Q4 2023 Guild Holdings Co Earnings Call

Operator: Good afternoon, ladies and gentlemen, and welcome to the Guild Holdings Company fourth quarter 2023 earnings call. At this time, all participants are on a listen. Later, we will conduct a question and answer session, to follow at that time. As a reminder, this call will be. I would now like to turn the conference over to International Relations. Please go ahead. Thank you, and good afternoon, everyone.

Good afternoon, ladies and gentlemen, and welcome to the Guild Holdings Company fourth quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session with instructions to follow at that time as a reminder, this call will be recorded I would now like to turn the conference over to Investor.

Relations. Please go ahead.

Thank you and good afternoon, everyone before we begin I'd like to remind everyone that comments on this conference call may contain certain forward looking statements regarding the company's expected operating and financial performance for future periods and industry trends.

Unknown Executive: Before we begin, I'd like to remind everyone that comments on this conference call may contain certain forward-looking statements regarding the company's expected operating and financial performance for future periods and industry trends, which are based on the company's current expectations. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of risks or other factors that are described in greater detail under the section titled Risk Factors in Guild's most recently filed Form 10-Q and in other reports subsequently filed with the U.S. Securities and Exchange Commission. Additionally, today's remarks will refer to certain non-GAAP financial measures. Reconciliations of non-GAAP financial measures to the corresponding GAAP measures can be found in our earnings release furnished today with the SEC and are also available on Guild's Investor Relations website. I'd now like to turn the call over to Chief Executive Officer Terry Schmidt. Terry?

These statements are based on the company's current expectations.

Actual results for future periods may differ materially from those expressed or implied by these forward looking statements due to a number of risks or other factors that are described in greater detail under the section titled Risk factors <unk>. Most recently filed forms 10-Q and in other reports subsequently filed with the U S Securities and Exchange Commission.

Additionally, today's remarks will refer to certain non-GAAP financial measures reconciliations of non-GAAP financial measures to the corresponding GAAP measures can be found in our earnings release furnished today with the SEC and are also available on <unk> Investor Relations website.

I'd now like to turn the call over to Chief Executive Officer, Terry Schmid Gary.

Terry Lynn Schmidt: Good afternoon, everyone, and thank you for joining us to discuss our fourth quarter and full year results and a strategic update. I am joined by our President, David Neylan, as well as our Chief Financial Officer, Amber Kramer. Throughout 2023 in the fourth quarter, we have remained consistent with our strategy to grow market share by being a lender of choice in the communities we serve across the country. I am proud of our achievements throughout the year as we grew our market share, delivered full-year positive adjusted net income, and executed on attractive acquisitions. We accomplished this amidst the macro headwinds that we and others in the industry have been discussing, including elevated interest rates and tight housing inventory. For the full year 2023, we generated $15 billion of in-house origination, 93% of which was from purchased business. And we generated a net loss of $39 million and an adjusted net income of $48 million.

Good afternoon, everyone and thank you for joining us to discuss our fourth quarter and full year results and a strategic update.

I am joined by our President David Nealon, as well as our Chief Financial Officer Albert Kramer.

Throughout 2023 in the fourth quarter, we have remained consistent with our strategy to grow market share by being a lender of choice in the communities we serve across the country.

I am proud of our achievements throughout the year as we grew our market share delivered full year positive adjusted net income and executed on attractive acquisitions we.

We accomplished this.

And then the macro headwinds that we and others in the industry have been discussing including elevated interest rates and tight housing inventory.

For the full year 2023, we generated 15 billion of in house originations, 93% of which were from purchase business.

And we generated a net loss of $39 million and adjusted net income of 48 million.

Terry Lynn Schmidt: By being disciplined and focusing on maintaining a robust capital position, we have successfully completed complementary and compelling acquisitions and team additions, which position us for accelerated growth when the cycle turns, including the post-year-end announcement of our acquisition of Academy Mortgage, which David will discuss. We have completed five transactions over the past year and a half. Each of these transactions helps us to further our strategic growth of growing market share by adding new geographies, loan officers, products, and enhanced relationships, which support our focus on the purchase market. These transactions have helped to lift Guild to become the eighth largest non-bank retail mortgage lender.

By being disciplined and focusing on maintaining a robust capital position, we have successfully completed complementary and compelling acquisitions and team additions.

Each position us for accelerated growth when the cycle turns.

Including the post year end announcement of our acquisition of Academy mortgage, which David will discuss we have completed five transactions over the past year and a half.

Each of these transactions helps us to further our strategic growth or growing market share by adding new geographies loan officers products and enhanced relationship which support our focus on the purchase market.

These transactions have helped to lift Gil to become the eighth largest nonbank retail mortgage lender.

Terry Lynn Schmidt: In addition, according to the MLS data, we have increased our number of licensed individuals by 34% since just prior to the first of these transactions in November of 2022. This illustrates our success at growing and retaining our sales teams and positioning them to take full advantage of the next cycle in the housing market. We've also continued to enhance our product depth with the addition of reverse mortgages and builder products, among others, which in turn enhances relationships with key partners such as builders. All of this growth has been facilitated by our consistent focus on execution, and we are confident it will continue to distinguish Guild in the marketplace and allow us to create meaningful value for our stockholders over time. Market conditions were challenging throughout the year with higher interest rates and limited home inventory.

In addition, according to the MLS data, we have increased our number of licensed individuals' by 34%.

It's just prior to the first of these transactions in November of 2022.

This illustrates our success at growing and retaining our sales teams and positioning them to take full advantage of the next cycle in the housing market.

We've also continued to enhance our product depth with the addition of reverse mortgages and builder products, among others, which in turn enhanced relationships with key partners such as builders.

All of this growth has been facilitated by our consistent focus on execution and we are confident it will continue to distinguish skilled in the marketplace and allow us to create meaningful value for our stockholders over time.

The market conditions were challenging throughout the year with higher interest rates and limited home inventory. Despite this backdrop, we continue to grow our market share.

Terry Lynn Schmidt: Despite this backdrop, we continue to grow our market share. We prioritize being integrated members of the communities we serve, and the foundation of our approach is our relationship-based loan sourcing strategy and being able to provide our customers with innovative products that serve their needs. While we anticipate the current headwinds will continue through much of 2024, we are encouraged by our market share growth and disciplined approach, which should deliver results when sentiment improves and the rate environment eases. Today, more than ever, we are confident in our model and the platform that we have established.

We prioritize being integrated and members of the communities, we serve and the found out Dacian of our approach is our relationship based loan sourcing strategy and being able to provide our customers with innovative products that serve their needs.

While we anticipate the current headwinds will continue through much of 2024, we are encouraged by our market share growth and disciplined approach, we should deliver results when sentiment improves and the rate environment eases.

Today more than ever we are confident in our model and that the platform that we have established.

Terry Lynn Schmidt: This includes our focus on purchase mortgage originations, as well as our strategy of retaining our servicing, allowing us to generate more reliable cash flow. Maintaining our customer relationships that support our customer for life philosophy positions us to be a lender of choice for our customers for future transactions. Furthermore, we continue to view the current environment as an opportunity to be even better positioned as the cycle turns. We have maintained a disciplined approach to capital management, as demonstrated by our year-in leverage ratio of 1.3 times, which allows us to selectively pursue growth opportunities. We have built a brand with a stellar reputation, and in fact, in the 2023 Mortgage CX Best in Class Awards by the Stratmore Group, Guild had the most overall winners in the large independent mortgage bankers category, with six of the top 10 loan officers working for Guild.

This includes our focus on purchase mortgage originations as well as our strategy of retaining our servicing allowing us to generate more reliable cash flow.

Maintaining our customer relationships that supports our customer for life philosophy positions us to be the lender of choice for our customers for future transactions.

Furthermore, we continue to view the current environment as an opportunity to be even better positioned as the cycle turn.

We have maintained a disciplined approach to capital management as demonstrated by our year end leverage ratio of 1.3 times.

Which allows us to selectively pursue growth opportunities.

We have built a brand with a stellar reputation and in fact in the 'twenty to 'twenty three mortgage CX best in Class Award by the strap more group field have the most overall winners in the large independent mortgage bankers category with six of the top 10 not loan officers working for guilt.

David Manuel Neylan: By maintaining our reputation for integrity and service, we are able to continue to attract loan officers, potential M&A prospects, and customers. We are proud of our ability to continue to execute on our plan, expand our platform, and create value for our stockholders.

By maintaining our reputation for integrity and service, we are able to continue to attract loan officers.

Potential M&A prospects and customers. We are proud of our ability to continue to execute on our plan expand our platform and create value for our stockholders.

And now I'd like to turn the call over to David Neal It's David.

David Manuel Neylan: Thank you, Terry. In the fourth quarter, we delivered total in-house loan originations of $3.5 billion, compared to $4.3 billion in the third quarter, reflecting both market headwinds and seasonality. We anticipate we will see continued pressure on originations in the coming quarters, aligned with higher rates and limited housing supply. However, on a relative basis, we benefit from our focus on the purchased mortgage market. In the fourth quarter, we originated 93% of our closed loan origination volume from purchased business, compared to the mortgage banker's estimate of 81% for the industry for the same period. As Terry mentioned, subsequent to Quarter End, we acquired the retail lending assets of Academy Mortgage Corporation, a privately held Utah-based lender that is licensed to operate in 49 states and Washington, D.C. Academy boasts approximately 200 branches and more than 1,000 employees who have transitioned to Guild, including more than 600 licensed mortgage originators.

Thank you Terry and the fourth quarter, we delivered total in house loan originations of $3 5 billion compared to $4 3 billion in the third quarter, reflecting both market headwinds M. Seasonality. We anticipate we will see continued pressure on originations in the coming quarters aligned with higher rates and limited.

Housing supply however, on a relative basis, we benefit from our focus on the purchase mortgage market in the fourth quarter, we originated 93% of our closed loan origination volume from purchase business compared to the mortgage bankers estimate of 81% for the industry for the same period.

As Terry mentioned subsequent to quarter end, we acquired the retail lending assets of Academy Mortgage Corporation.

But we held Utah based lender that is licensed to operate in 49 States and Washington D C.

Both are approximately 200 branches and more than a thousand employees, who have transitioned to guild, including more than 600 licensed mortgage originators. The addition of academy mortgage represents a 25% increase to origination volume based on results through the third quarter of 2023 according to data.

David Manuel Neylan: The addition of Academy Mortgage represents a 25% increase in origination volume based on results through the third quarter of 2023, according to data from Inside Mortgage Finance Publications. Just like the other transactions we have completed in the previous several quarters, we pursued a combination with Academy due to their close alignment to our culture, values, and approach of having local sales and fulfillment that supports our Customers for Life strategy. Additionally, we are encouraged by our ability to attract organic talent and M&A opportunities over the past several quarters and that we are being recognized as a partner of choice as the platform for local retail mortgage originators seeking long-term growth and stability. We have continued to pursue our goal of facilitating homeownership in the communities that we serve, and to that end, throughout the year, we introduced a number of new products that make sustainable homeownership attainable, including rate buy- The entire industry faces ongoing pressure.

From inside mortgage finance publications.

Just like the other transactions, we have completed in the previous several quarters, we pursued a combination with academy due to their closer alignment to our culture values and approach of having local sales and fulfillment that supports our customers for life strategy.

Additionally, we are encouraged by our ability to attract organic talent and M&A opportunities over the past several quarters and that we are being recognized as a partner of choice as the platform for local retail mortgage originators speaking long term growth and stability we.

We have continued to pursue our goal of facilitating homeownership in the communities that we serve and to that end throughout the year. We introduced a number of new products that make sustainable homeownership attainable, including rate buy down programs downpayment assistance and options for no lender fees refinancings.

Entire industry faces ongoing pressure. However, we remain confident that kills balanced business model and strategy that we have always adhere to is one that will again prove to be successful in this cycle and will allow us to continue to increase our market share and deliver attractive earnings growth overtime.

David Manuel Neylan: However, we remain confident that Guild's balanced business model and strategy, which we have always adhered to, is one that will again prove to be successful in this cycle and will allow us to continue to increase our market share and deliver attractive earnings growth over time. I will now turn the call over to our Chief Financial Officer, Amber Kramer, to discuss the financials in more detail.

I will now turn the call over to our Chief Financial Officer, Andrew Kramer to discuss the financials in more detail Amber.

Desiree A. Kramer: Thank you, David. As is our standard practice, my comments will focus on sequential quarter comparisons. For the fourth quarter of 2023, we generated $3.5 billion of total in-house loan origination compared to $4.3 billion in the third quarter. Net revenue totaled $57 million compared to $257 million in the prior quarter, which generated a net loss of $93 million compared to net income of $54 million in the third quarter. The 2023 results were negatively impacted by fair value adjustments with respect to the company's MSRs.

Thank you David.

As is our standard practice my comments will focus on sequential quarter comparison for the fourth quarter of 2023, we generated $3 5 billion of total in house loan originations compared to $4 3 billion in the third quarter.

Net revenue totaled 57 million compared to $257 million in the prior quarter, which generated a net loss of 93 million compared to net income of $54 million in the third quarter.

The 'twenty 'twenty results were negatively impacted by fair value adjustments with respect to the company's msr's.

Desiree A. Kramer: Adjusted net income was $13 million or $0.20 per diluted share, and adjusted EBITDA was $13.2 million. For the full year 2023, we generated $15 billion of total in-house loan originations compared to $19.1 billion in 2022. Net revenue totaled $0.7 billion compared to $1.2 billion in the prior year, which generated a net loss of $39 million compared to a net income of $329 million in the prior year.

Adjusted net income was $13 million or 20 cents per diluted share and adjusted EBITDA was $13 2 million.

For the full year 2023, we generated 15 billion of total in house loan originations compared to $19 1 billion in 2022 net revenue totaled <unk> 7 billion compared to $1 2 billion in the prior year, which generated a net loss of $39 million compared to a net income of 329 million in the prior year.

Adjusted net income was $48 million and adjusted EBITDA was $75 million for the full year 2023.

Desiree A. Kramer: Adjusted net income was $48 million, and adjusted EBITDA was $75 million for the full year 2023. Focusing on our origination segment, our gain on sale margins came in at 330 basis points compared to 377 basis points in the third quarter on funded origination. Gain on sale margins on pull-through adjusted Vox volume was 347 basis points compared to 389 basis points in the prior quarter, and total pull-through adjusted Vox volume was $3.3 billion compared to $4.1 billion in the prior quarter. In our servicing segment, our portfolio grew to $85 billion. We reported a net loss of $72 million compared to net income of $84 million in the third quarter.

Focusing on our origination segment, our gain on sale margins came in at 330 basis points compared to 377 basis points in the third quarter unfunded origination.

Gain on sale margins on pull through adjusted lock volume was 347 basis points compared to 389 basis points in the prior quarter and total pull through adjusted lock volume was $3 3 billion compared to $4 1 billion in the prior quarter.

Our servicing segment our portfolio grew to 85 billion, we reported net loss of 72 million compared to net income of 84 million in the third quarter.

Losses due to a noncash downward valuation adjustments of MSR is of $122 million, reflecting the interest rate decline you saw in the fourth quarter.

Our servicing portfolio continues to be a valuable source for ongoing cash flow future opportunities for loan recapture and it reinforces our customer for life strategy.

Our balance sheet remains strong and provides us with the flexibility to continue to invest in our growth.

Desiree A. Kramer: The loss is due to a non-cash downward valuation adjustment of MSRs of $122 million, reflecting the interest rate decline we saw in the fourth quarter. Our servicing portfolio continues to be a valuable source of ongoing cash flow, future opportunities for loan recapture, and it reinforces our customer for life strategy. Our balance sheet remains strong and provides us with the flexibility to continue to invest in our growth. Turning to liquidity, as of December 31st, cash and cash equivalents totaled $120 million, while unutilized loan funding capacity was $1 billion, and the unutilized mortgage servicing rights lines of credit were $336 million, based on total committed amounts and barring base limitations. Our leverage ratio, defined as total secured debt, including funded funding, divided by tangible stockholders equity, was 1.3 times. Book value per share at the end of the quarter was $19.36, while tangible net book value per share was $15.90.

Turning to liquidity as of December 31st cash and cash equivalents totaled $120 million well Unutilized loan funding capacity was $1 billion and Unutilized mortgage servicing rights lines of credit with $336 million based on total committed mouse and borrowing base limitations.

Our leverage ratio defined as total secured debt, including funded funding divided by tangible stockholders' equity was one three times.

Book value per share at the end of the quarter was $19.36 will tangible net book value per share was $15.90.

We believe we are well positioned to manage through the current more challenging operating environment, while allowing us to invest to create additional value.

In addition, during the fourth quarter, we repurchased approximately 98000 shares at an average stock price of $11.69 per share.

On March seven 2024, our board of directors extended the share repurchase program to make that 2025.

As of December 31, 2023, there were $11 $2 million remaining under the original $20 million share repurchase authorization.

In the first two months of 'twenty 'twenty four we generated $2 2 billion of loan originations and $2 6 billion of culture adjusted lock volume.

We closed on the acquisition of Academy mortgage at the end of February and consistent consistent with experience with prior acquisitions, we anticipate a short term earnings impact as loan originators and play into our pipeline and production volume starts to ramp up on the Yelp platform.

Desiree A. Kramer: We believe we are well positioned to manage through the current more challenging operating environment while allowing us to invest to create additional value. In addition, during the fourth quarter, we repurchased approximately 98,000 shares at an average stock price of $11.69 per share. On March 7, 2024, our Board of Directors extended the share repurchase program to May 5, 2025. As of December 31, 2023, there were $11.2 million remaining under the original $20 million share repurchase authorization. In the first two months of 2024, we generated $2.2 billion in loan originations and $2.6 billion in pull-through adjusted loss volume. We closed on the acquisition of Academy Mortgage at the end of February, and consistent with the experience of prior acquisitions, we anticipate a short-term earnings impact as loan originators integrate into our pipeline and production volume starts to ramp up on the Guild platform. We anticipate continued pressure on origination volume and gain on sale margins. However, we remain confident in our balanced business model, which we believe results in more durable and sustainable performance across market cycles. And with that, we'll open up the call for questions. Operator?

We anticipate continued pressure on origination volume and gain on sale margin. However, we remain confident in our balanced business model, which we believe resulted in more durable and sustainable performance across market cycles.

And with that we'll open up the call for questions operator.

Thank you.

At this time, we will be conducting a question and answer session. If you would I would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question is from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

And one moment, please while we poll for questions.

Our first question comes from the line of Don Fan Daddy with Wells Fargo. Please proceed with your question.

Hi, Good evening, Albert can you talk a little bit about gain on sale margins for Q1, it sounds like Theres continued pressure there.

And then secondarily, just any comments around the competitive environment.

Sure. Thanks, John you know, we don't provide guidance going forward and we've continued to see gain on sale really stabilize with no change and we're not seeing anything that is moving that up or down and so you know where we've been in this.

<unk> environment over the last year and a half I think is going to hold them until we see some changes in in housing inventory capacity opening up and fed rate moves.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your questions from the queue. This depends on the use of speaker equipment; it may be necessary to pick up your handset before speaking.

And then can you just comment a little bit on what you are seeing just competitively in general.

So do you think.

The opportunity to make more acquisitions.

Yeah.

Yeah.

Things are still.

Competitive and I think there's still some excess capacity you know in our in our industry.

But our growth strategy is working we're still seeing a lot of activity on the M&A front as well as the organic growth front. There as you know there are owners that are looking for you know.

Operator: And one moment, please, while we poll for questions. Our first question comes from the line of Don Fandetti with Wells Fargo. Please proceed with your question. Hi, good evening.

Desiree A. Kramer: Amber, can you talk a little bit about gain on sale margins for Q1? It sounds like there's continued pressure there. And then, secondarily, just any comments on the competitive environment?

Another home with a company, that's a little bit more.

Larger can offer more to their employees and same thing with loan originators Theyre looking for stability and you know a company that's growing and investing in their future. So you know we feel like there's still opportunity out there and our strategy's working if you if you.

Desiree A. Kramer: Sure, thanks, Don. You know, we don't provide guidance going forward. We've continued to see gain on sale really stabilize with no change, and we're not seeing anything that is moving that up or down. And so, you know, where we've been in this pressure environment over the last year and a half.

If you look at the fourth quarter of 'twenty three you compare that to the fourth quarter of 'twenty two for originations in the in the industry the industry was down.

David Manuel Neylan: I think it is going to hold until we see some changes in housing inventory capacity opening up and fed rate moves, and then can you just comment a little bit on what you're seeing just competitively in general? And also, do you think you have the opportunity to make more acquisitions? Yeah, you know, things are still competitive, and I think there's still some excess capacity in our industry. But our growth strategy is working. We're still seeing a lot of activity on the M&A front as well as the organic growth front. There are, you know, owners that are looking for, you know, another home with a company that's a little bit larger and can offer more to their employees. And the same thing with loan originators.

About two 4% skilled.

We increased by about 18%. So overall, we're about 20% ahead of the industry and so we believe that our strategy is working.

Thank you.

Mhm.

Thank you. Our next question comes from the line of Rick Shane with J P. Morgan. Please proceed with your question.

Thanks for taking my questions everybody.

Just one quick thing in Edinburgh, I think given the questions. We've chatted about in the past this isn't going to be a surprise.

The percentage of MSR that was retained this quarter was down to 77%.

I'm curious if that is related to any existing contracts related to acquisitions and that you will gravitate back towards your historical target of 90% I'm curious, particularly because you've made such a large acquisition entering 2020 for if there.

David Manuel Neylan: They're looking for stability and, you know, a company that's growing and, you know, investing in their future. So, you know, we feel like there's still opportunity out there and our strategy is working. If you look at the fourth quarter of 23, and compare that to the fourth quarter of 22, for originations in the industry, the industry was down, about 2.4 percent, but it increased by about 18%.

Any distortion related to forward sales on Msr's that we should be aware of.

Yeah. Thanks, Rick I'm. The overall the percentage of service retained versus released is gonna be driven mostly just by profitability and execution.

Richard Barry Shane: So overall, we're about 20% ahead of the industry, and so we believe that our strategy is working. Thank you. Our next question comes from the line of Rick Shane with J.P. Morgan. Please proceed with your question. Thanks for taking my questions, everybody. Just one quick thing, and Amber, I think given the questions we've chatted about in the past, this isn't going to be a surprise. The percentage of MSR that was retained this quarter was down to 77%.

And you know some of the Aggregators are paying up for it and we're seeing that pick up there and we'll take that opportunity and capitalize on it to pick up that extra basis points of gain on sale the acquisitions aren't they don't impact. It you know that the last acquisition that we had will take some time to ramp up so they're not in any of our vault.

Numbers anyway, and I think the other big part of this is a lot of the reason acquisitions come together is because of our you know our customer for life strategy and so you know we continue to focus on that and balance that out with you know looking at execution and profitability.

Desiree A. Kramer: I'm curious if that is related to any existing contracts related to acquisitions and whether you will gravitate back towards your historical target of 90%. I'm curious, particularly because you've made such a large acquisition entering 2024, if there's any distortion related to forward sales on MSRs that we should be aware of. Yeah, thanks, Rick.

Got it and in the context of that customer for life are you selling so when you're doing when you're selling servicing released or are you selling to purchasers, who aren't necessarily seeking recapture business because.

They have a different intent with the MSR hedge.

Good for them and not necessarily potential future pipeline.

Desiree A. Kramer: The overall percentage of service retained versus released is going to be driven mostly just by profitability and execution. And, you know, some of the aggregators are paying up for it. And we're seeing that pick up there. And we'll, you know, take that opportunity and capitalize on it to pick up the extra basis points and gain on sale. The acquisitions aren't, they don't impact it. You know, the last acquisition that we had will take some time to ramp up. So they're not in any of our volume numbers anyway.

Not necessarily we're just looking at the execution as far as pricing if if theres a correspondent.

Out there as a correspondent lender that that is aggressively pricing to where we can't justify for example, the value of their servicing for example, then we're going to take advantage of that that price and execute through the correspondent on a servicing released basis.

Got it and what Oh, no sales servicing.

Desiree A. Kramer: And I think the other big part of this is that a lot of the reason acquisitions come to Guild is because of our, you know, our customer for life strategy. And so, you know, we continue to focus on that and balance that out with, you know, looking at execution and profitability.

Released started parsing my language here on the sales servicing release is it do you see it as a jump ball going forward, if you're selling to a lender who was seeking recapture or are there any covenants preventing you given you.

Your knowledge and frankly close relationship with the borrower.

Desiree A. Kramer: And in the context of that customer for life, are you selling certainty when you're doing when you're selling servicing release? Are you selling to purchasers who aren't necessarily seeking recapture business because they have a different intent with the MSR? It's an edge for them and not necessarily a potential future pipeline?

To be able to recapture refis as that becomes a bigger part of the market.

I'm trying to understand if there's an opportunity cost that you're giving up by selling the MSR servicing released.

Understood.

Yeah, and I think the one important part of this is that we have a really strong CRM and we are in close contact with our borrowers and the realtors and so you know just because we're selling them service release doesn't necessarily mean that we're losing touch with that borrower overall and and so that's I think that's an important part of this.

Desiree A. Kramer: Not necessarily; we're just looking at the execution as far as pricing is concerned. If there's a correspondent lender out there that is aggressively pricing to where we can't justify, for example, the value of their servicing, for example, then we're going to take advantage of that price and execute through the correspondent on a service release. Got it. And what, on the sales servicing release, sorry, I'm parsing my language here, on the sales servicing release, do you see it as a jump ball going forward if you're selling to a lender who's seeking recapture? Are there any covenants preventing you, given your knowledge and, frankly, close relationship with the borrower, from being able to recapture refis if that becomes a bigger part of the market?

Got it Okay, and then I misspoke when I said, so the MSR servicing really sold sell the loan servicing released I want to correct myself on that.

Okay. That's very helpful guys. Thank you.

Thank you. Our next question comes from the line of Eric Hagen with <unk>. Please proceed with your question.

Hey, Thanks, Good afternoon hope her well did you say how much you paid for Academy.

In the in that acquisition and is there a good way to think about the expenses going forward.

Desiree A. Kramer: I'm trying to understand if there's an opportunity cost that you're giving up by selling the MSR service. Unknown Speaker Yeah, and I think the one important part of this is that we have a really strong CRM, and we are in close contact with our borrowers and the realtors. And so, you know, just because we're selling them service release doesn't necessarily mean that we're losing touch with that borrower overall. And so that's, I think that's, an important part of this. I got it.

And the Onboarding of that platform.

We did not say, what we paid for the acquisition and fault file our 10-K in the next couple of days and you'll see in our subsequent event with the purchase price was but we have that's not public information at this time and as far as the expenses going forward it would.

You know fall into our normal expense structure over time, although the the acquisition takes time to ramp up usually 90, 90 ish days plus to get onto our system. They come on as employees on day, one and they integrate onto our platform and then we'll start closing their lungs within 90 days. So you do have an impact as I mentioned.

Richard Barry Shane: Okay. And I misspoke when I said sold the MSR servicing released, sold, sell the loan servicing released. I want to correct myself.

Desiree A. Kramer: Okay, that's very helpful, guys. Thank you. Thank you. Our next question comes from the line of Eric Hagen with BTIG. Please proceed with your question. Hey, thanks. Good afternoon. Hope you're well.

My remarks to near term earnings from a cost structure perspective.

Eric Hagen: Hey, did you say how much you paid for Academy in that acquisition? And is there a good way to think about the expenses going forward following the onboarding of that platform? We did not say what we paid for the acquisition, and we'll file our 10K in the next couple days and you'll see in our subsequent event what the purchase price was, but that's not public information at this time.

Right Yeah that's helpful.

Historically, we used to.

Show a profit on these types of acquisitions within four to six months, but with the.

The.

Margins being much thinner than they than they have been in the last year and a half two years.

We were shooting for within 12 months to start showing profitability on these acquisitions.

Unknown Executive: And as far as the expenses going forward, they would fall into our normal expense structure over time, although the acquisition takes time to ramp up, usually 90-ish days plus to get onto our system. They come on as employees on day one, they integrate onto our platform, and then we'll start closing their loans within 90 days. So you do have an impact, as I mentioned in my remarks, on near-term earnings from a cost structure perspective. Yep, that's helpful. Historically, we used to see, www.globalonenessproject.org, margins being much thinner than they have been in the last year and a half, two years. We're shooting for within 12 months. Unknown Speaker, Unknown Speaker, Unknown Speaker, Yep.

Yes.

That's helpful. Thank you so much.

Can you share how can conventional mortgage rates are comparing to FHA right now and what youre seeing in terms of any changes in borrower credit quality between the two channels and even you know in which channel you could potentially be more active or.

Aggressive and if rates were to fall.

David do you want to take that question.

Sure, where our credit quality for our borrowers continues to remain high and we continue to see in both the conventional and the government side that.

Borrowers standards are high underwriting standards continue to remain high.

There there is a bit of a narrowing of the gap in terms of pricing.

David Manuel Neylan: That's helpful. Thank you so much. Hey, can you share how conventional mortgage rates are comparing to FHA right now and what you're seeing in terms of any changes in borrower credit quality between the two channels? And even, you know, in which channel you could potentially be more active or aggressive in if rates were to fall? David, do you want to take that question?

But we really continue to see options for both particularly first time homebuyers down payment assistance programs.

Being able to close the gap here a little bit. So it's it remains competitive in both we've got a ton of experience in operating in both areas and we have different areas of the country.

Where some of that business shifts a little bit based on the geography, but again, we're seeing high credit quality standards, good underwriting good collateral and good performance as well.

David Manuel Neylan: Sure. Credit quality for our borrowers continues to remain high. We continue to see on both the conventional and the government side that borrower standards are high.

David Manuel Neylan: Underwriting standards continue to remain high, and there is a bit of a narrowing in the gap in terms of pricing, but we really continue to see options for both, particularly first-time home buyers and down payment assistance programs being able to close the gap here a little bit. So it remains competitive in both. We've got a ton of experience operating in both areas, and we have different areas of the country where some of that business shifts a little bit based on geography. But again, we're seeing high credit quality standards, good underwriting, good collateral, and good performance as well. Great. Thank you guys so much. Unknown Speaker.

Great. Thank you guys so much.

Uh huh.

Thank you and as a reminder, if anyone has any questions. You May press star one on your telephone keypad to join the question and answer queue.

And our final question comes from the line of Derek <unk> with Jefferies. Please proceed with your question.

Hi, Good afternoon, I'm, just as we're moving into 'twenty four and some of the origination headwinds persist. How are you guys feeling about the balance in aggregate between your origination segment and servicing segments.

I mean, each quarter are our origination segment continues to we continue to get our cost in order, even even though we're still adding via acquisitions and organic growth were still cutting our expenses. So we feel good about that at all.

Eric Hagen: Thank you. And as a reminder, if anyone has any questions, you may press star 1 on your telephone keypad to join the questioning. And our final question comes from the line of Derek Sommers with Jefferies. Please proceed. Hi, good afternoon.

Going in the right direction and of course on the servicing side I mean, where is solid our cash flows are really solid I know, we had an impairment this last quarter, but you know it and in reality our prepayments in our pay offs. Just continue have continued to go down.

Derek Sommers: Just as we're, you know, moving into 24 and some of the origination headwinds persist, how are you guys feeling about the balance in aggregate between your origination segment and service? I mean, each quarter, our origination segment continues to, we continue to get our costs in order, even though we're still adding via acquisitions and organic growth, we're still cutting our expenses. So we feel good about that. It's all going in the right direction. And, of course, on the servicing side, I mean, it's solid. Our cash flows are really solid. I know we had an impairment this last quarter.

So we feel like from the cash flow perspective, the value of our servicing is still is still you know very strong and we feel like that.

That model of having originations and servicing still works well for us.

Got it and then.

Kind of some of the data we track shows home inventory starting to loosen slightly at least compared to the past couple of years does that reflect kind of what you're hearing from the field.

Desiree A. Kramer: But, you know, in reality, our prepayments and our payoffs just have continued to go down. So we feel like, from the cash flow perspective, the value of our servicing is still very strong. And we feel like that model of having originations and servicing still works well for us. Got it. And then some of the data we tracked shows home inventory starting to loosen slightly, at least compared to the past couple years. Does that reflect kind of what you're hearing from the field?

Yes, yes, there there has been some relief its still there still isn't enough inventory to you know to.

Great I think.

The demand is still so high compared to the inventory I mean, it looks like the inventory year over year is about 20% higher than it was.

And we're seeing some price cuts in markets more price cuts than we have in the past so it's going in the right direction.

Unknown Executive: Yes, yes. There has been some relief. But, there still isn't enough inventory to, you know, to, Unknown Attendee, Kyle Joseph, Guild Hldg. Demand is still so high compared to the inventory. It looks like the inventory, year over year, is about 20% higher than it was.

But I think because we can we continue to you know.

Work on our growth strategy.

As this keeps getting better and starts churning, we're gonna we're gonna be in a great position and benefit greatly from it.

Got it. Thank you that's all for me.

Yeah.

Thank you.

Unknown Executive: And we're seeing some price cuts in markets, more price cuts than we have in the past. So you know, it's going in the right direction. But I think because we've continued to, you know, work on our growth strategy, as this keeps getting better and starts turning, we're going to be in a great position and benefit greatly.

We have reached the end of the question and answer session I will now turn the call over to management for closing remarks.

Thank you everyone and we're just going to keep doing what we do and executing on our strategy and we look forward to to give you an update next quarter. Thank you.

Thank you for joining us today have a great evening and we look forward to updating you on our next call.

Unknown Executive: Got it. Thank you. That's all for me.

Terry Lynn Schmidt: And we have reached the end of the question and answer session. I'll now turn the call over to management for a. Thank you, everyone, and we're just going to keep doing what we do and executing on our strategy, and we look forward to giving you an update next quarter. Thank you. Thank you for joining us today. Have a great evening, and we look forward to updating you on our. Super Gifted Army Logo

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