Q2 2023 UWM Holdings Corporation Earnings Call
Good morning, My name is Lisa and I'll be your conference operator today at this time I would like to welcome everyone to the U W. N Holdings Corporation's second quarter 2023 earnings 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.
I 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 that is star one again.
Hello, Hugh Cole 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 second quarter 2023 U M Holdings Corporation earnings call before we start I would like to remind everyone that this conference call include.
Forward looking statements for more information about factors that may cause 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 <unk>, Chairman and CEO of uranium Holdings Corporation, and United a wholesale mortgage thanks, Blake well I like to start by thanking everyone for joining the call.
I really appreciate it we're very excited here you Debbie am proud of our team members part of our clients and really proud of the amazing quarter. We've had at U W. N. The market. The data the numbers. We're seeing are all really strong and we're going to talk more about that soon but before I get into that I want to start with the one of the overarching themes in our industry and that's the market. It's been a very difficult mortgage market over last 18 months.
But you don't see them as demonstrate the strength because of the foundation, we've built for years and years, we can succeed in all market environments. As I have said dating back to my initial roadshow. When we went public in every quarterly call since this quarter as evidenced once again that you'd have M can succeed in all these markets. While other companies are exiting the market losing money.
Drinking and laying people off where the exact opposite we are profitable. We are hiring we are investing in technology and we're planning to continue to grow we know the refi boom, whether its a long sustained one or a mini refi boom is going to come soon the opportunities are usually in the first three six months, maybe nine months to really make money from a volume and margin.
They've been really to grow your business. We're prepared for that now scale is the name of the game and that is why we've been winning and we're going to continue to win going forward.
Our business model succeeds in the up markets in the down markets. This is the ultimate down market and we are still winning I can't wait for the big market to come it's going to come I don't know when I as I said, but we are prepared at UW M and that's why we are different than everyone else well, let's get into the quarter's numbers first.
We delivered $31 8 billion in overall production, beating our guidance we set another new all time quarterly record for purchase volume 28 billion with a $28 billion of purchase that's more business than anybody else did business altogether, just our purchase volume and we are on pace for an all time record purchased year here you Wm.
Our gain margin was 88 basis points well within guidance, we made $228 $8 million of net income, which is very profitable and more than we made last year in the second quarter. When the market was significantly better and stronger with that being said some of the net income includes value of the MSR moving up a small amount of it just like I, just woke last quarter MSR value moving up and down.
One doesn't really play into my business or our mind at all so maybe we made only have about $200 million. When you take all the MSR adjustment just like last quarter people to hit a sport. It doesn't really matter, we are running a profitable and successful business no matter, which way you look at it you know and this is a hell of a quarter given the environment before turning it over to Andrew our CFO I want to touch on a few other highlights.
The broker channel continues to gain momentum in addition to the sheer growth we've seen in the channel. The past year. We also continue to see loan officers join the broker channel in Big Big numbers. These things go hand in hand in my mind, you know, it's actually a multiplier effect when a loan officer joins the broker channel. It's not like we just get loans, one time, we get loans for potentially years and years to come so it's a big deal when they make the.
Jumped from retail to wholesale in the second where we attract thousands more loan officers join the broker channel with more than half of them, leaving the retail channel to join the broker channel I've said, it before and I'll say it again not only is the broker channel the best place for consumer to get alone. It's also the best place for loan officers to work.
In the second quarter, we really enhanced our products as well, we rolled out a 1% down program, which is really helping lower income borrowers achieve the dream of homeownership, which we feel is very important and we're excited about how that has been going.
On the other side of the spectrum, we enhanced our jumbo products significantly to drive more volume there too and help more consumers by clarifying programs with brokers and helping them succeed we think theres, a big opportunity the jumble coming soon as well.
We are already winning the conventional and government loans you know in the practice helped us win brokers, but helping the lower end and higher end loan sizes were focused on as well to really round out what you W. M. Does we also had UWS live event in the second quarter, which was a record event for us with about 6000 brokers and real stage is attending a lot of excitement and energy around the broker.
Your channel, we announced two big enhancements, one the UW portal, which helps the technology and efficiency for brokers and other ones P. A plus which is really preparing brokers or scale as I said before a lot of our competitors are laying people off a lot of people aren't prepared or the next mini boom or big refi boom. When it comes brokers are no different UWS is prepared and P. A.
As a way to help them scale by helping them process and facilitate their loans. So they can go out and get new business, so with a broker to double or triple their business they'll be ready because he UWS P. A plus we're really excited about that and EW and portal and we've rolled those out just a couple of months ago. Those things are things. We're investing in now that we might hit our expenses now that we will see the reward.
<unk> next year or whenever the refi boom comms, we're excited about both those things these new products and process are proof of the never relax commitment that you'd have been passed to the broker channel and growing at you'd have yet now I'm going to turn it over to Andrew for a few more details on our financials. Thanks, Matt.
The momentum from Q1 carried over to Q2 as our production volume increased over the prior year quarter and was 43% higher than Q1 of 2023.
Year to date net income turned to a positive $90 2 million and our operational performance before considering changes in the fair value of Msr's improved in both Q2 and year to date compared to 2022.
Year to date gain margin of 90 basis points as solid and right in the middle of what we continue to guide to in this competitive market.
This is also a significant increase from the last half of 2022, when we had our game on pricing as we have transitioned from this more broad based pricing strategy to a more targeted initiative.
Furthermore, despite being in growth mode from a team member standpoint expenses continued to moderate in Q2.
Excluding servicing interest and other non operational expenses total expenses declined approximately 9% year to date.
Overall, we delivered very solid financial performance in Q2, considering current raw mortgage market conditions.
We have previously discussed our plans to Opportunistically sell M. S. Ours in 2023 as market conditions warrant to support the operating and capital liquidity needs of the business, while maintaining a sizable and high quality MSR portfolio that provides a recurring quarterly cash flow stream. We continued to execute on these plans in Q2 by.
<unk> sales of Msr's, while maintaining a total servicing portfolio of approximately 295 billion at the end of the quarter additional.
Additional bulk sales on loans with a total U P. B of approximately $26 2 billion were completed subsequent to quarter end, resulting in total proceeds from MSR and excess sales year to date nearly 1.4 billion.
We have maintained a strong balance sheet total equity of approximately 2.9 billion and total accessible liquidity of approximately 2.8 billion as at the end of the quarter.
Matt mentioned, our current strong competitive positioning from all of our efforts to provide superior technology speed and service to our broker partners and our significant investments in growing both the wholesale channel and our market share.
We believe that our current financial strength also positions us very well to capitalize on future market opportunities.
Okay, I will now turn things back over to our chairman and CEO Maddish via for some closing remarks, thanks, Andrew I want to close with a few quick points I'm pleased with how we've performed in this market.
Like I said earlier, we did more purchase business that anyone else did and overall business. This past quarter. We're on track for our biggest purchase you're ever even in this rate and inventory environment.
We don't use those things as excuses, we use them to our advantage and continue to grow and dominate this mortgage business and brokers are winning this provides us a great foundation of business when rates do drop and the Refis do grow.
With that backdrop in mind, our proven strategy has not changed and we've established a clear formula for long term success in the mortgage market and it means we will continue to invest in our team members invest in tech and products to better serve our brokers invest in the broker channel and we'll continue to invest in our future by hiring new team members are prepared for the opportunity ahead. I'm also very proud to report that for the 11 quarters.
Wrote we announced a 10 cent quarterly dividend and as I said 2023 has been a year. The overall industry production is down mortgage spreads are wide consumers are faced rapidly rising rates yet against this backdrop, we are growing share breaking purchase production records and continue to invest in product and technology overall, the future is extremely bright at <unk>.
Yeah, and you can tell I'm excited for the third quarter, we expect production to be between 26, and 33 billion and our margins in the range of 75 to 100 basis points I'm going to turn things back over to the operator for Q&A.
Thank you 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'd like to remove yourself from the queue. Please re press star one at this time, we'll pause momentarily to assemble Irish setter.
We will now begin the Q&A session and your first question comes from the line of Kyle Joseph with Jefferies.
Your line is open.
Hey, good morning, let Andrew and Blake, Thanks for taking my questions.
Wanted to talk about our origination.
And capacity, obviously your volumes were up substantially quarter on quarter and I know you guys do not.
Undertaken any any layoffs, but can you just give us the status.
Is that it is.
Our people working overtime to do that you hire some more folks or are how you are able to really.
Dry volume up 40% quarter on quarter.
Thanks, Scott I appreciate the question.
Yes. So the answer is our technology I talked about it multiple times again.
You can follow it pretty closely I can a lot of people don't realize like everything we've said for quarter over quarter. It's Greg It's a strategy to plan until the technology investments. We've made in both the different investments have made it. So we can handle the volume when it when we have an opportunity you'll get the volume and the opportunity was there and the opportunities continue to be there right now, especially because we dominate the purchase market and sort of brokers.
With that being said we.
We're hiring anywhere else is letting people go right now the hiring that we did well.
Where we did a couple of hundred people a month 253 people in a month last month or two that doesn't really impact any operational congrats because it takes six months for someone to get ready and that's why I talk about the word scale. These other companies that are preparing laying off and still playing these games.
When the market turns we don't know when its going to be the first six months is when you make your money. The first six months if you take your market share. This first.
We are prepared and so we.
Hearing things, we don't have zero impact on what we did in the second quarter and will have zero and thank God. We did in the third quarter for what we do in the third quarter, but we are preparing for the first quarter or second quarter next year, when when that when rates might drop and that we might go from doing 30 billion to 40 billion or $50 billion, and we will be able to handle it and bigger margins at more capacity that anywhere in the country.
That's really when things happened. So we're prepared scale as the word of the day for us and that's why we're winning now and that's why we will continue to win.
Got it yeah that makes sense and then I guess just wanted to follow up for me He test Saturday at the Jumbo opportunity in your remarks is that a function of what's gone on with the banks and you know how big of an opportunity is that for you yet.
Yeah. Thanks.
Like I said you follow the industry closely so I know youre talking about Thats, an important point to understand like the capital rules and what impact that can make on banks and credit unions and how that does not impact us non banks and brokers. It also can impact correspondence with some of these smaller players are small warehouse line. The bigger players that we work with and it's not really relevant but it's interesting to see what that will happen that as part of the jamba.
Thought along with other things I'm working on we're working on here your Wm and the Jumbo front.
This is truly capture those opportunities and help the brokers continue to grow because that's really the name of the game as a brokerage grow we grow.
And even when that and that's what we're focused on I think jumbos and opportunity.
Got it thanks for taking my questions Congrats on a great quarter. Thank you.
Yeah.
Your next question comes from the line of James Fawcett with Morgan Stanley . Your line is open.
Great. Thanks, I wanted to follow up on those last comments around kind of competitive environment et cetera last quarter. I think you mentioned you were deploying some of your excess cash to self warehouse. Some of your production in order to help manage interest costs. What is your strategy has been like during this quarter given the elevated <unk>.
Rate environment, and the fact that some warehouse lenders seem to be pulling back.
Yes, so we use our excess cash the same way it does limit our interest expense when we're doing that and thats. What we have a lot of cash cash is king we keep a lot of cash on the balance sheet.
So we continue to do that so there's really no change in our strategy and the warehouse lines I think thats.
That's really not a story right.
Right now to be honest with you maybe it's a story.
Small correspondence, but they work with the other lender, it's not affecting brokers and it's not affecting a lender like UWS warehouse line issues are really not a concern at all.
With <unk> I mean, obviously, we have the cash and top of that but that's not really a concern. It's more concern for some of the smaller regional banks that give out small lines. These little correspondence I could argue that thats actually a positive for us because we know smaller warehouse lines kind of get out of the business like we saw <unk> America do recently and some other ones. What happens is those little lenders that use them I can't do this anymore.
Can you just go back to being a broker and that becomes a big client for <unk> and so we've seen some of that happen, but once again I don't think it's a huge mover right now.
Got it Matt and I appreciate that color and then just on pricing you mentioned the couple of pricing incentives in recent quarters, including conventional 1% down.
Offering as well as game on and some other initiatives.
How much of a drag are those incentives having on your margin.
I guess the bigger question is do you have a lifespan in mind for any of these promotions.
Yes, so they are not a drag on.
Our margins like our margin exactly where I wanted to be.
In every aspect so that's not that's not a concern at all to your question, though how long these things.
Those are things that we don't really discuss and talk about but the reality is I think that these.
These things that we do are all helping consumers, which we care about brokers, which we care about and helping the real estate Committee, which partners with our brokers and then at the end of the day. It helps you Wm and all of our investors and all our shareholders and so.
We're going to continue to stay in the detailed stay in the weeds and like I'm involved with this every single day, if not hourly and the data. So we know exactly where we are where we want to be and we're going to continue to be in the weeds of our business and so there is no timing or ending of what we want to do.
And some of these things and we're just building the ratio of and deepening or at least where the brokers for when rates do drop or just helping brokers wind right now, which they're winning we're winning and it's really an all round success for <unk> and I think you saw that our quarterly numbers and I expect you to see that again in the third quarter too.
Yes, Thanks, a lot Matt.
Yes.
Okay.
Our next question comes from Bose, George with <unk>. Your line is open.
Hey, good morning, everyone.
Need to stick to the volumes.
Ended game on but it looks like your share it looks like it went up a little bit on your volume came in above the high end of your guidance.
Can you just talk about how that kind of played out would you expect the share and and where you think you are in terms of your share of the broker market this quarter versus last.
Okay. Thanks for the question here.
Can you just describe what's happened and it's exactly what I said what happened if you look at our.
2022, second quarter and third quarter, we talked about game on and people aren't we this is what we do all day right. So.
It is what we expected as we planned for it it's all part of the strategy the thing that people don't get.
After 11 quarters of doing this I figured that youll guys like when we talk about something we explained something this is what we do all day theres not hyperbole is not be not rhetoric like a lot of my competitors, we actually are doing it consistently and hopefully you've seen it in so.
Am I surprised that game on worked in loan officers join the broker channel and our share went up and then it will go down a little bit from the high end because we picked up our margin like no I'm not surprised at all that is what we do and that's what the plan is I'd be surprised if it didn't and now from the markets. You go back and you can listen to the recording I think I've said it a year ago I expect.
There are market share will go up we did not do it for a market share play, but once someone starts working with UWS. They realize how great. We are and how easy it is to work and that they can grow their business and so when someone tries us brokers didn't try up before because they were so focused on price game on brought them into our 10th and then they say Wow you guys are amazing like I don't know why I should care about eight basis.
Or 12 basis points, or 20 basis points or more and they become our loyal partners and so that's what happened Thats, what we're proud of and that's what we'll continue where market share is this quarter like I said I consider it's game on a success. If we if we go up from the 30%. We were at that time I think we peaked at 50 and if we stay in the low 40%, it's a pretty big success.
And I think we are there and I think you see are higher numbers on purchase and our brokers that are working with us as Rob our alloys that are working with us are up and so overall, we feel great about where we're at.
And our strategy is working at the same time, we're coming up with new strategy and new moves and new techniques to continue to win and continue to build this business for our partners for our investors for our brokers and for our team members here at UWS.
Okay, great. Thanks, a lot.
Your next question comes from the line of Doug Harter with Credit Suisse. Your line is open.
Thanks, Matt talked about kind of being prepared for the eventual turn in the market whenever that may be.
How do you think about what that size of that market opportunity might be.
Yes, so great question, Doug I mean, it's going to be big right. So like everyday that goes by as another day, where my competitors lay people off so they're becoming unprepared everyday that goes by it's another day, where a lot of loans are closing at 7% and seven a quarter percent. So it's a bigger supply opportunity for us.
Every day that goes by another day that were deeply relation with our brokers everyday that goes by as an everyday on preparing for the scale and so like.
Although everyone wants rates drop I kind of like where it's at right now it keeps going and it keeps building. This monstrosity. If that's the right word of an opportunity and that opportunity last for three months six months or three years, I don't know, but I'm going to be ready and we're gonna be ready at UW mean, nobody else's and so when will it come I don't know how big.
It will be it can be pretty big think about this Doug we've.
We've had two two trillion last year too Julian this year, almost 7% rates go down and rates don't have to go to three rigs go to $5 875, and you got four trillion dollars of loans that are refi eligible instantly and then flipped around and say don't forget we're still at 28 billion of purchase let's just maintain that purchase volume so I think the.
Refi volume will be significant and then of course my competitors at all maybe.
Maybe struggling right now and laying people off let's say how great. Their business model is and you guys will probably write how smart they are how they do good things because they're dependent on rates, we're dependent on the mortgage business or the economy being relevant we're dependent on being alive and running our business. That's all dependent we arent running our business and being successful there dependent on rates and so when rates drop.
We will dominate will do great everyone else will do great June and everyone think that they are doing good things and they'll talk about their strategy, but this has been the best thing that you actually got to see what the market happens what happens to the lenders when the market changes and what we've done and what we're going to continue to do but we are ready and we are the most prepared glenda for refi boom, but other places we'll figure it out too unless it's like a.
Three months room, and then they stay and they get higher quick enough and then lay people off again and its just theyre in this little death spiral that they all live in.
Great.
I think historically, you've kind of thought about 50 basis points as the incentives.
Just think about the incentives.
Today and is that lower with within the broker channel than it might be in other channels.
No I don't think it is lower in the broker channel I think its all about savings to the consumer what makes sense, it's 50 basis point in rate drop enough to hit.
Hit a refi boom I don't know if it is I think I lean towards more 75 to 100.
But I also remember there's like I said everyone's at 7%, but I'll have your six five and so if you were seven a quarter. So like the number I'm targeting as it hits the high five youre going to have a big big opportunity.
Are the revised being done today, yes, I mean, I think it's 12% of our business or whatever the number is kind of 15% and some other companies I mean, if your business is still doing a lot of refis right now and it will be percentage of your business Youre, obviously, not winning in the purchase market and so.
What will happen what it needs to be I believe doing right by the consumer is important and so these gains as these players play that it has lowered a quarter point and then they can they can miss a payment that's not really what we believe and that's not what we aren't brokers of <unk>. So the number I think is three quarters appointed right. It's kind of a number I think.
We will revise opportunity comment six in a quarter six yes, when it hits the high five it'll be good the other piece that people don't recognize when rates at the high five people that are at the 25335 range. They are the ones that arent selling their houses because it's so expensive to someone buying the route when it becomes a little more palatable they will sell their house. It opens up inventory like the purchase business will be Greg.
Three five years would be great and that's why I'm, so bullish and we've been bullish I've been saying the same stuff for years now is now we're starting to see the light in the tunnel is coming whether it's in three months 12 months 18 months and I think it's sometime next year I don't know exactly when.
Great. Thanks.
Thank you.
Your next question comes from the line of Kevin Barker with Piper Sandler.
Please go ahead, great. Thanks for thanks for having me on just wanted to ask about the growth in the government origination volume you saw quite a bit.
Originally production volume growth I believe it's about 60% quarter over quarter.
Very strong could you talk about what youre seeing in that market in particular, and whether it's from a competitive dynamic or some of the pricing initiatives you are doing there. Thank you.
Yes, thanks, a lot so it's not really a pricing initiatives a lot of times.
Government loans, a lot of them a lot of the growth is in FHA World FHA World.
Yes.
It's a little bit with the home affordable programs from FHFA, which is Fannie and Freddie Mac and so as Fannie Mae and Freddie Mac do less to help affordable homes.
Those borrowers go to FHA and it doesn't always go to FHA FHA. The best option for them also FHA did cut through MRI, you remember, which is either monthly <unk>, which actually made it. So it was more advantageous sometimes to use an FHA loan than a conventional loan. So brokers are smart loan borrowers right, they're going to go to the cheapest payment. So the cheapest names FHA.
A great FHA lender, we can dominate that market if the market's convention, we'll do it and so right now youre seeing a little pickup in the FHA MIP cuts and maybe the affordability programs have not been as successful as FHFA is focused on and Fannie and Freddie kind of do their own things and some of the stuff and so we're going to continue to focus on it but whatever is best for the consumer is what we're going to focus on.
And we do a lot of FHA, we do a lot of VA veterans and veterans', there's still another big opportunity, we think veterans don't necessarily get the best opportunities and we've got to get through the final mortgage brokerage.
As you keep veterans because they can save a lot of money to and we're continuing to work on that with veterans as well and those both veterans and FHA are both in the government world that you speak of.
Do you expect the veterans loans too.
Greater source of refinance originations over the next year, just given the rates sort of streaming.
The programs that are in place, yes, exactly yet veterans have great purchase programs.
And so does that Vijay, but they also have great refinance programs. The URL in the streamlined refinance and so those programs will help invest back to the point is like there.
Certain recruitment rules about how much the rate back to the question about how much.
Great to have to drop.
We want to make sure that the veteran or the FHA bar or any borrower is saving enough money that makes sense.
It could be a great opportunity for them and so but I do think veteran loans or on a lot of refinancing in that program.
That will come through but I'm focused more on the veteran purchases and helping the veterans with buy those homes and so those things. We can continue to do to help them along with FHA and Thats why youre seeing the government pick up as we're doing those things and you can see our government volume has grown significantly quarter over quarter, and I think youll see it continue to grow going forward.
Great just a quick clarifying question Andrew I believe your comment was at 26 billion servicing portfolio was sold after the quarter end.
And could you clarify that and then was there one sold during the quarter I'm just trying to understand see what happens.
Yes after quarter end just over $26 billion of NPV was sold in during the quarter I think it was about $28 billion of NPV was sold.
Okay, great. Thank you Andrew Thank you Matt.
Thank you.
Your next question comes from the line of Eric Hagen with BTG your.
Your line is open.
Hey, Thanks, Good morning, good to talk to you guys. Maybe a couple of follow ups here I mean, what are you thinking could could lead to growth of the broker channel itself like as a share of the overall market.
Contribute to some relative growth for brokers and then.
Second question here I mean, if youre, if youre doing say like 20, or 30% more volume than Youre doing right now how do you feel like that would drive your policy towards returning capital and keeping msr's.
Following up on that last question I mean, you've been a seller of MSR so of other lenders.
Do you feel like the volume of MSR sales for the market more broadly just kind of drives your appetite to sell servicing and the value that you think you can get for it yes, so the answer to the.
Second question first and you have to repeat the first one but the second question is like like we're opportunistic if there's opportunities out there we will sell servicing we also love the servicing asset we have about 300 billion of it and we will continue to service clients and take rate to your consumers and help brokers when that opportunity comes down the road for the refinancing of those consumers and so.
But we look at all opportunities like my job and our job here is to make the right business decisions for our team members our brokers are.
Our shareholders like everyone, we're thinking about everyone across the board and so.
Right now when theres opportunities to sell servicing we will do it if we think it's a good price if not we will sell none of it right whether we sell the whole thing so access all of these different options.
Our liquidity is so strong right now, but I always like having extra liquidity and more liquidity or cash as always king we've done it with $2 $89 billion.
Access to liquidity and we're in a great position across the board. So I feel good about our MSR strategy, Andrew has done a great job rate, causing a great job and we're in the weeds of that every day and that is a day by day week by week decision.
<unk> capitalized at the right times to make great decisions for our company.
Have you repeat your first question.
I went on a tangent I want to make sure I get that right yes.
Yes, no that was helpful. Thank you.
He was asking about relative growth in the broker channel itself.
The share of the market what do you feel like the conditions would have to look like to see that the channel itself grow.
Well so listen.
Loan officers continue to move over right. We've got to continue to dominate from a service perspective for the broker. So they can continue to build engaged with Reorders and continue to do these things every day, but and I think that from the last year was 20% I think first quarter was 22% market share for brokers. So we're up 10% I don't know thats relative not enough for me, but the fun part is like.
Rick mind that I have is like I like when its still low and were still dominating like imagine when it goes up there is no. One in this industry that will tell you that broker market share is going to go down there is no one in this industry out there, but the biggest retail guys in the world.
Brokers are growing I could go back to everyone knows brokers are winning and the fact that the numbers don't come through as big as I like that just like all upside green pastures in rainbows and Sunshine for UWS. So when it goes to 20% to 25, 27% to 30%.
Happens, we're not going to do less business than we're doing today right and so it's all upside right now and so I feel good about where it's at we're prepared for scale. We're prepared for those opportunities and brokers are growing and brokers are succeeding in brokerage our loyalty gws, where all winning together and I feel great about our business.
Your next question comes from the line of Michael Kaye with Wells Fargo.
Your line is open.
Hi, Good morning, I'm wondering one of your major competitors, who is both a direct to consumer lender.
And our wholesale lender seems to be further emphasizing hiring local loan officers to better compete in the purchase mortgage market.
<unk> is obviously very strong and resonates with consumers. So what strategies and tools are you trying to put in brokers' hands to better able to compete with us threats such as this especially if they go after the distributed retail model in a much grander way.
Thanks, Michael I appreciate the question I'm familiar with that company.
Don't think highly of them or any of the things that you do.
And the reality is understanding what that company is about brokers know too. If you remember that company also with someone that all the brokers have left and although if you look at their what they've said they've kind of fallen off the deep into lost their CEO fire. The CEO fire, there President <unk>, Chief legal officer CFO everyone's gone.
Their business strategy doesn't work now with that being said when Refis come back that company will probably do a lot of refis, but the local loan officers strategy is a silly concept is just the way of saying we can't win in the broker market.
And this is typically their hat dws. So we're going to try anything else. We can do and so the reality is theres not a broker in America and Michael you notice that doesn't think that <unk> is the best partner for them and it always does the right thing for brokers and we'll continue to do that and really back to the last question that was asked to me about like well how will brokers grow market share the last time rates dropped.
Brokers Werent prepared just like all these other lenders aren't prepared and when that happens.
They couldnt process the loans they couldnt originate.
Aloes originate and property. So we built that PK plus as I talked about earlier, which basically is helping broker scale brokers don't have access to.
What happens when rates drop next year.
They're going to double their business well they don't have they can't double their process everyone's gonna go on hire operations people <unk> has already built the scale for brokers to succeed and PK plus is a big part of that and so part of the strategy is preparing for that but.
That company it doesn't really matter to us and at the reality of when Youre asking about or Michael you know what they are in the broker channel, they're not really relevant.
And really they're not really relevant in the overall industry. Besides when rates dropped which there'll be great again when rates dropping now I'm sure they'll tell you guys how great. They are at that point too.
Okay. Thank you.
Again, if you would like to ask a question. Please press Star then the number one on your telephone keypad. Your next question comes from the line of Steve Delaney with JMP Securities.
Hey, Matt <unk> with you and congrats on another strong quarter for gas surprising how Steve.
Yes ma'am.
That difference.
Okay.
Picking up on your comments with Doug about coupons.
Did you guys.
You, obviously know which are average coupon was on second quarter production.
Is that something that the average coupon is that something that you and Andrew.
There with the analyst community or is that too much information.
You don't want in the hands of competitors.
So thanks, Steve appreciate the question, but yes, I appreciate that and I always appreciate the questions.
That is pretty much public information I don't have the number right in front of me, but if you look at some data you can figure out with our average interest rate is and where the market is but I mean generally like just being general not just <unk>, but the market's basically like 675% to 7% in the second quarter. If you think of that range and I think maybe a little bit lower in some situations a little bit higher but right right now.
There was a month in there that low rates it depends on when you locked them in when they quote and so the way I look at it as rates are all in the <unk> and low sevens and during the 6% low seven that's why I keep saying high fives.
Is the focus and when it hits high fives and remember the other people that have a fed is raising rates you'd like to talk about that I'm not going to inflation, but don't forget the spreads between the 10 year and a 30 year fixed or at all time highs too and so.
It could be any day, it really could be I think day right now that rates could drop and it doesn't need some crazy thing to happen. It could just means those spreads come back to normalized numbers instead of 300 down to 150 to 200 and boom is a refi opportunity for everybody and so we're really excited about that we're prepared for it we're not sitting here.
We don't need it to happen.
But we're ready for when it does happen where a lot of our competitors needed to happen. So they can come back on these calls and sound rationale to you Steve but the reality is we don't need it we're excited for it but we're going to keep winning in the meantime.
Yes, well I suspect fed funds futures is saying.
We're going to we're going to go down over 100 basis points by the end of <unk> 'twenty, four and I would suspect along into the market with solid deferred and youre going to follow the 10 year. So.
Like 2020 or could give us.
It's not it's not going to be talking about lower rates at this point and I get your point about you got to get it be theyre scaled up and ready to go for that first six months.
What is the way I'd think about it.
One comment Steve I think it's definitely a reason to think that we're going to outperform the market.
Yes and to that point.
You have handy I don't care, what it is today or June 30.
Employee head count and broker count.
Just so we get a sense of how much growth there has been year to date there.
Yes, I don't have the numbers I don't have those numbers handy, but the reality is if you'd always talked I know you talked a bleak order you can get you some of the information, but the way we look at it is.
Obviously, you're a big company. Some people believe we're hiring I think we hired 350 people in July which is actually new information because thats actually in the third quarter. So you can understand our focus but none of those people and as I answered. The question earlier, none of the hires whether its 200 plus people in June 300, plus people in July none of those people are contributing to our success right now they will contribute to our success.
Next year, we're preparing and it's like it's like you are building this opportunity what everyone else is flashing slashing slashing and what I've tried to explain to people is that sometimes these refi booms arent five years running they might be three months six months and if youre not prepared you can't take advantage of you can't grow market share in <unk> plus the scale that we have the technology, we have the <unk>.
Partnerships, we have we're ready for it and we're going to be ready when it happens and in the meantime, we're still going to have record purchase quarters, just like we did $28 billion and we don't need any revised so if we don't need anything to be successful we're going to win in all markets and Thats why I said back in my Roadshow and I know you've followed US back then Steve and everyone's seen every quarter consistently successful.
Thanks for the comments, Matt Blake I'll follow up with you on those numbers I appreciate that.
Your final question comes from the line of Vilas Abraham with UBS.
Hey, everyone. Thanks for the question.
Real quick just one for me can you talk a little bit about new production MSR multiples, how that's contributing to the margin and just how we should think about that dynamic moving forward. Thank you.
Yes.
Yes. Thanks for the question so that new production multiples on Msr's doesn't really contribute to really any of the volume or the I mean, it's just it's a number that's plugged in based on the assumptions that we have along with everyone else has and so if you look at a lot of the things I think our assumptions are maybe a little more conservative than other places, which makes me feel like I got it.
Little upside in it but the reality is I don't think that really is moving any needles hydro margin tied to volume.
New production is the game right now and purchases back to the point on.
We're not the most price sensitive borrowers purchases as they want to buy a house.
So our focus is on helping those buyers buying the house.
Foster easier and cheaper and so the reality is nobody really wants a mortgage like him in the mortgage business no. One wants a mortgage they want the house, how do we get back easy and cheap and that's what we focus on and so understanding rates understanding like the MSR values tied to the rates.
It's not really contributing in a positive or negative wages, which is a number that's plugged in rates are the rates people are buying houses $6 $8, five or seven or $6 five or wherever it is and then the real game, though comes out when that when rates drop and when they do drop that opportunity will be there for UW haven't even if they don't drop for another two years, which I don't think let's just play it out.
So now I'm going to make 200 plus million dollars a quarter of a nice couple of years still make $1 billion.
We're going to be doing just fine and so when revise do come though thats when you make billions with an asset and in a year and the opportunity is there and so we're prepared for it I don't know if the MSR.
Assumptions really make big movements, plus or minus basis points here or there I don't think it really moves the needle much.
Okay. Thank you.
So thank you everyone for joining the call I know youre, all real busy and have a lot of things going on we appreciate the support obviously Blake Cora Andrew and our team here is all available via revenue more questions, but we appreciate it we're excited about the second quarter and we're real excited about the third quarter as well where to keep doing it with brokers. Thanks for the support have a great day.
And this concludes today's conference call you may now disconnect.
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