Q3 2022 UWM Holdings Corp Earnings Call

Good morning, My name is Rob and I'll be your conference operator today.

At this time I would like to welcome everyone to the U W. M Holdings Corporation third quarter 2022 earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If at any time, you would like to remove yourself from the queue. Please re press star one.

Thank you Les Colo you may begin your conference.

Good morning. This is Blake Colo Chief business Officer, and head of Investor Relations. Thank you for joining us and welcome to the third quarter 2022, you Wm Holdings corporations earnings call before we start I would like to remind everyone that this conference call includes forward looking statements for more information about factors that may cause <unk>.

Actual results to differ materially from forward looking statements. Please refer to the earnings release that we issued this morning.

I will now turn the call over to Matt <unk>, Chairman and CEO of UW M Holdings Corporation, and you're right a wholesale mortgage.

Thanks, Blake and thank you everyone for joining us today, we're excited to be hosting this call as the number one overall mortgage lender in America, there's never been a 100% wholesale lender that has earned his title and we are very proud to be number one.

What a great day for the U W family, our team members, our mortgage broker partners and our investors well I didn't know when I was kind of at this day would come because as I continue to say brokers are the best place for consumers to get alone in the wholesale channels. The best place for a loan officer work.

And that is why we are number one together as a community with our brokers at this point I would hope everyone realizes we consistently deliver on what we say we said we dominate the purchase market. We just had our best purchase quarter of all time and nearly $28 billion of purchase volume. We believe the combination of brokers and their real estate partners.

Coupled with UW them efficiencies and technologies make for a championship combination for the American consumer.

We told you when we launched all in in March of 2021 that this decision would help the broker channel growth and ultimately our share of the channel. Some question to us and thought we'd lose brokers and market share. However, the exact opposite has happened I estimate that our share in the wholesale channel in the third quarter will be the largest ever recorded in history I believe it would be no.

With a 40% and perhaps even closer to 50%.

Most recently, we told you our game on strategy with separate us even further from our competitors since the start of game on we've had thousands of loan officers try for the first time experiencing our technology, our servicing quickly realizing the partnering with U W. M can help them win in any market.

We said that loan officer would migrate from retail to wholesale this year and accelerate during game on this is habit. We estimate over 17000 alone I said joined the mortgage broker channel this year and about half of them coming directly from the retail channel.

These are highest numbers ever seen since tracking this data.

We also told you that it would be better for us to focus on growing our market share organically instead of by acquisition. How has that played out I'll tell you. This is played out extremely well there were a lot of uncommitted wholesale lenders in the market and with game on some of them decided to exit because of their lack of efficiency and lack of commitment to the broker community.

There are many committed wholesale lenders in the market that are doing very very well and brokers have so many choices over 50, great wholesale options to choose from but I want to make one thing very clear the decisions. We make continually force every wholesale lender competing in the wholesale channel to level up their game, which is a massive positive.

For every broker and consumer in America. Many people express their disbelief that a company only fighting for two out of every 10 loans, you Wm and the broker channel could ever be the largest lender in America and here. We are the number one overall mortgage company America about one year. After our first publicly said that that was a possibility.

Do it.

One other thing we've talked about that also sets us apart is we've never had a layoff and never will have layoffs.

We don't need to lay off people to control our expenses year to date, we've made about $1 billion and one of the most difficult mortgage environment of all time.

And we do this by leaning into technology, our operational efficiencies things such as bolt and other technology that we built from scratch here at U. W. M. We are about people and family and our culture layoffs I've never been on the table and never will be but controlling our expenses and managing our cost per loan is always a major priority at UWS.

I told you the dividends would continue and I'm happy to announce for the eighth consecutive quarter, we will be paying 10 cents per share, which right now represents over a 10% annual yield.

Now I'm going to tell you what else is going to happen. We are the best strategic position we've ever been at your Wm, because brokers are growing our competitors, who are uncommitted to the channel are struggling and retail is falling apart just like we said it would I'm very confident that sometime in the very near future, where there's 24 2020 by 2000 and I think we will have years just like 2020.

Or even better.

We are excited about the future and we are in great position to dominate.

We've been questioned about all in we've been question about gay man. We've been question of whether we would ever be number one we've been whether they are at and we continue whether we win and purchase whether the broker channel will grow I don't know what else to say, but what we have said would happen has happened maybe just maybe there really is one elite mortgage company in America, maybe theres, one CEO and us.

Leadership team that really is in the weeds of the business and knows the business better than the rest who knows that's what we believe I hope you are starting to believe it is well alright lets get into third quarter highlights we closed about 33 and a half a billion dollars in production for the quarter handily, beating our guidance 27.7 of this was purchase volume 24%.

Higher than last quarter I described our personal performance last quarter is dominant and 24% more is even more dominant again, we average about $24 billion and purchase for the last six quarters, we are winning in the purchase market.

I'm also proud to say, we delivered 325.6 million of net income for the quarter with a gain margin of about 52 basis points, which was within our guidance I'm still confident will average about 75 to 100 basis points for the full year as I've been saying all along.

We continue to deliver World class service levels are N P. S. As plus 88 for the year and our speed to close is nearly twice as fast as the rest of the industry.

In addition, we delivered about fully diluted earnings about 13 cents per share.

Andrew will provide more color on some of these numbers in a few minutes, but I want to dig deeper on the long term perspective of game on.

As a refresher game on as a long term investment in our business and the broker channel. We launched on June 22nd in this strategy will help brokers and UW on win long term as partners together.

We know with brokers, having the best Technology service partnership that will lead them. They can win but now with a massive pricing advantage they will grow and recruit even more loan officers and they will continue to build their real estate relationships. This is a winning combination and brokers are winning right now and game on is a big part of it just like the all in from March of 2021.

<unk> game on receive criticism from our competitors and other industry pundits. It's undeniable that game on has been a massive success for the broker community brokers are adding aloes faster now than we've ever tracked as I said earlier brokers that added over 17000 loan officers this year to our channel with a good amount of those coming in Q3.

At UWS since the launch of game on we've also converted nearly 12000 loan officers that have never worked with us before or haven't worked those in a long time, we are winning with these new clients that are trying us for price and working with us because of how great. We are from a service technology and partnership perspective, the broker channel is growing.

Loan officers are joining the broker channel came on is a huge part of this.

As you can tell I'm fired up about how far we've come and where we are going our business in the broker channel have never had more momentum than it has right now and we're going to continue to grow together I'll now turn things over to our principal financial Officer, Andrew who Robyn Thanks, Matt as Matt discussed we remained profitable in this environment as reflected in our reported net income of 300.

$25 6 million in the third quarter, our Q3 results benefited from increases in the fair value of our MSR portfolio due to rising primary mortgage interest rates, but our total origination volume for Q3 was very strong as Matt mentioned of approximately 12% sequentially from Q2.

Our servicing portfolio also remains very strong with a total view P. B of approximately 306 billion is newly originated and retained MSR ours have largely kept pace with sales and payoffs to date in 2022 with a very low WAC very low delinquencies and a high asset quality, our MSR portfolio is stronger than ever.

And continues to provide balance to our business model, our recurring quarterly cash flow stream and a strategic source of additional liquidity.

Speaking of liquidity, we took steps in Q3 to further improve our liquidity position, which allows us to continue to strategically invest in both the wholesale channel and in growing our market share.

In early August we entered into an unsecured line of credit with our principal shareholder with available borrowing capacity of $500 million in late September we entered into a line of credit secured by certain of our msr's with available borrowing capacity of 1.5 billion. Neither of these facilities have been drawn upon has at the end of Q3 and we ended Q3.

<unk> with approximately 2.9 billion and total available liquidity, including over $800 million of cash and self warehouse and 2 billion of available borrowings under our secured and unsecured lines of credit.

This is a significant enhancement to our liquidity position for Q2 and the beginning of the year.

Excluding the impact of an increase to our representation and warranty indemnification reserves recorded in Q3 total expenses were down sequentially in Q3. Despite the increase in loan production. We continue to be focused on staying disciplined with cost management in the current origination environment and are comfortable at more aggressive cost reduction actions are unnecessary and would be shortsighted.

As noted in our earnings release, the board again authorized for the eighth consecutive quarter, a regular dividend to be paid to our public shareholders for Q4, we continue to be comfortable with the amount and timing of the dividend and believe it is appropriate to continue to reward our stockholders.

I will now turn things back over to our chairman and CEO Maddish via for some closing remarks.

Thanks, Andrew appreciate it before turning to your questions I want to reemphasize a few things almost all things that we have talked about publicly since GW went public.

Whether the predictions or interpretation of the market of the business have come true and I talked about some of those things earlier in the call.

We are dedicated the broker channel we have been in the channel will continue to grow as we have been discussing while it's great to be number. One overall, we're just getting started there's a lot of upside ahead and I'm. So excited for the next three to five years and what we're doing here together at you Wm and with our broker partners and with that being said, we expect our fourth quarter production to be between.

In 19, and 26 billion and our our margins in the range of 40 to 70 basis points.

Want to take a second to thank our amazing team members and clients being number one is a testament to all of you and your hard work, while we certainly celebrate this great achievement and all of our progress we already have a saying here at U W. M, which is never relax I believe we are the best strategic position, we have ever been in yet we will keep going we'll keep winning together you can count.

On that.

We're now glad to take your questions I'll turn it over to the moderator.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. If at any time, you would like to remove yourself from the queue. Please re press star one.

At this time, we will pause momentarily to assemble our roster.

We will now begin the Q&A session. Our first question comes from the line of Doug Harter from Credit Suisse. Your line is open.

Thanks, Matt I think you mentioned that you would expect your.

Our market share within the channel to be around 50%. This quarter you know I guess, how do you think about where that could go.

The short end.

Intermediate term.

Yes, Yes, I said I think it was over 40% maybe as high as 50.

I've said before I think we can be 50% of the market and wholesale can we be more probably could be the reality is as the broker channel grows and grows it'll be harder to be that big of a percentage of the market share. There's a lot of other wholesale lenders are doing well in and at the same time. There is a lot of brokers you've got to convince a lot of people to work with you and so we're doing really well we feel great about our market share we feel great about the growth.

A lot of the reason our market share is growing at the level. It is there's a lot of the brokers that are partnered with PWM are growing faster than the rest of the market and succeeding and they're really winning in the purchase market right now that's the game. It's a purchase market. So we feel great about the market share perspective of UWS, but most importantly focused on the mortgage broker market share and how that's growing because that's the key to the success.

Brokers growers <unk> add to the channel, we're going to keep winning right now and you guys have seen that but 'twenty four 'twenty five 'twenty six when all these loan officers have left the retailer in the broker channel, it's going to it's going to make 2020 like I said, we're two years that would make that looks like hopefully just an average or a good year.

And then I guess on that can you talk about how you the stickiness of.

Kind of customers that you've brought in during.

You know kind of the game on initiatives, you know kind of as that eventually kind of rolls off.

Stickiness of that volume or brokers that you brought in.

Yeah, well, we've done a similar thing in 2019, and we see a high percentage of the people that start working with us they working with us whether they start do they stay doing three loans a year with us six loans here, where those 12 loans a year 'twenty long as a year that all determined based on how big of originator. They are in and how much they buy into some of the tools, we have and so with the stickiness factor is.

A big part of it but the reality is game out is much more a strategic play to help the channel growth.

W has market share goes from 40, or 50% down to 25%, but the mortgage broker channel is 40% we're doing more business overall, we're going to grow with the channel. That's the focus it's less about your wm, Although UWS, winning and I told you guys. When it when rates go up because we win and purchase where not only dependent we're not a one trick pony on refis were focused on.

All in strategic business will do revised but purchase market broker channel, that's the focus and Thats what wins in all market cycles of course, when the refi market's like all other cycle other things when but in the purchase cycle. This is the game plan that wins, that's winning for US right now.

Thank you Matt.

Your next question comes from the line of Jay Mccanless from Wedbush Securities. Your line is open.

Hey, good morning, Thanks for taking my questions.

So when I look at the originations in the quarter. Your your government rich purchase originations up about 70% versus last year and up.

30% plus sequentially.

Are you guys managing the servicing on that paper or someone's sub servicing it for you Wm.

Yeah. Thanks, Yeah.

All of our originations are up quite a bit quarter over quarter government, obviously as well.

Pretty much in line, but yeah, we sub service with two sub Servicers right now.

And we've been doing that for years, and that's continuing and those guys do a great job for US we have a whole team here that oversees it works with them and make sure. We are able to help out in a consumer issues, but everything is great. Our delinquency rate is really the thing to focus on not only our government convention I think we have the best MSR book in America. So if you look at them as hard because it's not the biggest but it's the basketball alone quality delinquency.

FICO score WAC, which is weighted average coupon we have the best MSR book in America, I believe youre, starting to see some of that and that will come through.

For years and years to come because of the WAC and where interest rates are right now.

When you stole my next question, Matt That's what I was going to ask is on the delinquency trends, but then also just starting with some of the distressed are starting to hear it there just weren't early payment trends, how that's looking on the government book.

So again fantastic businesses like I said were significantly better than the market.

And all of the metrics that I look at from a delinquency perspective.

Remember, we're one of those lenders that doesn't chase.

Volume by going low on quality a lot of my competitors almost all my competitors go down to for instance, a 580 credit score we don't do that we stay at 620, we don't do certain things to chase volume and that sounds good right now people like Oh Chase volume.

The more profitable loans, yeah, but in two years three years four years, you're going to have delinquencies you have a lot of different issues. We're not folks that we were not only that because I mean, the biggest which we are the number one overall lender, but being the best lender in America, and we think we've had that title for a long time now.

Sounds good thank you thank.

Thank you.

Your next question comes from a line of Bose George from K B W. Your line is open.

Hey, good morning.

I was wondering if the game on program, how long is that likely to continue and.

And what percentage of your loans participate in that program.

Yes, I mean, it's.

It's a strategy it's not so it's not a percentage of our loans fit into it.

So it's all of our loans are focused on the same strategy as our whole businesses.

How long will it last.

Well with the returns and the success, we're seeing with it right now with the loan officer conversions is lasting longer than maybe we had expected obviously, we're extremely profitable even with that mindset and so we're feeling really good about it and I know a lot of competitors and a lot of retail lenders would love us to stop but the reality is their loan officers are joining the broker channel.

The broker channel is better for loan officers and game on is just you know.

Not only.

Showing it as accentuating it are highlighting it because everyone already knew that but it is kind of pushing it. So right now the game on is a massive success, we're going to continue with that until we decide to change that I don't have a deadline or a date on that but I look at pricing I look at margins I know I won't say daily based I'll say multiple times a day basis.

Okay, great. Thanks, and then just in terms of your volume your guidance for <unk>.

The low end suggests a decline versus the market and <unk>, obviously took a ton of share. So just curious anything to read into that or just a broad range that you're providing for your guidance.

There's nothing to read into it there's two things you know one obviously, we went up significantly went up what else went down so its youre looking at relative to our current number but second.

What I would mention is purchases.

In the fourth quarter and first quarter.

All they do is refi refis don't matter the month or the part of the year purchases are a little different so thats why youll see a little bit of a decline in the purchase volume overall.

But in general we're feeling really good about not only our volume in the fourth quarter, but also into 2023 and not only maintaining the number one overall lenders spot, but actually growing the growing our market share and growing our lead.

Okay, great. Thanks, a lot.

Thank you.

Your next question comes from the line of James Fawcett from Morgan Stanley . Your line is open.

Hi, Thanks for the time. This morning can I just ask a quick follow up to the previous question what are your assumptions for underlying assumptions for what the market will do particularly in purchase in the December quarter.

Well I mean, obviously I've said it publicly before.

At the end of the third quarter, beginning of the fourth quarter become more of a buyer's market. That's what's happening in the market has softened.

So now there's a lot more opportunity where sellers are chasing the buyers were reversed.

Versus six months ago.

The purchase will be slower obviously in the northern States winter and also with people in school people don't buy houses in December as often as they do in August right. That's just obvious stuff. So we're prepared for that and we've done this for years and years and so we feel really good about it our purchase volume was $27 7 billion, which is our highest reading of all time I think our purchase volume actually.

Just our purchase alone was bigger than every other mortgage Captain America older volume purchase and refi combined so the purchases are down a little bit we'll do a little bit less business that we didn't have third quarter. That's not a concern at all we're really focused on continuing to grow the market share, helping our brokers when helping more <unk> joined the broker channel and getting ready to dominate in 2023, 24%.

<unk> 25.

So thanks for that and then looking to that longer horizon, Matt.

Can you give us an idea of how much room, you think there is to improve our efficiencies and mortgage servicing.

Loans.

And to exit forbearance programs do you see the risk that that the number of loans requiring more labor intensive servicing could increase as bottles deal with those modifications and foreclosure activity in key bring incremental efficiencies there to further helps your opportunities in that longer horizon.

Yes, I don't see that at all I don't really I'm not concerned about that do I think there'll be more delinquencies. If there's a recession hits of course, so I think thats, what you got to realize our book and our quality of paper is just not the same as everyone else. The age of our book along with the WAC along with the quality of our paper makes it. So we'll have a lot less of those concerns well delinquencies in the market.

With the recession, yes, well things happened in the market, yes, but from an efficiency perspective, and what we're doing on the servicing side.

I don't see any massive incremental cost or.

Our expenses that will hurt us in any way that's material.

That's great. Thanks, a lot Matt.

Thank you.

Your next question comes from the line of Kyle Joseph from Jefferies. Your line is open.

Hey, good morning, Thanks for taking my questions just wanted to get a little bit more color on what's going on in the broker channel you know obviously we saw.

A number of participants announced they were exiting but youre talking about it taking share. So does that mean, just essentially the players in that existing market or taken an even bigger piece of that pie.

Yes, the wholesale vendors that are committed to channel are leveling up their game just like we are helping brokers wind doing more than just being a wholesale lender.

The 2005 version of a wholesale letter. This Susan 15 version also that it was throw rates it out and close the loan for the broker that's not the game anymore and so people that were uncommitted that are just thinking it's all rates you don't get loans from our wholesale brokers aren't sticking around because they can't compete at that level, if youre not going to invest in technology helped brokers grow if youre not going to help train.

Brokers help them from a compliance perspective helped them build their business help them market like help teach them help them succeed be their true partner youre not going to win in wholesale that's the borrower and anti to play and a lot of people don't want to pay that anti and so if they're not around they're not around there's so many wholesale lenders that are around that are starting to level up and do great things for <unk>.

Occurs and I love that I love It I love when UWS market share goes down in wholesale channel because I know when that is happening that the other wholesalers are doing great things, one and through the broker channel is a lot bigger than it is today, which will be a win win for everybody.

Great. Thanks, very much for answering my question. Thank.

Thank you.

Your next question comes from the line of <unk> <unk> from RBC. Your line is open.

Hey, guys. Thank you so much for the call.

Can you just started maybe right.

And fourth quarter.

I ended up guidance.

Thank you.

Todd equal market share our market share that you see in first quarter.

I'm not exactly sure what you're asking you're saying is our guidance is our guidance is based on what I believe we're going to do.

And so obviously understanding the purchase market understanding our market share I understand our perspective.

That's what I try to give you as much accuracy.

We will do from a production and <unk> and not Amazon production and gain on sale perspective, So thats kind of where the guidance comes from.

At the same time, we focus on like I keep saying to grow the broker channel. We have an extreme amount of liquidity. Our MSR book is extremely strong our delinquencies are extremely low we feel really great about our position in the fourth quarter and more importantly in 'twenty three 'twenty four 'twenty five and beyond so I think that's hopefully that answers your question.

Not clarify for me.

Got it.

Just trying to see whether you can outperform that you've taken.

Okay.

The first thing is you.

And you guys have talked about 70 to 90 gain on sale margin.

On an annual basis, just given that you have been on theater guidance for fourth quarter.

Remain in the 40 to 70 range should be.

Next quarter back in 2023.

Back to the 70 to 90 or should we be should we expect continued lower gain on sale.

I Havent made that decision yet.

What I've always said is that in wholesale.

Margin of 75 to 100 or kind of the bottom level I see I think I started even earlier in my call that 75 to 100 is kind of like the low end range in wholesale we're going to be in that range. This year right and so we feel confident with that.

We see the first half of the year larger of a bigger second half a little lower I actually only because my head I don't even count the game on margins is like dropping margin I considered a investment long term, whether you wanted to think about it as a risk.

<unk> development marketing expense like building the business for the long term rather than like what what do we make this quarter, but I know everyone looks at it their own way, we're thinking long term right now and so whether the margins I gave the 40 to 70 basis point range will be within that range and between 75 to 100 basis points on a yearly basis.

That's what we're doing but it's a it's a long term investment I told you guys last time the game on investment as you know there's been a couple of hundred million dollars instead of acquiring companies, where there's been a couple of hundred million dollars youre going to see it come out about gain on sale and if you flip that around and say what's that going to return it's going to return multiple multiple times on that because the broker channel is going to grow and <unk> will grow with it.

Got it and just one last question on the MSR line that you guys have done.

How long do you keep that liquidity and what do you use it for buybacks how should we be thinking about that thank you.

Yes, we're focused on liquidity, we look at everything from share buybacks, obviously theres a float things. So we don't get really do that right.

Bond buybacks that we look at all aspects of the business at all times, Andrew does a heck of a job in the finance team, helping us make those right decisions, but right now we feel really good about our business and where we stand right now and we're going to continue to focus on originations building, our servicing book, helping the mortgage brokers grow and succeed and grow more there.

Market share and when that happens we will continue to make decisions around our liquidity, but liquidity is the key and we have a massive amount of liquidity right now and we feel really great about our position.

Thank you. Thank you.

And again, if you would like to ask a question Press Star then the number one on your telephone keypad. Your next question comes from the line of Courtney <unk> from Barclays. Your line is open.

Hey, guys. Thanks, so much for the question and congrats on the results just a quick one from me on leverage you guys have pretty consistently kept on funding debt to equity within about a half to three quarters of a turn should we think about this is the sweet spot moving forward and how you're managing the balance sheet.

Yeah no. Thanks for the question.

What we're at right now obviously, we feel really comfortable in that range could we go higher absolute you go higher than that I think almost everyone is a little higher than that in our market interest in the industry in general, but we feel really good about where we stand we manage liquidity very closely we manage our debt.

Are all the ratios that you're speaking of and probably more very closely and Andrew and his team do a great job anything you want to add to the Andrew field.

Well Greg.

Awesome. Thanks, and then just one follow up on.

On the MSR front, how are you guys thinking about retention moving forward and the potential I know you mentioned you remain.

Sorry that you would remain acquisitive, but how are you thinking about what types of MSR issued a wanted to acquire you opened to Ginnie additions or would you say that you're more focused on conforming.

Well, we're not really acquiring MSR, so thats not really our game what we're doing is originating loans and so we originate agency loans, usually Fannie Freddie and Ginnie.

And depending on what the focuses at UW I mean, what our broker who are looking for is what we deliver so I don't know if you misspoke or I misunderstand. Your question, but we're not acquiring msr's. We originate MSR is at the highest level in the industry I think people will try to buy our MSR is obviously and we're much more efficient at originating and then even if it were to buy them and so.

We just focus on originating.

Buying MSR is not our game, but continuing to build our business is.

Yeah, that's great I misunderstood. Thank you.

Thank you.

And your final question comes from the line of Kevin Barker from Piper Sandler Your line is open.

Morning, Thanks for taking my questions I just wanted a follow up how much MSR did you sell in the quarter and then could you give us an idea of whether that was just season portfolio or newer production that youre selling.

Yes, most of the stuff we sell was usually.

Over 12 months I don't know the exact details of it but we sold about let's call. It between 20 and $25 billion I think in the third quarter and so we look at servicing sales as an opportunistic way to bring in cash we don't really need to do it. However, when you look at all things were always check in our markets and seeing what's going on and so we feel really good about our position in our MSR book.

Is extremely valuable right now.

Yeah. It seems like higher interest rates are definitely pushed out MSR values.

But we've seen.

We hear that the market's softened or like seems attractive to be buying MSR is right now.

Compared to purchase I mean.

Are you seeing fairly strong bids or is there a flow programs that youre using to.

Continue to have decent bids on the MSR sales that youre doing.

Yeah, our MSR sale bids are extremely high actually.

And very strong with a lot of people coming to us you've got to remember our MSR is people.

People don't want to buy Msr's from someone if they don't think they're going to be around for the rep and warranty to be there for the long term and everyone knows we are going to be around and strong and so.

That you can give us.

If you think of it makes the supply in the market less because there's only so many lenders that people feel confident buying big portfolios of MSR from we are one of those and we feel really good about our position on that so the MSR bids I've actually been very strong we feel good about it but at the same time we.

We haven't really been acting on much of it because of our servicing book is fantastic. We don't need the liquidity, we have a lot of liquidity right now and we feel really good about just focusing on our core business of helping mortgage brokerage grow and win and continue to originate at the highest level in the country, which is what we've been doing.

Okay and then.

GAAP earnings were really strong.

Definitely have a lot of liquidity access to msr's.

But it appears like on an operating basis, it's still negative cash flow, which is not surprising just given the environment, but.

I mean, how long do you feel that you can continue to operate on.

On a negative operating cash flow, excluding MSR sales just given you know is a tough environment out there.

Yes, I really don't think thats, helping the environment. So I think it's obviously tougher than it was last year, but last year wasn't real and people that were succeeding last year doing 90% refi are finding that out now so Kevin like my perspective as cash flow is a different thing that income we're extremely we're profitable running the business right now the way we are running at operating income we had a 200 <unk>.

$36 million fair value increase we made $325 million, we're making money right now running our business and I'm very confident in that going forward on the cash flow side wholesale lending is always negative cash flow has been forever always has been always really will be and thats why liquidity is such an important part to dominate in the wholesale channel and so we feel great about where we're at.

We're going to continue to focus on running the business originating helping brokers grow helping brokers succeed in this market and taking market share and its been working for us.

Thank you for the questions I appreciate it.

Thank you.

And this will wrap up the Q&A portion I would like to turn the call back over to Matt you should be up for closing remarks.

Yes. Thanks, a lot appreciate all the questions people joining the call hopefully your understanding a little bit about our business and understand what we're trying to do and we really appreciate all the support and the positivity and we're going to continue to grind and work hard over here at UW IHOP mortgage brokers when help UWS win and take good care of our team members brokers shareholders and everyone likes it.

For the time have a fantastic day talk to you next quarter.

This concludes today's conference call you may now disconnect.

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Yes.

Yes.

[music].

Okay.

Sure.

Sure.

[music].

Yeah.