bridge, the latter of which increased 50% quarter of a quarter. Driven by growth in multi-family, where funding's double versus Q3, and the launch of our effort to source loans from third party originators. We're stirring the fourth quarter represented over.

Funded volume during Q4 was split evenly between single family rental and bridge, the latter of which increased 50% quarter over quarter driven by growth in multifamily, where fundings doubled versus Q3 and the launch of our effort to source loans from third party originators.

Which during the fourth quarter represented over 10% of total fundings.

Speaker 4: Single family rental production declined slightly in the quarter due largely to a handful of transactions extending their closing

Single family rental production declined slightly in the quarter due largely to a handful of transactions extending their closing timelines many of which already closed in January in fact January fundings overall for <unk> exceeded $300 million.

Speaker 4: Many of which are already closed in January . In fact, January funding is overall for Corvast, exceeded 300 million.

Speaker 4: Corvass strength and leadership in the market lies in part in its ability to reliably serve its client base. As evidenced by a repeat customer rate.

Core of our strength and leadership in the market lives in part and its ability to reliably serve its client base.

As evidenced by our repeat customer rate consistently above 50%.

Speaker 4: And while Q4 tends to be a seasonally strong quarter for the BPL business, Corvests also enters 2022 with a significant pipeline of activity. And we remain excited about a volume outlook for the business.

And while Q4 tends to be a seasonally strong quarter for the BPL business corvettes also enters 2022 with a significant pipeline of activity and we remain excited about volume outlook for the business.

Speaker 4: For Vailing Industry Dynamics, most notably consistent demand growth for single family rentals. Continue to attract more equity capital to the space that we believe will sustain even as rates.

Prevailing industry dynamics, most notably consistent demand growth for single family rentals continued to attract more equity capital to the space that we believe will sustain even as rates rise.

Speaker 4: We have recently witnessed a notable increase in demand within our client base, evidenced by higher funded volumes across all products, particularly in the build for rent and multi-family.

We have recently witnessed a notable increase in demand within our client base evidenced by higher funded volumes across all products, particularly in the build for rent and multifamily sectors.

Speaker 4: Align with Redwood's overall corporate mission are lending activities in BPL to continue to support the construction and stabilization of high quality and accessible rental housing stock. Fennefitting renters.

Aligned with Redwoods overall corporate mission, our lending activities and BPL continue to support the construction and stabilization of high quality and accessible rental housing stock benefiting renters in local communities alike. In short we believe the importance of BPL products to the housing market has never been higher.

Speaker 4: And short, we believe the importance of BPL products to the housing market has never been

Speaker 4: Growth and distribution must go hand in hand, and such was the case in the fourth quarter, as Corvests distributed over $500 million of SFR loans, including a $304 million traditional capital securitization, and a $202 million whole loan.

Growth in distribution must go hand in hand, and such was the case in the fourth quarter as corvettes distributed over $500 million of <unk> loans.

Including a $304 million traditional capital securitization and a $202 million whole loan sale.

Speaker 4: We also contributed additional loans to our inaugural bridge loan securitization completed in the third quarter, which as a reminder has a 30 month replenishment.

We also contributed additional loans to our inaugural bridge loan securitization completed in the third quarter, which as a reminder has a 30 month replenishment feature.

Speaker 4: We expect to explore executing additional transactions of this type during the first half of 2020.

We expect to explore executing additional transactions of this type during the first half of 2022.

Speaker 4: The recent path of home prices has also made access to private label mortgages important for consumers in more parts of the country than ever.

The recent path of home prices has also made access to private label mortgages important for consumers and more parts of the country than ever before.

Speaker 4: As Chris noted, our residential business set a few records of its own in 2021, and the fourth quarter capped off a historic year for the platform, funding close to $13 billion and locking approximately $16 billion.

As Chris noted our residential business set a few records of its own in 2021, and the fourth quarter capped off a historic year for the platform funding close to $13 billion unlocking approximately $16 billion of months drew.

Speaker 4: During the fourth quarter, purchase is totaled $3.2 billion and locks totaled $2.8 billion as the business position itself accordingly in the face of significant volatility during the last few weeks of the year. Gross margins for the quarter were 90 basis.

During the fourth quarter purchases totaled $3 $2 billion in locks totaled $2 8 billion.

As the business positioned itself accordingly in the face of significant volatility during the last few weeks of the year.

Gross margins for the quarter were 90 basis points at the high end of our historical target range blocks in January were 15% above December lock volumes in February is off to a strong start including the acquisition of several bulk packages from origination partners.

Speaker 4: Locks in January were 15% above December lock volumes, and February is off to a strong start, including the acquisition of several bulk packages from the region.

Speaker 4: More than ever, the depth of our distribution channels and our ability to move risk quickly and efficiently remains a key competitive advance.

More than ever the depth of our distribution channels and our ability to move risk quickly and efficiently remains a key competitive advantage.

Speaker 4: Last year's record volumes in residential certainly benefited from macro tailwinds, but also reflect the platform operating at peak of...

Last year's record volumes in residential certainly benefited from macro tailwind, but also reflect the platform operating at peak efficiency in.

Speaker 4: In 2021, we funded loans from our sellers in an average of 12 days, 50% more quickly than just two years ago, and faster than any of our-

In 2021, we funded loans from our sellers in an average of 12 days, 50% more quickly than just two years ago and faster than any of our peers.

Speaker 4: Our rapid funding program recently eclipsed $1 billion in transaction volume, and we are primed to reengage the market on agency-eligible products, most notably higher-balance loans, where we believe the private markets will once again offer superior execution.

Our rapid funding program recently eclipsed $1 billion in transaction volume and we are prime to Reengage the market on agency eligible products, most notably higher balance loans, where we believe the private markets will once again offer superior execution for our consumers.

Speaker 4: Over the years, we have consistently demonstrated the ability to support our origination partners as markets evolve and are currently poised to go deeper with our solar base than ever.

Over the years, we have consistently demonstrated the ability to support our origination partners as markets evolve and.

And our currently poised to go deeper with our seller base than ever before as.

Speaker 4: As testament to our distribution strength in late January , we completed our first Sequoia transaction of 2022, size at approximately $680 million of principal balance and priced significantly tighter than other R&B upsteals concurrently.

As Testament to our distribution strength in late January we completed our first Sequoia transaction of 2022 size at approximately $680 million of principal balance in price significantly tighter than other arm MBS deals currently in the market.

Looking ahead, we expect a year of transition for the consumer residential mortgage market overall refinance volumes will be lower due to rising rates and if past is prologue will trigger contractions for originators with excess capacity until margins stabilize.

Speaker 4: Looking ahead, we expect a year of transition for the consumer residential mortgage market overall. Refinance volumes will be lower due to rising rates, and if passed, this prologue will trigger contractions for originators with excess capacity until margins stable.

Speaker 4: Our activity in the still resilient purchase market has represented 60% of our volume over the past few quarters.

Our activity in the still resilient purchase market has represented 60% of our volume over the past few quarters.

An area of continued emphasis for us.

Speaker 4: We also expect a renewed focus by originators toward expanded credit products in 2012.

We also expect a renewed focus by originators towards expanded credit products in 2022 to assist homebuyers, who are likely to experience declining purchase power as mortgage rates rise.

Speaker 4: to assist homebuyers who are likely to experience declining purchase power as mortgage rates.

Speaker 4: We've been actively preparing for this market shift for months, especially as more geographies across the country become non-conforming, where access to home ownership will rely on private label products.

<unk> been actively preparing for this market shift for months, especially as more geographies across the country become nonconforming, where access to homeownership will rely on private label products, such as ours and to reiterate Chris's point, while last year's substantial home price depreciation at a proportional impact on GSE loan limits. The recent adjustments to the gse's pricing regime for <unk>.

Speaker 4: And to reiterate Chris's point, while last year's substantial home price appreciation had a proportional impact on GSE loan limits, the recent adjustments to the GSE's pricing regime for certain high balance and second home products will be an important driver of preserving private capital's influence, including Redwoods, in the parts of the market where it is most impactful.

Hi balance and second home products will be an important driver of preserving private capitals influence, including redwoods and the parts of the market where it is most impactful.

Our investment portfolio took full advantage of the fourth quarter as volatility as Chris referenced deploying $222 million of capital overall invest.

Speaker 4: Our investment portfolio took full advantage of the fourth quarter's volatility, as Chris referenced, to point 222 million of capital over.

Speaker 4: The investment mix included agency CRT bonds and a fresh flow of home equity investments or HEI through our arrangement with point digital. We also completed the acquisition of additional season excess servicing rights from securitizations issued pre-2008 through an existing joint.

The investment net mix included agency CRT bonds, and a fresh flow of home equity investments or hei through our arrangement with point digital.

We also completed the acquisition of additional season excess servicing rights from Securitizations issued pre 2008 through an existing joint venture.

Speaker 4: As a reminder, given the highly seasoned profile of the underlying loans, this investment is less interest rate sensitive and more driven by bar or...

As a reminder, given the highly season profile of the underlying loans. This investment is less interest rate sensitive and more driven by bar curates.

Speaker 4: The joint venture also provides several unique adjacent opportunities over the next few years related to calling certain of the underlying securitization

The joint venture also provides several unique adjacent opportunities over the next few years related to calling certain of the underlying securitization transactions a separate effort from our ongoing work and calling our jumbo and FSFR securitizations.

Speaker 4: separate effort from our ongoing work in calling our jumbo and SFRs.

Speaker 4: We have been waiting for an environment like today to deploy our investment capital and continue to find ways to raise additional capital. Pre-de-

We have been waiting for an environment like today is to deploy our investable capital and continue to find ways to raise additional capital Accretively.

Speaker 4: including through the innovative distribution avenues unique to Redwood that I highlighted previous

Including through the innovative distribution avenues unique to redwood that I highlighted previously.

Speaker 4: in order to remain opportunistic while also funding near-term capital needs for our operating platform.

Order to remain opportunistic while also funding near term capital needs for our operating platforms.

Speaker 4: Overall, fundamentals in our investment portfolio remain strong, as overall, the link with these remain low and still elevated prepaid speeds unlock more opportunities to call transactions. Following?.

Overall fundamentals in our investment portfolio remains strong as overall delinquencies remain low and still elevated prepay speeds unlock more opportunities to call transactions as Brook will discuss further.

Speaker 4: As Chris highlighted earlier, the fourth quarter capped off a productive inaugural year for our Horizons.

As Chris highlighted earlier, the fourth quarter capped off a productive inaugural year for our Horizons initiative.

Speaker 4: We completed five new investments during the fourth quarter, including the first two investments through our partnership with Frontiers Capital, and our first follow-on investment in an existing portfolio.

We completed five new investments during the fourth quarter.

Including the first two investments through our partnership with Frontier capital and our first follow on investment in an existing portfolio company at.

Speaker 4: At December 31, 2021, the Horizons portfolio included 15 investments overall in companies with a direct nexus to our operating platform.

At December 31, 2021, the Horizons portfolio included 15 investments overall and companies with the direct access to our operating platforms.

Speaker 4: Life today deployment for horizons is approaching $25 million and our goal remains by the end of 2022 to have 50 to $100 million of capital committed to an increasingly diversified portfolio of primary

Life to date deployment for Horizons is approaching $25 million and our goal remains by the end of 2022 to have $50 million to $100 million of capital committed to an increasingly diversified portfolio of primarily early to mid stage companies.

Since launching our WT horizons, we have strived to imagine how business gets done in the non agency housing market and emphasized innovation in all that we do in.

Speaker 4: Since launching RWT Horizons, we have strived to imagine how business gets done in the nonagency housing market and emphasize innovation and all that we can do to help.

Speaker 4: In addition to encouraging progress at each of our portfolio companies, we continue to see tangible benefits within our businesses.

In addition to encouraging progress at each of our portfolio companies, we continue to see tangible benefits within our businesses and networks.

Speaker 4: Liquid Mortgages blockchain technology is now live for five Sequoia transactions, including our most recent issuance in January .

Liquid mortgages blockchain technology is now live for five Sequoia transactions, including our most recent issuance in January allowing investors access to reliable real time information on underlying loan remittances we.

Speaker 4: allowing investors access to reliable real-time information on underlying loan

Speaker 4: We believe our recently completed HEI Securitization with Point is a critical first step to bring standardization to a diffuse and potentially large assets.

We believe our recently completed hei securitization with point is a critical first step to bring standardization to a diffuse and potentially large asset class.

Speaker 4: Other emerging touchpoints include assessment of the tech-enabled construction management platform built by one of Horizon's early portfolio companies and several data analysis initiatives that we believe can drive our business intelligible.

They're emerging touch points include assessment of a tech enabled construction management platform built by one of Horizon's early portfolio companies and several data analysis initiatives that we believe can drive our business intelligence efforts.

Speaker 4: When you're on, in many ways, the fund is just beginning, especially as we assess strategic overlaps amongst our portfolio companies. That may yield...

When you're on in many ways. The fun is just beginning, especially as we assess strategic overlaps amongst our portfolio of companies.

That may yield new and unexpected innovations.

Speaker 4: I will now turn the caller over to Brooke Carulo, Redwood's chief financial officer.

I will now turn the call over to broker Willow Redwoods, Chief Financial Officer.

Speaker 2: Thank you, Dash. The powerful combination of our complementary segments produced historic operating and financial results in 20...

Thank you.

<unk> combination of our complementary segment produced historic operating and financial growth in 2021.

Speaker 2: As Chris highlighted in his remarks, in the fourth quarter we reported gap net income of $44 million, or 34 cents per diluted share, delivering a 13% overall annualized return on equity for the quarter.

As Chris highlighted in his remarks in the fourth quarter, we reported GAAP net income of $44 million.

34 cents per diluted share delivering a 13% overall annualized return on equity for the quarter.

Book value per share increased to $12.06.

Speaker 2: And during the quarter we announced our fourth consecutive dividend increase, up nearly 10% to 23 cents per share, or more notably up 64% on the year.

During the quarter, we announced our fourth consecutive dividend increase of nearly 10% and 23 cents per share or more.

More notably up 64% on the year.

Speaker 2: In terms of full-year results for 2021, we earned $2.37 per diluted share. Our GAP ROE was 25% and both value grew 22%.

In terms of full year results for 2020 . One we earned $2 37 per diluted share our GAAP ROE was 25% and book value grew 22%.

Speaker 2: The growth in both our dividend and our book's value led to a 30% total economic return on these.

The growth in both our dividend and I both value led to a 30% total economic return on the air.

Speaker 2: I'll begin with our segments, which were realigned this quarter to reflect how we are managing and evaluating the business.

I'll begin with our segments, which were realized this quarter to reflect how we are managing and evaluating the business.

Speaker 2: believe in your segments clearly present the distinct contributions of our operating businesses and our investment portfolio and how they drive value for the overall company.

We believe the new segments, clearly presented distinct contributions of our operating businesses and our investment portfolio and how they drive value for the overall company.

Speaker 2: At year end, approximately 70% of our capital was allocated to the investment portfolio, with the remaining 30% towards our mortgage banking platform, which was roughly unchanged on the court.

At year end, approximately 70% of our capital was allocated to the investment portfolio with the remaining 30% towards our mortgage banking platform, which was roughly unchanged on the quarter.

Speaker 2: We saw several highlights from our business purpose mortgage banking segment. As Dash mentioned, Corvus had a record quarter for volume, up 15% quarter over quarter, ending a year where we saw continued growth in funding volume and growth in new products, which has continued into 2020.

We saw several highlights from our business purpose mortgage banking segment.

<unk> mentioned <unk> had a record quarter for volume up 15% quarter over quarter, and EMEA, where we saw continued growth in funding volume and growth in new products, which have continued into 2022.

Speaker 2: The segments fourth quarter adjusted return on capital was 29%, compared to 43% in the prior quarter. The decline was primarily driven by widening securitization spreads on SFR loans as we approached your end, which negatively impacted the pricing of the pipeline relative to QC.

The segment's fourth quarter adjusted return on capital of 29% compared to 43% in the prior quarter.

The decline was primarily driven by widening securitization spreads on our loans as we approach year end, which negatively impacted the pricing of the pipeline relative to Q3.

Speaker 2: The residential mortgage banking segment generated a 10% return on capital during the quarter compared to 26% in Q3 primarily due to lower loan loss volume.

Residential mortgage banking segment generated a 10% return on capital during the quarter compared to 26% in Q3, primarily in data.

And when my volume.

Speaker 2: Additionally, during the fourth quarter, we saw pressure on our gain-on-sale margins as heightened interest rate volatility resulted in higher hedging costs, and our pipeline was impacted by wide means spread.

Additionally, during the fourth quarter, we saw pressure on our gain on sale margins at heightened interest rate volatility and resulted in higher hedging costs and our pipeline was impacted by widening spreads.

Speaker 2: However, we proactively managed our volume in order to preserve profitability, and we were able to maintain margins at the high end of our historical 75 to 100 basis point range and near the levels we saw in Q2 2021.

However, we have proactively managed our volume in order to preserve profitability.

I'm able to maintain margins at the high end of our historical 75 to 100 basis point range and near the levels. We saw in Q2 2021.

Speaker 2: The dash mentioned are declines in volume were largely driven by seasonality, and our view of the risk of award trade-offs going into your end given volatility, and uncertainty related to monetary policy.

As Josh mentioned, our declines in volume were largely driven by seasonality and our view of the risk or avoid tradeoffs going into year end, given volatility and uncertainty related to monetary policy our.

Speaker 2: Our discretion is beginning to pay dividends in that we enter this most recent period of volatility carrying my inventory as over 90% of the 1.7 billion of residential loans on Valentine's Eve 1231 have been sold, are committed to be sold, or were securitized as of the end of January .

Our discretion is beginning to pay dividends and that we entered this most recent period of volatility carrying my inventory is over 90% of the $1 7 billion of residential loans on balance sheet. At 12, 31 have been sold or committed to be sold or securitized as at the end of January .

The investment portfolio segment also contributed another strong quarter generating additional positive investment fair value changes from our Rps and <unk> securities.

Speaker 2: The investment portfolio segment also contributed another strong quarter, generating additional positive investment fair value changes from our RPL and CoreVest SFR.

Speaker 2: Following the $122 million of investment fair value changes we experienced through the end of the third quarter, the $8 million increase in Q4 reflects further improvement in credit performance across the board.

Well, I mean $122 million of investment fair value changes, we experienced through the end of the third quarter. The $8 million increase in Q4 reflects further improvement in credit performance across the back.

Our investment portfolio delivered 17% adjusted return on capital in the fourth quarter compared to 13% in the third quarter. As we have mentioned, we had an active quarter deploying $222 million of capital to make new investments.

Speaker 2: Our investment portfolio delivered 17% adjusted return on capital in the fourth quarter compared to 13% in the third quarter. As we have mentioned, we have an active quarter deploying 222 million of capital towards new investments.

Speaker 2: We also settled call rights on both CAFL and Sequoia securitization, acquiring $79 million of loans at par, which brings us to nearly $300 million of total loans called in 2021.

We also settled call rights on both capital and Sequoia securitization acquiring $79 million of loans at par, which brings us to nearly $300 million of total loans called in 2021.

Speaker 2: As we amass these loans on balance sheet, we have several financing outlets we are exploring to optimize our capital and our capital.

As we have Matthew student loans on balance sheet, we have several financing outlived their exploring to optimize our capital and execution.

Speaker 2: Turning to the income statement, net interest income was positively impacted by the robust deployment within our investment portfolio, leading to a higher average balance of investments, and a 20 basis point lower average cost of funds on a bridge loan financing, as we experience the full quarter benefit from the bridge securitization, and the warehouse line improvements we implemented in Q3 2020.

Turning to the income statement net interest income was positively impacted by the robust deployment within our investment portfolio, leading to a higher average balance of investment and a 20 basis point lower average cost of funds on our bridge loan financing.

We experienced a full quarter benefit from the securitization and the warehouse line improvements we implemented in Q3 2021.

Speaker 2: Additionally, net interest income also benefited from higher accretion and are available for sales securities with assumed near to intermediate prospects of being called.

Additionally, net interest income also benefited from higher accretion on our available for sale securities with assumed near to intermediate prospect of being called <unk>.

Speaker 2: Looking ahead, none of the fourth quarter gains, there remains potential upside of roughly $2.73 per share in our portfolio. The recombination of premium from callable loans and book value upside from discount securities as underlying performance continues to improve.

Looking ahead net of the fourth quarter gains there remains potential upside of roughly $2 73 per share in our portfolio through a combination of premium from callable loan and book value upside from discount securities and underlying performance continues to improve.

Speaker 2: We currently estimate around 700 million of sick oil loans could become callable through the end of 2022, which we've arrived lower quarter of a quarter, getting flowing estimated pre-payment speeds attributable to higher.

We currently estimate around $700 million of Sequoia alone could become callable through the end of 2022, which we have a revised lower quarter over quarter getting flowing estimated prepayment speeds attributable from here right.

Speaker 2: are commitment to response full growth remains well.

Importantly, our commitment to responsible growth remains well paced despite.

Speaker 2: Despite the record volume we've achieved this year, our portfolio remains fundamentally found, given our disciplined underwriting, the tailwinds of double digit home price appreciation nationwide, robust economic growth and favorable labor market.

Despite the record volume we've achieved this year our portfolio remains fundamentally sound given our disciplined underwriting the tailwind of the double digit home price appreciation nationwide robust economic growth and favorable labor market. We continue.

Speaker 2: We continue to experience stable to improving the length and size across our portfolio. And despite the recent uptick and rates.

To experience stable to improving delinquencies across our portfolio.

And despite the recent uptick in rates.

Speaker 2: average coupons in our residential portfolio remain in excess of current mortgage rates. So while prepayments have fallen from their 2021 peaks, they remain elevated, which is continued positive for our credit investment.

Average coupons in our residential portfolio remain in excess of current mortgage rates.

While prepayments have fallen from their 2021 peak they remain elevated which is continued positive for our credit investments.

Speaker 2: Switching to our funding structure, we maintain excellent strengths in our capital and liquidity position at December 31st.

Switching to our funding structure, we maintained excellent strength in our capital and liquidity position at December 31st with 2 billion of total capital, including unrestricted cash of $450 million, which represented over 50% of our Max exposure.

Speaker 2: $2 billion of total capital, including unrestricted cash of $450 million, which represented over 50% of our marginal debt exposure.

Speaker 2: Our available capital for investment decreased to 150 million at your end, driven by our largest quarter of deployed capital since 20 nights.

Our available capital for investment decreased to $150 million at year end, driven by our largest quarter of deployed capital since 2019.

Speaker 2: Our recourse leverage increased slightly to 2.4 times compared with 2.2 times in Q3, as we utilized approximately $240 million of incremental warehouse debt to finance a higher balance of residential loans and inventory at your end.

Our recourse leverage increased slightly to two four times compared with 2.2 times in Q3, as we utilized approximately $240 million of incremental warehouse debt to finance, a higher balance of residential loans in inventory at year end.

Speaker 2: We continue to balance our warehouse funding capacity between Marginable and non-marginable facilities growing overall warehouse capacity by 14% to 4.6 billion, and our non-marginable warehouse capacity to over 65% of total capacity.

We continue to balance our warehouse funding capacity between margin and non margin of both facilities going overall warehouse capacity by 14% to $4 6 billion and our non marketable warehouse capacity to over 65% of total capacity.

Speaker 2: Additionally, we maintain the conservative risk posture in our investment portfolio. With over 85% of the debt funding of our $2.7 billion portfolio of assets, it's either funded with non-mark to market or recourse debt.

Additionally, we maintained a conservative risk posture in our investment portfolio with over 85% of the debt funding of our $2 $7 billion portfolio of assets, it's either funded with non mark to market our recourse debt.

Speaker 2: Relative to the third quarter, general administrative expenses decreased as variable compensation decline comminsurate with earnings, given the strong alignment of our pay programs with performance.

Relative to the third quarter general and administrative expenses decreased as variable compensation declined commensurate with earnings given the strong alignment of our pay programs with performance.

Speaker 2: While acutely focused on expense management, our absolute expense levels did rise in 2021 as we continue to invest in our people and capabilities to grow our franchise.

While acutely focused on expense management, our absolute expense levels did rise in 2021, as we continue to invest in our people and capabilities to grow our franchise.

However.

Speaker 2: Diverine efficiency ratios, such as pre-tax margin and operating expense of the percentage of gap net income, have improved relative to the prior few years, demonstrating the scalability we're creating within our own platform.

Different efficiency ratios, such as pre tax margin and operating expense as a percentage of GAAP net income have improved relative to the prior few years, demonstrating the scalability, we're creating within our own platform.

Speaker 2: Given the changing tone of the Fed and impending rate hikes, I want to expand upon some of our opening commentary around rising rates to make a few points about Redwoods Financial Driver.

Given the change in tone of the fed and impending rate hikes I want to expand upon some of our opening commentary around rising rates to make a few points about redwood financial drivers.

Speaker 2: We have built a company with complementary and resilient earnings streams that are intended to operate and deliver across changing market environments. Relative to the last hiking cycle Redwood experienced, today over 30% of our capital is allocated to business purpose lending activities and assets that sit in our investment portfolio, which exhibit lower interest rate sensitivity as Dash mentioned earlier.

Built a company with complementary and resilient earnings stream that are intended to operate and deliver across changing market environment.

Relative to the last time hiking cycle of Redwood experienced today over 30% of our capital is allocated to business purpose lending activities in asset that sit in our investment portfolio, which exhibit lower interest rate sensitivity as dash mentioned earlier in.

Speaker 2: In fact, over 90% of the 2.7 billion of assets in our investment portfolio are subordinate securities, bridge loans, and other investments that have a limited impact to values from rising rates.

In fact over 90% of the $2 7 billion of assets in our investment portfolio, our subordinate Securities bridge loans and other investments that have limited impact to values from rising rates.

Speaker 2: We also hedge much of our exposure to interest rates on our loan pipeline. So hedge costs increase in volatile rate environments like we saw in the fourth quarter.

We also hedged much of our exposure to interest rates on our loan pipeline. So hedge costs increase in volatile rate environment like we saw in the fourth quarter.

Speaker 2: and our funding structure limits the impact to net interest margin from rising rates and our margin exposure, mitigating the impact to both profitability and liquidity.

And our funding structure and limit the impact to net interest margin from rising rates and our margin exposure mitigating the impact of both profitability and liquidity.

Speaker 2: In addition to the fact that approximately 80% of our corporate funding from our convertible debt is fixed rate, approximately a third of the financing in our investment portfolio, which drives a significant portion of our net interest income, have fixed rate terms that extend more than a year.

In addition to the fact that approximately 80% of our corporate funding from our convertible debt is fixed rate approximately a third of the financing and our investment portfolio, which drives a significant portion of our net interest income has fixed rate terms that extend more than a year.

Speaker 2: Of the remaining two-thirds, over 90% funds either are bridge loans or are called Sequoia loans which we expect to securitize the next few months.

Of the remaining two thirds over 90% funded either are bridge loans or are call. It took away alone, which we expect to securitize. The next few months.

Speaker 2: The vast majority of our bridge portfolio is floating rate, meaning we've locked in that asset spread, or have a weighted average life of less than a year on those assets.

The vast majority of our bridge portfolio is floating rate, meaning we've locked in that asset spread or have a weighted average life of less than a year on those assets.

Speaker 2: Our speed to market and the depth of our distribution channels is a different shader from our risk management perspective in markets like today. That would continue to turn collateral to the three times faster than the competition with a weighted average loan age of zero to one month on a residential securitization compared to others in the market where it's three to four months.

Our speed to market and the depth of our distribution channels as a differentiator from a risk management perspective in markets like today.

I would continue to turn collateral two to three times faster than the competition with a weighted average loan age of zero to one month on our residential securitization compared to others in the market and we're in three to four months.

Speaker 2: or I conclude I wanted to address some enhancements and changes that we will be making to our package of reporting materials shared with the marketing support.

Before I conclude I wanted to address some enhancements and changes that we will be making to our package of reporting materials shared with the market each quarter.

Speaker 2: Since the firm's founding in 1994, Redwood's commitment to thorough disclosure has been second to none. The centerpiece of this tradition has been the Redwood Review, a unique document that blends personalized outreach from management with rich detail about our recent results and current financial conditions.

Since the firm's founding in 1990 for Redwood commitment to thorough disclosure has been second to none the centerpiece of this tradition has been the Redwood review are.

Our unique document the blend personalized outreach from management with rich detail about our recent results and current financial conditions, as we expand and scale our company the transparency and utility of our disclosures must keep pace.

Speaker 2: As we expand and scale our company, the transparency and utility of our disclosures must be

Speaker 2: As such, we have sought and assessed input on our financial reporting and have decided to make some changes that we will believe will make it easier for all of our stakeholders to digest and evaluate our results.

That should be a thought and assessed and put on our financial reporting and have decided to make some changes that we believe will make it easier for all of our stakeholders to digest and evaluate our results.

Speaker 2: This will be the last quarter we will present the Redwood review in its current form and have instead augmented our other disclosures, particularly the enhanced quarterly earnings related investor presentation, which will soon the Redwood review name going forward.

This will be the last quarter, we will present, the Redwood review in its current form and haven't set augmented our other disclosure, particularly the enhanced quarterly earnings related investor presentation, which will assume the Redwood review your name going forward.

Speaker 2: We outline these changes in detail in this quarter's Redwood review, and we thank you for your valued feedback. With that, I would like to turn it back to the operator to open the call for Q&A.

Along these changes in detail in this quarter's Redwood review and we thank you for your valued feedback with that I would like to turn it back to the operator to open the call for Q&A.

Speaker 1: Thank you. At this time, we'll conduct our question and answer session.

Thank you at this time, we will conduct a question and answer session.

Speaker 1: If you would like to ask a question, please press star 1 on your telephone keypad.

If you would like to ask a question. Please press star one on your telephone keypad.

Speaker 1: A confirmation tone would indicate that your line is in the question queue.

A confirmation tone will indicate that your line is in the question queue.

Speaker 1: You may press the star key followed by the number two if you would like to remove your question from the queue.

You May press the Star key followed by the number two if you would like to remove your question from the queue.

Speaker 1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.

For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.

Yes.

Speaker 1: Our first question comes from both George with KBW, please stay.

Our first question comes from Bose, George with <unk>. Please state your question.

Speaker 1: Hey everyone, good afternoon. Actually first just in terms of residential gain on sale, margin trends, how are they looking in the first quarter to relative to what you saw last?

Hey, everyone. Good afternoon actually first just in terms of residential gain on sale margin trends.

How are they looking in the first quarter two relative to what you saw last quarter.

Speaker 4: Suppose they're still within our historical long-term range, probably a bit closer to the lower end than the 90 basis points that we had in the fourth quarter.

So bose there.

There is still within our historical long term range.

Probably it would be closer to the lower end than the than the 90 basis points that we had.

In the fourth quarter just.

Speaker 4: Just a couple points of insight in terms of what we're seeing in the market right now. Obviously there's been a fair amount of interest rate volatility year to date. A couple things, we have been able to consistently leverage our speed and brand to enhance our execution in general. Some of the securitization executions that we've seen.

Just a couple of points of insight in terms of what we're what we're seeing in the market right now obviously there's been.

A fair amount of interest rate volatility year to date.

A couple of things, we have been able to consistently leverage our speed and brand to enhance our execution in general.

Some of the securitization execution that we've seen.

Speaker 4: year to date are somewhat of a function of issuers securitizing lower coupons, you know, amidst obviously this rate backup. So our ability to securitize more quickly I think is particularly powerful in markets like this.

Year to date.

Are somewhat of a function of issuers securitizing lower coupons.

Amidst obviously this rate backup.

So our ability to to securitize more quickly I think is particularly powerful in markets like this.

Speaker 4: As a reminder, when we securitize our typical loan age is a month or less, which leads the market and really helps from...

As a reminder, when we securitize, our typical loan ages, a month or less which leads the market and really helps from a from an execution perspective, just to be as close to current coupon as possible.

Speaker 4: From an execution perspective, just to be as close to current coupon as possible.

Speaker 4: when rates are moving around. The other thing just what we're observing, market-wide in general with our competitors, there's always an array of pricing strategies between some of our direct competitors, the banks, et cetera. And I think what we're observing now is an opportunity to slot our pricing in a spot that is relatively compelling in order to drive more volume at margins that we like.

When rates are moving around.

The other thing just what we're observing market wide in general with our competitors you know theres always an array of our pricing strategies between some of our direct competitors the banks et cetera, I think what we're observing now is an opportunity to the slot are pricing at a spot that is relatively compelling.

In order to drive more volume.

At margins that we like that are within our long term range.

Speaker 1: Okay, great, thanks, that's helpful. And then just in terms of the money, the investments you put to work in the third party channel this quarter, just curious what the returns are like and how they compare to what you have, your target rate for your retained securitization.

Okay. Great. Thanks, that's helpful. And then just in terms of the investments you put to work in the third party channel. This quarter just curious what the returns are like and how they compare to what you have you would target rate for the for your retain securitization investments.

Speaker 5: Yes, they did a little bit by product, but we're seeing mid-tains returns just given the fact that we...

Yes, thanks, but they all differ a little bit by product, but we're seeing really kind of mid teens returns just given the fact that we.

Speaker 5: We were deploying those as as spreads were widening throughout the fourth quarter. So in terms of entry point, we we really like the basis at which we're owning the security. So it's paired, you know, favorably relative to what we had been seen in terms of subordinated retention level.

You are deploying those as a spread.

Spreads were widening throughout the fourth quarter. So in terms of entry point team, we really like.

The basis on which we're owning those securities.

So.

Favorably relative to what we had been saying in terms of subordinated retention level.

Okay.

Speaker 1: Thanks a lot. I can just one quick one more. Just book value, quarter to date, any changes there.

Thanks, a lot Hey, just one quick one more just book value quarter to date any changes there.

Speaker 5: Yeah, through January , you know, we were about a half of a percent lower in terms of book value.

Through January we are about.

About a half of a percent lower in terms of book value.

Okay, great. Thanks, a lot.

Yeah.

Speaker 6: Thank you. Our next question comes from Don Fandetti with Wells Fargo.

Thank you. Our next question comes from Dod Vendetti with Wells Fargo. Please state your question.

Speaker 7: Good evening. Thanks for the efforts to make things a little more simple. I guess to follow up on the residential mortgage originations, is this sort of just like a market blip where you think you could get back to that $4 billion lock range per quarter, or do you think this is like a permanent step down in the market where you'll just be less active?

Good evening, thanks for their efforts to make things a little more simple.

I guess to follow up on the residential mortgage originations is this sort of just like all market blip, where you think you could get back to that 4 billion lock range per quarter.

Or do you think this is like a permanent step down in the market, where youll just be less active.

Hey, John it's Chris.

Speaker 3: Hey Don, it's Chris. I think the makeup of our production will change, but we're optimistic that we can grow volume from here. We are in a state of transition in the non-agency space for certain, and I think the headlines out of the space, you know, there's another month to go in February of issuers clearing aged collateral.

I think the makeup of our production will change, but we're optimistic that we can grow volume from here.

We are in a state of transition and the non agency space for certain.

And I think the headlines out of the space. There's another month to go in February of issuers clearing aged collateral and dash.

Speaker 3: And Dash mentioned, you know, most of our, most of what we're seeing today is new loans, but what you're seeing is curitized as, are loans that are three or four months old or more. And, you know, a lot happened in the last three months with the rates. So I think there's another month to go there with...

Josh mentioned most of our most of what we're seeing today is new loans, but what are you seeing securitized as your loans there are three or four months old or more and you know a lot happened in the last three months with rates. So I think theres another month to go there with.

With pls, but what's what's happening now and where we're transitioning as to some of the changes that we've seen on the agency side, which should start to hit the market.

Speaker 3: But what's happening now where we're transitioning is to some of the changes that we've seen on the agency side, which has started to hit the market in April , most notably the LOPA adjustments for second homes.

In April .

Most notably the <unk> adjustments for second homes.

Speaker 3: We still see a lot of non-underoccupied. So I think the makeup of what you see in non-agency is going to change, but for somebody in our position, we remain optimistic that we can grow volume over time. This quarter I think is definitely a quarter of transition.

We still see a lot of non owner occupied so I think the makeup of what you see in non agency is going to change but for somebody in our position. We remain optimistic that we can we can grow volume over time.

This quarter I think is definitely a quarter of transition.

Speaker 3: So I think we'll have better guidance the next time we talk.

So I think we'll have better guidance. The next time, we talk but.

Speaker 3: But there's a lot to like from our perspective and where the market's headed.

There's a lot to like from our perspective on where the market's headed.

Speaker 7: it and I know at the September investor day I think there was some guidance provided for 22. How should we think about that now?

Got it and I know with the September Investor Day, I think there was some guidance provided for 'twenty two how should we think about that now.

Speaker 5: I think echoing Chris's comments about where we are just in terms of kind of being in the midst of a massive transition and

I think echoing chris's comments about where we are just in terms of.

I haven't been in that in the midst of a massive transition in terms of all markets.

Speaker 5: in terms of all markets, we have a lot to learn here heading into.

We have a lot to learn here heading into.

Speaker 5: to March, but both with the pace of runoff, the pace of rate hike and the landscape from here. And so I think we wouldn't want to draw a straight line through.

March both with then.

The pace of run off the pace of rate hike and the landscape from here and so I think.

Wouldn't want to draw a straight line through.

Speaker 5: So we're seen in terms of trends in the first quarter, so it's early to give update on guidance. There's a lot that remains, you know, in terms of our long-term plan, we have a lot that remains on.

But we are seeing in terms of trends in the first quarter. So it's early to give an update on guidance, there's a lot that remain.

In terms of our long term plan, we have a lot that remains on track with the objectives that we laid out with our Investor day.

Speaker 5: with the objectives that we laid out with our investor day. And we're seeing, you know, what we, I think one, one thing that we've seen this year is if you look at the contribution of each of our segments, say, into the year, almost kind of commensurate with one another, all around 26 to 28% return. And that was that demonstrated tremendous variability between the segments, between the quarters, just given they have.

And we're seeing you know what we I think one.

One thing that we've seen this year is if you look at the contribution of each of our segments.

Ended the year almost kind of commensurate with one another.

<unk>, 26% to 28% return.

That was that has demonstrated tremendous variability between the segments between the quarters just given they have.

Speaker 5: Very different drivers of performance and so that is just something that we're seeing with the residential business this quarter. Obviously, we there's a lot that we're constructive on in terms of the investment portfolio that just generated a 17% adjusted. Return on the quarter, and we're highly constructive on the. The outlook to from here with respect to volume, so a lot remains on track, but it would. It would be early to give an update on that guidance at this at this stage. Thank you.

Very different drivers of performance and so that is something that we're seeing with the residential business this quarter.

Obviously, we there's a lot that we're constructive on in terms of the investment portfolio that just generated a 17% adjusted return on this quarter and we're highly constructive on the BPL outlook to from here with respect to volumes. So a lot remains on track, but it would it would be early to give an update on that guidance at this stage.

<unk>.

Okay. Thank you.

Our next question comes from Stephen Laws with Raymond James Please state your question.

Speaker 4: Hi, good afternoon. You know, I guess, you know, look like the increase on the BPL side bridge, about half the volume. Can you talk about that? You know, how you expect that mix going forward between SFR and bridge and, you know, I don't think bridge is very interest rate sensitive. But can you maybe talk about stabilized SFR and how you're seeing that product, you know, react any change in price?

Hi, good afternoon.

You know I guess it looks like the increase on the BPL side bridge are about half. The volume can you talk about that you know how you expect that mix going forward between NASA Foreign bridge and you know.

I don't think bridges very interest rate sensitive.

But can you maybe talk about to stabilize FSFR and how youre seeing that product.

Any change in pricing.

Speaker 4: Sure, we really like the balance. Stephen, thanks for the question. Historically, over the past three or four quarters, it's probably been closer to 2 1 3rd SFR and bridge. And so we really liked the balance for a number of reasons, including that historically, Corvast has been particularly adapted, turning the bridge portfolio into opportunities for SFR loans, the lifecycle lender to housing investors. So the more balance we see between bridge and SFR, we think that really.

Sure.

We really like the balance Stephen Thanks for the question historically over the past three or four quarters, it's probably been closer to two thirds, one third FSFR and bridge and so we really like the balance for a number of reasons, including the historically core vest has been particularly adapted.

Turning to bridge portfolio into opportunities for us if our loans.

The lifecycle lender.

Housing investors so the more balanced we see between bridging FSFR.

We think that really organically.

Speaker 4: butchers is the pipeline very positively for us. In terms of the bridge opportunities, you know, we are doing a lot of our traditional bread and butter products, but things like lines of credit, which are cross collateralized to investors, things of that nature.

Buttresses the pipeline very positively for us.

In terms of the bridge opportunities. We are we're doing a lot of our traditional bread and butter products, but things like lines of credit, which are cross collateralized to investors things of that nature.

Speaker 4: We are starting to see more opportunities in the multifamily space come our way. Having a bridge securitization under our belt from last year was a really important step because it provides really long tenure and stable financing for us.

We're starting to see more opportunities.

In the multifamily space come our way.

A bridge securitization under our belt from last year was a really important step because it provides really long tenured and stable financing for us that.

Speaker 4: That is very efficient. And you're right, obviously the bridge portfolio carries with it little to no duration rest.

That is very efficient.

You're right obviously the bridge portfolio carries with it a little to no duration risks.

Speaker 4: because of the nature of the loans. You know, on the single family rental side, we still think there are a lot of layers to peel back, you know, to fully serve that market, you know, are repeat customer rate in general is around 50%, which is again a good balance because it's the right mix between repeat customers. And.

Because of the nature of the loans on the single family rental side. We still think there are a lot of layers to peel back to fully serve that market are a repeat customer rate in general is around 50%, which is again a good balanced because it's the right mix between repeat customers.

And folks that.

Speaker 4: you know, are new to the platform and new to the space in general. Obviously, you know, we pay close attention to benchmark interest rates, you know, those SFR loans are our size, both to home values from a retail perspective, but also debt service coverage, obviously, we have to carefully underwrite our exit. You know, one tailwind there has been obviously the path of rents, you know, rents, as you know, have been historically extremely Brazilian.

Our new to the platform and new to the space in general.

Obviously, we pay close attention to benchmark interest rates those <unk> loans are our size, both so home values from a retail perspective, but also debt service coverage, obviously, we have to carefully underwrite our exit.

One tailwind there has been obviously the path of rents rents as you know have been historically extremely resilient.

Speaker 4: even when HPA hasn't been and so that's a big tail on there. But we continue to see a lot of equity capital come into the space. Nothing is purely rate agnostic but we're very bullish on the fact.

Even when HBA hasnt been and so that's a big tailwind there, but we continue to see a lot of equity capital come into the space.

Nothing is purely rate agnostic, but we're very bullish on the fact that now.

Speaker 4: that capital will continue to come into the space. It's still a very efficient and attractive investment. And as you know, it's worked out quite well.

That capital will continue to come into the space, It's still a very efficient and attractive investment as you know it's worked out quite well as an asset class.

Speaker 4: Over the past 10 years, and we think that will continue to attract more sponsorship.

Over the past 10 years, and we think that will continue to attract.

More sponsorship to the space.

I appreciate the comments there, Chris and touching you talked a little bit of that expanded prime products and opportunities in the purchase market. You know when you think about bigger picture.

Speaker 4: appreciate the comments there Chris and you know touching you know you talked a little about expanded prime products and and opportunities in the purchase market you know when you think about bigger picture

Speaker 4: You know, it's just market going to benefit more from, do you think these expanded prime products, or is it more supply that needs to head as various bottlenecks get sorted out? And then, as you think about refi is going forward, certainly rate driven refi is likely in the past, but given HPA and what seems like less stimulus coming, you know, could we see a wave of cash out refi as homeowners tap equity in their homes, which is pretty fizable for a lot of homeowners with funds?

You know its purchase market going to benefit more from from do you think these expanded prime products or is it more supply that needs to head as various.

Bottlenecks get sorted out and then yeah.

As you think about Refis going forward.

Certainly rate driven refis are likely in the past, but given H P. E. And then what seems like less stimulus coming you know could we see a wave of cash out refi as homeowners tap equity in there in their homes, which is pretty sizeable Florida homeowners at this point.

Speaker 3: Sure, we're pretty excited about the non-QM lineup that we plan to roll out before the QM roll changes. It was largely.

Sure.

We're pretty excited about.

The non QM lineup that we plan to roll out.

For the QM rule changes it was largely.

Speaker 3: DTI driven and now there's just a number of different products that that were interested in.

<unk> driven and now there's just a number of different products.

That we're interested in.

Speaker 3: So, you know, I think there's a big runway there, and I think a lot of originators are pivoting towards those types of products. We're having really good engagement with our seller base.

So I think there's a big runway there and I think a lot of a lot of originators are pivoting.

Towards those types of products, we're having really good engagement with our seller base.

Speaker 3: As far as cash out refi's, I'm not sure given where we're at in the cycle that you'll see so much of that. But I do think you are going to see people look for ways to tap into equity in their homes. And that's something...

Far as cash out Refis I'm not sure.

Given where we're at in the cycle that youll see so much of that but I do think you are going to see.

People look for ways to tap into equity in their homes and that's something.

Speaker 3: We've been very focused on internally, and we should have a lot more to talk about going forward. Obviously, we did the first securitization in the third quarter of home equity investment options with Point Digital. So there's a lot to like there. But overall, I do think there's going to be a big transition to

We've been very focused on internally and we should have a lot more to talk about going forward. Obviously, we we did the first securitization and.

In the third quarter of home equity investment options with point digital.

So there's a lot to like there, but overall I do think theres going to be a big transition to two credit cure.

Speaker 3: to credit cure or expanded credit non-QM. And for us, we feel like we're a step ahead there and that should definitely be a bigger piece of what.

Or or expanded credit non QM and for.

For us we feel like we're a step ahead there and.

Should should definitely be a bigger piece of what we do.

Okay I appreciate it.

Yes.

Thank you.

Our next question comes from Kevin Barker with Piper Sandler. Please state. Your question. Thank you very much.

Your execution on the CT.

Of course securitization has been very efficient and.

Speaker 8: Would you help us, or at least quantify, help quantify?

Could you help us or at least quantify or help quantify the impact of liquid mortgage and utilizing some of that technology in order to.

Speaker 8: impact of liquid mortgage and utilizing some of that technology in order to, you know, the real-time remittance payments and the...

Hum.

The real time remittance payments and.

The transparency that's developed can you help quantify not only the bid.

Speaker 8: the market just for those assets and the transparency, but also maybe the efficiencies are...

And the market.

Just for.

Those assets and the transparency, but also maybe the efficiencies are being developed.

Okay.

Speaker 3: Yeah, I mean, it all it all factors into

Yeah, I mean, it all it all factors into.

Speaker 3: you know our our financing costs at the end of the day and where our sequoies execute and i think early on um... we focused on blockchain technology to help investors get greater transparency into the performance of the underlying loans uh... so that's not something that uh... you know you sort of quantify in basis points but when we look at how our deals have executed

Our financing costs at the end of the day and where our Sequoia is execute and I think early on.

We focused on blockchain technology to help investors get greater transparency into the performance of the underlying loans. So.

So that's not something that you know.

You sort of quantify in basis points, but when we look at how our deals are executed.

Speaker 3: Certainly in January , I think it's widely known that the first Sequoia we completed was well through current market levels.

Certainly in January I think it's widely known that the first Sequoia, we completed was well through current market levels.

Speaker 3: And we continue to see very strong interest for the program. And I think those enhancements, continuing to roll those out, we rolled out some ESG disclosures the first time in January , SASB-based.

And we continue to see very strong interest for the program and I think those enhancements continuing to roll those out we rolled out.

Some ESG disclosures for the first time in January .

SaaS based.

Speaker 3: So trying to lead from the front with those types of innovations, I think is what keeps the...

So trying to lead from the front with those types of innovations I think is what keeps the b execution and our program ahead.

Speaker 3: the execution in our program ahead.

Speaker 3: And over time as we continue to work with Mortgage and we continue to work to enhance the deals and we are very focused on blockchain, you'll start to see more tangibles there, but I think it's still very early innings.

And over time is as we continue to work with look with mortgage and we continue to work to enhance.

The deals and we are very focused on blockchain youll start to see more tangibles, there, but but I think it's still very early innings and for.

Speaker 3: And for now, I think what we're most focused on is just kind of trying to stay ahead of the market, get through this transitionary phase until you start to see the broader markets in a more current coupon position. And I think there, the real differentiation will become more apparent, which is hard to do in a heavy refi market, which is where we've been.

For now I think what we're most focused on is just kind of trying to stay ahead of the market get through this transition phase until until you start to see the broader markets and a more current coupon position.

And I think there the real differentiation will will become more apparent which is hard to do in a heavy refi market, which is where we've been.

Speaker 8: And then we see, you know, home price appreciation was up an exorbitant amount, historical highs relative to the past.

Okay and then.

We see home price appreciation was up an exorbitant amount is at historical highs relative to peers.

Past several decades.

Bind with.

Speaker 8: student loan repayment that's gonna, the more time I'm gonna end here in a couple months.

Student loan student loan repayments, that's going on in the moratorium is going to end here in a couple of months.

You know there's significant amount of pressure that's likely to be on consumers as we move through this year on top of higher rates as well.

Speaker 8: there's significant amount of pressure that's likely to be on consumers as we move through this year on top of higher rates as well. When you look at your portfolio today, are there any specific asset classes where you feel like there's a lot of pressure on consumers as we move through this year?

When you look at that when you look at your portfolio today are there any specific asset classes, where you feel like there's.

Speaker 8: biggest risk from some of those changes whether it's slowing HPA or you know higher rates combined with you know potential

The biggest risk from some of those changes, whether it's slowing HPA or.

Higher rates combined with you know potential.

Less stimulus dollars can be seen in the past.

Yes, I mean at this point, we feel we feel great about the overall portfolio delinquencies are more or less back to pre pandemic levels, there's record amounts of of.

Speaker 3: Yeah, I mean, at this point, we feel great about the overall portfolio, the linkancies are more or less back to pre-pandemic levels. There's record amounts of home equity, you know, probably speaking. So there's no particular point or area of concern today. Clearly, we have, you know, some deep subs on the balance sheet, and we've got RPLs.

Home equity.

You know broadly speaking so theres no theres no.

Particular point or area of concern today.

Clearly we have.

Some some deep subs on the balance sheet and we've got <unk> reforming loan deals. So there is areas where the risks are marginally greater.

Speaker 3: forming loan deals. So there's areas where risks are marginally greater, but those affected down quite a bit as well. And when we look at the quality of the collateral and where we're at from a basis perspective,

But those are factored down quite a bit as well and when we look at the quality of the collateral.

And you know where we're at from a basis perspective.

Speaker 3: You know, we would need to see a pretty significant downturn. So we're not, we don't expect that currently. We obviously monitor, we've got a number of credit metrics that we track and model. But right now we feel very, very good about the book itself. And we're pretty opportunistic right now, putting capital to work. Great. Thank you for taking my questions.

We would need to see a pretty significant downturn.

So we're not we don't expect that currently we obviously monitor it.

<unk> got a number of of of <unk>.

Metrics that we track and model.

But right now we feel we feel very very good about about the book itself.

We're pretty opportunistic right now putting capital to work.

Great. Thank you for taking my questions.

Thank you. Our next question comes from Doug Harter with Credit Suisse. Please state your question.

Speaker 7: Thanks. You talked about the business purpose lending gain on sale was lower due to kind of volatility and securitization execution. One, can you talk about whether there's been any transactions kind of so far in the first quarter and kind of how those spreads are trending? And two, your ability to pass on higher financing costs into the note rate.

Hi, Thanks, you talked about the business purpose lending a gain on sale was lower due to kind of call it volatility and securitization execution.

One can you talk about you know.

Whether theres been any transactions kind of so far in the first quarter and kind of how those spreads are trending and choose your ability to pass on higher financing costs.

Into into the note rate.

Speaker 4: Yeah, there's been a couple of transactions here to date, Doug. Although I would emphasize that, you know, we are, we are the only platform that is that is securitizing our traditional core calfal loans. There's no one out there in the market doing those that remotely close to the scale that we are. And so, you know, our capital offerings are

Yes, there has been.

There's been a couple of transactions year to date Doug.

Although I would emphasize that.

We are we are the only platform that is that as securitizing, our traditional core castle loans, there's no one out there in the market doing those that remotely close to the scale that we are and so our capital offerings are.

Speaker 4: are very unique and they've historically executed accordingly. There have been a couple of transactions, one backed by bridge loans and then a couple backed by…

Our very unique and they have historically executed accordingly, there had been a couple of transactions.

One backed by bridge loans, and then a couple of back by <unk>.

Speaker 4: smaller balance, you know, 30 year term SFR loans, which tend to be backed by, you know, just one home. So pretty fundamentally different products.

Smaller balance.

30 year term <unk> loans, which tend to be backed by just one homes, so pretty fundamentally different products in it.

Speaker 4: it would be hard to draw, frankly, too solid of a line between those executions.

It would be hard to draw frankly to solid of a line between those executions.

Speaker 4: and our core capital offerings for a variety of reasons. That said, in terms of the ability to...

And our core capital offerings for a variety of reasons.

That said in terms of the ability to.

Speaker 4: you know, pass on, you know, to borrowers. You know, we have the ability.

Pass on to <unk>.

So borrowers we have the ability.

Speaker 4: obviously to reset our pricing and the market is competitive. But we look at that every day and I think one thing that I would say is historically just the margin of error with margins in that business, we've historically had significant pricing power. And so we feel like we've got room.

Obviously to reset.

Our pricing in the market is competitive.

But we look at that every day and I think one thing that I would say as you know historically just the the margin of error.

With margins in that business, we've historically had significant pricing power and so we feel like we've got room.

Speaker 4: to still make healthy margins even without fully passing along costs to the bar.

To still make healthy margins, even without fully passing along costs to the bar. It's just it's a huge competitive advantage for us like I said, because we're really the only platform doing those types of loans at scale.

Speaker 4: You know, it's a huge competitive advantage for us like I said because we're really the only platform doing those types of runs at scale.

Speaker 4: So those are pretty big mitigants. And again, in terms of observable prints in the market, there's nothing that really quite compares to what we traditionally issued.

So those are those are pretty big mitigates and again in terms of observable prints in the market. There is theres nothing that really quite compares to.

What we traditionally issue to us.

Speaker 7: Great. And then, you know, sticking with CorveS BPL, it seems like there is

Great and then sticking with core recipe P. L. It seems like there is.

Speaker 7: You know, more capital coming into to be a lender in that in that space through, you know, through other private equity backed companies or transactions that are happening there. Can you just talk about the competitive dynamics and you know, kind of how you feel that Corvest is positioned?

No more capital coming into to be a lender in that in that space through you know through other private equity backed companies or transactions that are happening. There can you just talk about the competitive dynamics and you know kind of how you feel the corvus is positioned.

Sure well you're right, we certainly seen.

Speaker 4: Sure, well you're right, we've certainly seen a couple of larger competitors of CoreVest change hands.

A couple of larger competitors are core vast change hands.

Speaker 4: over the past quarter to, you know, I think it's probably a bit early to tell exactly how that shakes out from a competitive landscape perspective. You know, I would note that one of the platforms

Over the past quarter or two.

It's probably a bit early to tell exactly.

Exactly how that shakes out from a competitive.

Landscape perspective, I would note that one of the platforms.

Speaker 4: originally held by a bank and then changed hands. So it's tough to tell exactly how the costs of capital will evolve.

It was originally are held by a bank and then changed hands. So there.

It's tough to tell exactly how that how the cost of capital will evolve from when the prior owners to the current but.

Speaker 4: from the prior owners to the current. But, you know, we we expect the market to remain very competitive. I think, you know, the couple big things with Corvast that I think are really durable competitive advantages are number one, just how institutionalized.

We expect the market to remain very competitive I think.

A couple of big things with Corvid.

I think a really durable competitive advantages are our number one just how institutionalized.

Speaker 4: and automated the processes are there.

And automated processes are there.

Speaker 4: It's a really big deal to be able to serve these housing investors more quickly. And we feel pretty strongly that we've got a pretty deep competitive mode around our technology and our process.

It's a really big deal to be able to serve these housing investors more quickly and we feel pretty strongly that we've got a pretty deep competitive moat around our technology and our process.

Speaker 4: which to your prior question is another reason why we feel like we've got good price and power in the space. The other thing is just the suite of products. You know, for us, there's always been the end-to-end lender or the ability to, you know, finance the first actions of the investor all the way to financing them when they've got a stabilized portfolio. We're continuing to diversify those products, you know, build for rent is another area of focus, which we hadn't, you had mentioned today. And so I think, you know, on any given loan.

Which to your prior question is another reason why we feel like we've got good pricing power in the.

The space, but the other thing is just the suite of products.

<unk> has always been the end to end lender or the ability to.

Finance the first the first actions of the Investor all the way to financing them when they've got a stabilized portfolio and we're continuing to diversify those products and have built for rent is another area of focus, which we havent yet mentioned today and so I think on any given loan.

Speaker 4: It is competitive, but when a borrower who has, who's got diverse needs, needs a one stop shop, Corvass continues to be.

It is competitive but when a borrower who is whose got diverse needs.

Needs a one stop shop for best continues to be.

Speaker 4: the phone call choice, but that said you're right. The market has clearly been favorable and we do expect competition to remain strong with these new owners.

And the phone call choice, but that said you're right. The market has clearly been favorable and we do expect competition to remain strong with these new orders.

Great. Thank you.

Thank you. Our next question comes from Eric Hagen with <unk>. Please state your question.

Speaker 6: Our next question comes from Eric Kagan with BTIG.

Speaker 9: Thanks, good afternoon. I think just one from me. Can you repeat how much discounted creation you have left to create in the portfolio and the rough timing for that to flow through and earn it?

Thanks. Good afternoon, I think just one from me can you repeat how much discount accretion you have left to accrete in the portfolio and the rough timing for that to flow through into earnings.

Speaker 5: Yeah, we have about $2.22 to share of discount remaining in the book. It didn't include the breakdown of that disorder in the investor presentation, but it is in one of the tables and our financial tables. But the vast majority of that is in our RPL portfolio and in our capital portfolio as well.

Yeah, we have about $2 and trying to sense of share of discount remaining but.

It didn't include the breakdown of that whether in the end.

The investor presentation, but it isn't one of the tables in our financial tables.

Majority of that is in our portfolio and in our.

Apple portfolio as well.

Speaker 9: And then the timing associated with pulling some of that into earnings and maybe has sensitive that is to all the conditions you've talked about on the call.

Okay, and then the timing associated with pulling some of that into earnings on maybe how sensitive that is to all the conditions you've talked about on the call today.

Yeah.

Speaker 5: Yeah, so we, you know, we have about 700 million of loans that we think are callable this year that could obviously accelerate some of the discount coming into the book. These, while they've slowed slightly, remain elevated. We see that across our RPL portfolio, which contains about a 16 CBR last quarter that has been continued tailwind for that portfolio over the last and, you know, these remains higher across.

Yeah. So we you know.

We have about 700 million of bonds that we have.

I think our callable this year that could obviously accelerate the member discount coming into the book.

Steve Boyle, they've slowed slightly remain elevated we see that across our portfolio contains about 16 CPR last quarter that had been a continued tailwind for that portfolio.

Over the last number of quarters and.

Yeah.

He has remained high across.

Speaker 5: Um, our select and choice shelves as well. So those are the main.

Our select and choice shelf as well so those are the main.

That's the main driver. In addition to you know underlying credit performance and as Chris and Dash Al had mentioned in prepared remarks subsequent to then.

Speaker 5: That's the main driver in addition to underlying credit performance. And as Chris and Dash all have mentioned and prepared remarks and such. And we continue to see a lot of strength in the consumer.

We continue to see a lot of strength in the consumer.

Speaker 5: And entail wins for delinquencies to. To continue to be stable at these levels, so all of those should provide support for us capturing that discount.

And in tailwind for delinquencies to to continue to be stable at these levels. So all of those should provide support for us capturing that discount.

Great. Thanks, a lot.

Speaker 6: Thank you. Our next question comes from Steve Delaney with JMP Security.

Thank you. Our next question comes from Steve Delaney with JMP Securities. Please go ahead.

Speaker 10: Thanks. Good evening, everyone.

Thanks, Good evening everyone.

Excuse me looked.

Speaker 10: obviously the changes in the financials i think well-bought-out uh... things do need to evolve i do appreciate you saving the uh... shareholders letter i think it's just a nice connection with your history and legacy so props on that not that i've had to change

Obviously, the changes in the financials, I think well thought out things do need to evolve I do appreciate you're saving the shareholders letter I think it's just a nice connection with your history and legacy so perhaps on that.

Not that I've had a chance to read it this.

This quarter yet.

Speaker 10: So look, I appreciate the candor you guys have kind of expressed in going through the business lines and the fact that there will be sensitivity.

So look I.

I appreciate the candor you guys have kind of expressed and go into the business lines and the fact that there will be sensitivity to higher rates and <unk>.

Credit spreads you know me.

Speaker 10: and widening out here. I mean, I just want to summarize exactly what I...

Being a volatile and widening out here.

I mean, I just want to summarize.

Exactly what I think you said core vest pretty much business as usual.

Speaker 10: pretty much business as usual with obviously tight focus on financing.

With obviously tight focus on financing the investment that would be number one in terms of okay. The least impacted businesses. It would be the bpl's number to use your investment portfolio. I think Brooks said, you didn't have a lot of availability, but $125 million, but if we're going to get dislocation spread why.

Speaker 10: That would be number one in terms of the least impacted businesses would be the BPLs. Number two, use your investment portfolio. I think Brooke said you didn't have a lot of availability but $125 million. But if we're going to get this location spread wide, that's obviously you guys are very well equipped.

That's obviously you guys are very well equipped to step in and take advantage of that so maybe that's like option too and it seems like the real challenge you have from a management standpoint, as you know the prime business residential business.

Speaker 10: to step in and take advantage of that. So maybe that's like option two. And it seems like the real challenge you have from a management standpoint is the prime business, residential business. I guess to switch from statement to questions. It sounds like that's the area where you need to be the most creative in terms of looking at products, whether it's more in the choice area, where it's more the...

I guess just switch from.

Statements to two questions.

It sounds like that's the area, where you need to be the most creative in terms of whether looking at products, whether it's more in the choice area, where it's more of these expanded our agency paper.

Speaker 10: you know, expanded agency paper.

Speaker 10: I mean, how quickly, I guess, did I summarize kind of how you're going to approach 2022, and how much can you really do in the residential to kind of make up for the slowdown with higher rates, especially with respect to refi's? Thank you.

How quickly I guess, what I'm, saying well first off did I did I summarize kind of where you are how are you going to approach.

<unk> 2022, and how much can you really do in the residential to kind of make up for the you know the.

The slowdown with higher rates, especially with respect to <unk>. Thank you.

Speaker 3: Well, hey Steve, I'll take a first crack at that. I think you summarized it well. You know, we're, you know, the Corvests business, the BPL business, we were very strategic in entering that space for these types of circumstances. Yeah, from right.

Hey, Steve I'll take a first crack at that.

I think you summarized it well.

We're you know the core bus business. The BPL business, we were very strategic in entering that space for these types of circumstances, yeah Gram great move.

Speaker 3: Yeah, that's happening exactly as we had hoped and expected, and we expect another strong year for the platform. The portfolio, you're right as well. When spreads widen, particularly credit spreads, we're more sensitive to credit spreads than rates in our book.

So that that's.

That's happening exactly as we had hoped and expected and we expect another strong year.

For the platform.

Portfolio, you're you're right as well.

You know when when spreads widened, particularly credit spreads were more sensitive to credit spreads and rates.

In our book.

Speaker 3: You know, asset prices go down and so that definitely has a marked market impact on your existing book, but creates great opportunities to deploy capital and that also played out in the fourth quarter as our biggest quarter of capital deployment since before the pandemic began.

You know asset prices go down and so that definitely has a mark to market impact on your existing book, but creates great opportunities to deploy capital in that that also played out in the fourth quarter is our biggest quarter of capital deployment.

Before the pandemic began.

Speaker 3: And so, you know, the more interesting story is clearly in Resi. The good news for us is, you know, I think we've tried to highlight how we're differentiated and there's points in that cycle where, you know, you should be more focused on not losing money than trying to make a lot of money. And in the fourth quarter.

So.

The more interesting story is clearly in <unk>. The good news for US as you know I think we've tried to highlight how we're differentiated and there's points in that cycle, where.

You know you should be more focused on not losing money than trying to make a lot of money and in the fourth quarter. You started you started with an industry that had the capacity to originate four trillion dollars of mortgages annually I'm all in.

Speaker 3: You started with an industry that had the capacity to originate $4 trillion of mortgages annually all in.

Speaker 3: And in the span of the quarter, we saw what happened with the inflation prints and with the Fed signaling. And mortgage rates gaped higher. They're significantly higher than they were a few months ago. And that was quickly on the back of record originations. And so we have all this inventory that needs to clear the market.

In the span of the quarter, we saw what happened with the inflation prints and with the fed signaling.

And you know mortgage rates GAAP tire.

Is significantly higher than they were a few months ago.

And that was that was quickly.

On the back of record originations and so we have all this inventory that needs to clear the market.

Speaker 3: which is in the process of doing. So that's gonna continue to be, you know, a headline in the consumer-resby space. We've...

Which is in the process of doing so.

So that's going to continue to be a headline.

And in the consumer resi space, we've substantially cleared out our pipeline, though and in fact I would say we're very much on offense.

Speaker 3: substantially cleared out our pipeline though. And in fact, I would say we're very much on offense in here in the middle of the first quarter. We're actively successfully buying bulk pools of mortgages from originators.

And here in the middle of the first quarter were actively successfully buying bulk pools of mortgages from originators.

Speaker 3: We are having a lot of success effectively pre-placing risk.

We are.

A lot of success effectively pre placing risks.

Speaker 3: And we're very much preparing for these LLPA adjustments and to make sure that we're in a position with our seller base to be boosting our production in our share. So I think our story is not the macro story that's going to command a lot of ink in the first quarter. I think clearly capacity needs to correct.

And we are very much preparing for you know these L O P E adjustments and to make sure that we're in a position with our seller base to be boosting our production.

And our share so I think our story is not the macro story, that's going to command a lot of ink in.

In the first quarter, I think I think clearly capacity needs to correct that.

Speaker 3: The expenses for most originators are too high at this point based on what they were sized to do.

<unk> expenses for most originators are too high at this point.

Based on what they were sized to do it.

Speaker 3: And for us, it's continuing to be efficient turnover capital. Make sure that we're issuing the same types of investments and securities that our support investors know and expect.

You know for us its continuing to be efficient turnover capital.

Make sure that we're we're issuing the same types of investments and securities that are support investors no unexpected.

Speaker 3: and be creative. You know, our team is very entrepreneurial. We've got, we're having great success with, you know, the rollout of non-QM products and just meeting, you know, the needs of consumers in this type of rate environment, you know, declining purchasing power.

And and be creative you know our team is very entrepreneurial we've got really great success with the <unk>.

Rollout of non QM products, and and just meeting the needs of consumers and in this type of rate environment declining purchasing power and the need for expanded products. So it'll be it'll be interesting, but I'd.

Speaker 3: and the need for expanded products. So it'll be interesting, but I'd say the headline for us is we feel really good about how we're positioned. The business is profitable, and if we can do our jobs here, we should be able to take market share and meet our goals.

I'd say the headline for US is we feel really good about how we're positioned the.

The business is profitable and.

If we can do our jobs here, we should we should be able to take market share and and.

Meet our goals.

Speaker 10: That's great to hear. I think it's a positive attitude for the year and it would be different, but you're gonna go for it. So thanks for the comments. Chris, I appreciate it.

Okay, that's great to hear I think it is.

A positive attitude for the year and it could be different but you're going to you're going to go for it. So thanks for the comments Chris I appreciate it.

Thanks, Steve.

Thank you and ladies and gentlemen that is our last question for today and with that that concludes today's call. All parties may disconnect have a great evening.

Speaker 6: Thank you. And ladies and gentlemen, that is our last question for today. And with that, that concludes today's call. All parties may disconnect. Have a great day.