Q3 2024 Mr Cooper Group Inc Earnings Call
Okay.
Unknown Executive: Good day, and thank you for standing by.
Speaker Change: Good day and thank you for standing by welcome to the Mr. Cooper Group Q3, 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.
Unknown Executive: Welcome to the Mr. Cooper Group, Q3 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press Star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised. Today's conference is being recorded.
Speaker Change: After the Speakers' presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then share an automated message advising your hand, just raised to withdraw your question. Please press star one one again.
Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker at Mr. Cooper Group. Please go ahead.
Unknown Executive: I would now like to hand the conference over to your first speaker at Mr. Cooper Group. Please go ahead.
Ken Posner: Good morning, and welcome to Mr. Cooper Group's third quarter earnings call. My name is Ken Posner, and I'm SVP of Strategic Planning and Investor Relations. With me today are Jay Bray, Chairman and CEO; Mike Weinbach, President; and Kurt Johnson, Executive Vice President and CFO. As a reminder, this call is being recorded. You can find the slides on our Investor Relations webpage at investors.Mr. Cooper Group.com. During the call, we may refer to non-GAAP measures, which are reconciled to GAAP results in the appendix to the slide deck. Also, we may make forward-looking statements, which you should understand could be affected by risk factors that we've identified in our 10-K and other SEC filers.
Ken Posner: Good morning, and welcome to metric Cooper group's third quarter earnings call. My name is Ken Posner and I am SVP of strategic planning and Investor Relations with me today are Jay Bray, Chairman and CEO, Mike Weinberg, President and Kirk Johnson Executive Vice President and CFO.
Speaker Change: As a reminder, this call is being recorded.
Speaker Change: You can find the slides on our Investor relations webpage at investors that Mr. Cooper Group Dot com.
During the call we may refer to non-GAAP measures, which are reconciled to GAAP results in the appendix to the slide deck also we may make forward looking statements, which you should understand could be affected by risk factors that we've identified in our 10-K and other SEC filings, we are not undertaking any commitment to update these statements if conditions change.
Unknown Executive: We are not undertaking any commitment to update these statements.
Unknown Executive: If conditions change, I'll now turn the call over to Jay.
I'll now turn the call over to Jay.
Jay Bray: Good morning, everyone, and thank you for joining our call. Let's dive into the quarterly highlights starting on slide three. In summary, we produce a very solid quarter with three tax operating income of 246 million and operating ROTC of 16.8%, which is at the upper end of our guidance. Tendulbook value grew 11% year-over-year to $69.93 per share, and our balance sheet remains in strong shape with a capital ratio of 27.9% and liquidity at a record high of $4.1 billion. Turning to operations, we grew the servicing portfolio to 1.2 trillion, which represents 5.4 million customers. In generated $305 million in pre-tax servicing income, thanks to continued strong operating leverage.
Jay Bray: Good morning, everyone and thank you for joining our call, let's dive into the quarterly highlights starting on slide three in summary, we produced a very solid quarter with pre tax operating income of 246 million and operating our OTC up 16, 8%, which is at the upper end of our guidance.
Jay Bray: Tangible book value grew 11% year over year to $69 93 per share and our balance sheet remains in strong shape with a capital ratio of 27, 9% and liquidity at a record high of $4 1 billion.
Jay Bray: Turning to operations, we grew the servicing portfolio to one two trillion, which represents five 4 million customers and generated $305 million in pre tax servicing income. Thanks to continued strong operating leverage.
Jay Bray: Our origination segment generated $69 million of pre-tax income, which significantly exceeded our guidance. This was, of course, due in part to the drop in mortgage rates in the quarter. However, we also benefited from investments we've been making in both our direct-to-consumer and correspondent platforms, which together out-index the market with 80% sequential growth and findings. I'm also very pleased to report that Mr. Cooper was certified once again as a great place to work, which now makes six consecutive years that we've received this special recognition. We put a lot of care into creating a purposeful and welcoming environment for our team members, and I'm delighted with this independent validation of our culture and our people.
Jay Bray: Our origination segment generated $69 million of pre tax income, which significantly exceeded our guidance. This was of course due in part to the drop in mortgage rates in the quarter. However, we also benefited from investments we've been making in both our direct to consumer and correspondent platforms, which together all index.
Jay Bray: The market with 80% sequential growth and frankly.
Jay Bray: I am also very pleased to report that Mr. Cooper was certified once again as a great place to work, which now makes six consecutive years that we've received a special recognition.
Jay Bray: We put a lot of care and to creating a purposeful and welcoming environment for our team members and I am delighted with this independent validation of our culture and our people.
Jay Bray: Finally, I'll mention that the Flagstar acquisition remains on schedule to close in the fourth quarter. We've been spending a lot of time getting to know the very talented team members in Flagstar's mortgage operations, and we're excited to welcome them to the Cooper fan.
Jay Bray: Finally, I'll mention that the flagstar acquisition remains on schedule to close in the fourth quarter. We've been spending a lot of time getting to know the very talented team members and flagstar is mortgage operations and we're excited to welcome them to the Cooper family.
Jay Bray: If you'll turn this slide forward, I'd like to share some thoughts about our competitive position as we look ahead into 2025 and beyond. As you know, we're very proud of our 20-year track record at Portfolio Growth, which is culminated in 1.2 trillion in outstanding. However, a different way to think of scale is that we now have 5.4 million customers, which will rise to over 6 million when flags are closed. This makes us the single largest customer franchise in the mortgage industry. Now, our mission is to help every single customer achieve their dream of home ownership.
Jay Bray: If youll turn to slide four I'd like to share some thoughts about our competitive position as we look ahead into 2025 and beyond.
Jay Bray: As you know, we're very proud of our 20 year track record of portfolio growth, which has culminated in one two trillion in outstandings.
Jay Bray: Whenever a different way to think of scale is that we now have five 4 million customers, which will rise to over 6 million when flagstar classes.
Jay Bray: This makes us the single largest customer franchise in the mortgage industry.
Jay Bray: Now our mission is to help every single customer achieve their dream of homeownership, and we're constantly working with them through a variety of channels answering questions, suggesting opportunities to save money or providing assistance when they face challenges.
Jay Bray: And we are constantly working with them through a variety of channels, answering questions, suggesting opportunities to save money, or providing assistance when they face challenges. As of today, we're running at 152 million customer interactions per year. As a result, we've amassed an enormous amount of information about how best to serve mortgage customers. In fact, our data lake now contains 16 petabytes. In a world of digital technology and especially AI, this data gives us a real advantage when it comes to understanding customers' needs and how to create value for them. Our goal is to become increasingly more proactive at anticipating their needs and faster at solving them.
Jay Bray: As of today, we're running at 152 million customer interactions per year.
Jay Bray: As a result, we've amassed an enormous amount of information about how best to serve mortgage customers in fact, our data Lake now contain 16 petabytes.
Jay Bray: The world of digital technology, and especially AI. This data gives us a real advantage when it comes to understanding customers' needs and how to create value for them.
Jay Bray: Our goal is to become increasingly more proactive in anticipating their needs and faster at solving them.
Jay Bray: So if you'll turn to slide five, I'll summarize the investment plans we've put in place to implement this vision, which we're now in the process of finalizing for our 2025 budget. To start with, we're investing in multiple areas to continue improving the customer experience. One such area is AI in the call center. Where earlier this month, we began piloting Agent IQ. This app is a state-of-the-art AI-driven coaching platform, which listens to calls in real time, assesses sentiment, and prompts our team members on how best to help the customer. We're also continuing to invest in our digital first platform, which consists of self-serve channels like web, mobile, and VR, where customers can access information at their fingertips.
Jay Bray: So if youll turn to slide five I'll summarize the investment plans, we've put in place to implement this vision.
Jay Bray: Which we're now in the process of finalizing our 2025 budget.
Jay Bray: To start with we're investing in multiple areas to continue improving the customer experience.
Jay Bray: One such area is <unk>.
Jay Bray: And the call Center, where earlier this month, we began piloting Asia IQ.
Jay Bray: This is a state of they are AI, driven coaching platform, which listens to calls in real time assesses sentiment and prompts our team members on how best to help the customer.
Jay Bray: We're also continuing to invest in our digital first platform.
Jay Bray: Consist of self serve channels like web mobile and RBR, where customers can access information at their fingertips.
Jay Bray: Our second focus area is Originations, where we believe we can sustainably gain market share in both our DTC and correspondent channels. We are working on enhancements for customers, including a faster and easier application process. And we are continuing to componentize and automate our workflows with the goal of driving lower unit cost savings in faster cycle times. Our third focus area is loss mitigation, which may surprise you since the linkities are so low today. But we know the cycle will eventually turn. We're working on innovative technologies, which will increase our capacity to help customers in what might be more difficult environments in the future.
Our second focus area is originations, where we believe we can sustainably gained market share in both our DTC and correspondent channels.
Jay Bray: We are working on enhancements for customers, including a faster and easier application process.
Jay Bray: And we are continuing to componentized and automate our workflows with the goal of driving lower unit cost savings and faster cycle times.
Jay Bray: Our third focus area is loss mitigation, which may surprise, you since delinquencies are solar today, but.
Jay Bray: But we know the cycle will eventually turn we are working on innovative technologies, which will increase our capacity to help customers and what might be more difficult environments in the future.
Jay Bray: Finally, to support all these initiatives, we're constantly strengthening the core. Last week, we announced the promotion of Sridhar Sharma to Chief Innovation and Digital Officer and the hiring of Jeff Carroll as Chief Technology Officer. Jeff's mission is to ensure our cloud-native tech stack is ready for the next leg of customer growth. These investments will benefit our customers, clients, and investors, and they will drive long-term productivity gains for the company.
Jay Bray: Finally to support all of these initiatives were constantly strengthening the core lab.
Jay Bray: Last week, we announced the promotion of <unk> Sharma, Chief Innovation, and digital officer, and the hiring of Jeff Carrol as Chief Technology Officer.
Jay Bray: <unk> mission is to ensure our cloud native Tech stack is ready for the next leg of customer growth.
Jay Bray: These investments will benefit our customers clients and investors and they will drive long term productivity gains for the company.
Jay Bray: Company. We can afford to make these investments because the company is generating consistent, strong profitability and cash flow. In fact, I would say, based on my 25 years of experience here, that there is as much excitement in the company and energy among our people as I've ever seen. In the last few years, we've had important strategic milestones. We've emerged as a scale leader in our industry, and we've gratified to see market recognition of this in a rising stock price. Which recently hit a record high, yet the stock valuation is still quite modest in our view, at only 8 times consensus 2025 earns, despite a significant runway for growth and rising return on equity.
Jay Bray: We can afford to make these investments because the company is generating consistently strong profitability and cash flow in.
Jay Bray: In fact, I would say based on my 25 years of experience here that there is much excitement in the company and energy among our people as I've ever seen.
Jay Bray: In the last few years, we've had important strategic milestones we've emerged as the scale leader in our industry and we're gratified to see market recognition of this and a rising stock price, which recently hit a record high.
Jay Bray: Yes, the stock's valuation is still quite modest in our view at only eight times consensus 2025 earnings despite a significant runway for growth and rising return on equity.
Jay Bray: We think there's still a meaningful opportunity for investors to join us on this journey, and we continue to view stock repurchase as a smart way to invest the company's own capital.
Jay Bray: We think there's still a meaningful opportunity for investors to join US on this journey and we continue to view stock repurchases as a smart way to invest the company's own capital.
Mike Weinbach: And with that, I'll turn the call over to our president, Mike Limeback, to take you through our operational results in more detail.
Speaker Change: And with that I'll turn the call over to our President Mike line back to take you through our operational results in more detail.
Mike Weinbach: Thanks, Jay, and good morning, everyone. I'd like to start by reviewing the servicing segment, where we reported pre-tax income of 305 million, which is up 38% year over year. Thanks to strong portfolio growth of 32% year over year and positive operating leverage.
Mike Weinberg: Thanks, Jay and good morning, everyone.
Mike Weinberg: To start by reviewing the servicing segment, where we reported pretax income of $305 million, which is up 38% year over year, thanks to strong portfolio growth of 32% year over year and positive operating leverage.
Mike Weinbach: Let me start by commenting on macro factors, specifically interest rates. As you can see in the chart in the upper right, CPR rose sequentially from 5.5% to 6.2%, which contributed to somewhat higher amortization in the quarter. We expect CPR to continue rising in the fourth quarter and throughout 2025, so higher amortization will be a theme for servicing, as well as some pressure on that interest income due to the custodial deposits we manage, which are sensitive to the Fed funds rate. However, we expect the impact of interest rates on servicing to be offset by gains and originations, which is the nature of our balanced business model.
Mike Weinberg: Let me start by commenting on macro factors, specifically interest rates.
Mike Weinberg: As you can see in the chart in the upper right CPR is rose sequentially from five 5% to six 2%, which contributed to somewhat higher amortization in the quarter.
Mike Weinberg: We expect CPR is to continue rising in fourth quarter and throughout 2025, so a higher amortization will be a theme for servicing as well as some pressure on net interest income due to the custodial deposits, we manage which are sensitive to the fed funds rate.
Mike Weinberg: However, we expect the impact of interest rates on servicing to be offset by gains in originations, which is the nature of our balanced business model and Meanwhile, we continued to deliver very strong operating leverage.
Mike Weinbach: And meanwhile, we continue to deliver very strong operating leverage.
Mike Weinbach: So let's turn to slide seven and drill down on this topic. Due to strong portfolio growth, servicing revenue is increased by 38% year over year. At the same time, as you can see from the chart on the left, servicing FTE is actually decreased by 8%. This is the result of a large number of process improvements, including our digital first strategy, which makes more information available to customers in the channels they prefer, which are typically self-served channels rather than phone calls. The chart on the right shows you the continued decline we're seeing in calls for loan, while utilization of other channels, including chat, IVR, mobile, and web, is rising.
Mike Weinberg: Let's turn to slide seven and drill down on this topic.
Mike Weinberg: Due to strong portfolio growth servicing revenues increased by 38% year over year at.
At the same time as you can see from the chart on the left servicing FTE has actually decreased by 8%.
Mike Weinberg: This is the result of a large number of process improvements, including our digital first strategy, which makes more information available to customers in the channels. They prefer which are typically self serve channels rather than phone calls.
Mike Weinberg: The chart on the right shows you. The continued decline we're seeing in cost per loan while utilization of other channels, including chat IV, our mobile and web is rising.
Mike Weinbach: Now phone calls will remain a critical channel for many customers, and we're committed to making this an excellent experience for them.
Mike Weinberg: Now phone calls will remain a critical channel for many customers and we're committed to making this an excellent experience for them.
Mike Weinbach: If you'll turn to slide eight, I'll give you a quick preview of our latest innovation, which Jay referenced: our PyroAgenIQ AI-driven coaching platform. This slide shows you the display that comes up on our team members' screens when they're taking a call. If the AI listens in real time, you can see a sentiment indicator towards the top, as well as information about the customer's question to the right, while on the bottom of the screen or suggested action.
Mike Weinberg: I will turn to slide eight I'll give you a quick preview of our latest innovation, which Jay referenced our pyro agent IQ AI driven coaching platform.
Mike Weinberg: This slide shows you the display that comes up on our team members screens when theyre, taking our call.
Mike Weinberg: As the AI lessons in real time, you can see a sentiment indicator towards the top as well as information about the customers question to the right on the bottom of the screen or suggested actions.
Mike Weinbach: Questions. This platform is one example of how we leverage those 16 petabytes of data. As it listens to the conversation, the AI system is reviewing a huge number of call logs to understand the most likely issues on the customer's mind and how our team members have most efficiently solved these problems for other customers. The system then prompts the agent with suggestions on how to proceed with the conversation or what kind of information the customer may be looking for. The goal of Agent IQ is to make our people extremely productive by helping them learn from best practices across our call center.
Mike Weinberg: This platform is one example of how we leverage those 16 petabytes of data.
Mike Weinberg: As it listen to the conversation the AI system is reviewing a huge number of call logs to understand the most likely issues on the customer's mind and how our team members, who most efficiently solve these problems for other customers.
Mike Weinberg: The system, then prompts the agent with suggestions on how to proceed with the conversation or what kind of information the customer may be looking for.
The goal of agent IQ is to make our people extremely productive by helping them learn from best practices across our call Center.
Mike Weinbach: Also, by saving them the true or manually looking up files, the system lets our team members focus empathetically on the customer and their needs. We started piloting Agent IQ earlier this quarter and expected to roll out the servicing and originations in 2025.
Mike Weinberg: So by saving them mature manually looking at files the system, let's our team members' focus empathetic Lee on the customer and their needs.
Mike Weinberg: We started piloting agent IQ earlier, this quarter and expect it to rollout in both servicing and originations in 2025.
Mike Weinbach: To wrap up on servicing, considering the impact of interest rates, our continued success in driving efficiencies and the closing of the Flagster acquisition, we'd guide you to a range of 285 to 305 million in pre-tax servicing income for the fourth quarter.
Speaker Change: To wrap up on servicing considering the impact of interest rates. Our continued success in driving efficiencies and the closing of the Flagstar acquisition. We would guide you to a range of $285 million to $305 million in pre tax servicing income for the fourth quarter.
Mike Weinbach: So now let's move on to talk about the origination segment, where we significantly outperformed our 35 to 45 million guidance, with pre-tax income hitting 69 million. I'll start on slide 9 by double-clicking on DTC, where we funded 2.3 billion, up 35% from second quarter. Clearly, our DTC team did an excellent job with execution this quarter, taking advantage of the rate drop in September to help customers save money and access equity. I'll also share that they responded very effectively to some market pressure in the quarter through innovative marketing and competitive pricing, which helped us sustain our recapture rate of nearly 70% despite higher volumes.
Speaker Change: So now let's move on to talk about the origination segment, where we significantly outperformed our $35 million to $45 million guidance with pre tax income hitting $69 million.
Speaker Change: I'll start on slide nine by double clicking on DTC, where we funded $2 3 billion up 35% from second quarter.
Speaker Change: Clearly our DTC team did an excellent job with execution this quarter, taking advantage of the rate drop in September to help customers save money and access equity.
Speaker Change: I'll also share that they responded very effectively to some market pressure in the quarter through innovative marketing and competitive pricing, which helped us sustain our recapture rate of nearly 70% despite higher volumes.
Mike Weinbach: The strong performance also reflected several initiatives that came together during the quarter. For one, project flashes producing efficiency gains in faster cycle times. Additionally, this year we kicked off another project, which we call Front Office Modernization, which includes improvements to the customer experience, such as new self-serve options, and this is starting to drive higher sales team productivity, as well as higher customer satisfaction scores. Also contributing to strong results this quarter, we've been adding capacity. So far this year, our amazing talent acquisition team has brought in over 300 new team members, giving us the capacity to move quickly when rates are favorable, as we just demonstrated.
Speaker Change: The strong performance also reflected several initiatives that came together during the quarter.
Speaker Change: For one project flash is producing efficiency gains and faster cycle times. Additionally.
Speaker Change: Additionally, this year, we kicked off another project, which we call front office modernization, which includes improvements to the customer experience such as new self serve options and this is starting to drive higher sales team productivity as well as higher customer satisfaction scores.
Speaker Change: Also contributing to strong results this quarter, we've been adding capacity. So far this year, our amazing talent acquisition team has brought in over 300, new team members, giving us the capacity to move quickly when rates are favorable as we just demonstrated.
Mike Weinbach: We've also been working to shorten the time it takes to onboard and train new team members. Overall, we're in a great position to take advantage of lower rates, whether they're sustained or a current intermittent rally has happened in September. As a reminder, our customer base has been gradually shifting, with approximately 20% of our customers now having no rates of 6% or higher. If you're interested, you can find a chart with a full-rate stack for our MSR portfolio and the appendix. Turning to slide 10, our corresponding team produced truly extraordinary results, more than doubling volumes from second quarter, and I would add that this was without sacrificing margin.
Speaker Change: We've also been working to shorten the time it takes the higher onboard and train new team members.
Speaker Change: Overall, we're in a great position to take advantage of lower rates, whether they are sustained or a current intermittent rally as happened in September.
Speaker Change: As a reminder, our customer base has been gradually shifting with approximately 20% of our customers now having note rates of 6% or higher.
Speaker Change: If you're interested you can find a chart with default rates stack for our MSR portfolio in the appendix.
Speaker Change: Turning to slide 10, our correspondent team produced a truly extraordinary results more than doubling volumes from second quarter and I would add this was without sacrificing margin.
Mike Weinbach: Now, let me remind you that over the last two years we stepped back from Correspondent to some degree because we correctly anticipated a dislocation in the bulk market, and we allocated most of our capital to that opportunity where option-adjusted spreads for season pools were historically attractive. However, at the same time, we were launching initiatives to level up our corresponding platform since we knew the cycle would eventually turn. Much of our work focused on developing more granular pricing models, allowing us to win the right loans at the right prices. Additionally, we went through an exhaustive review of our client relationships and found ways to deepen penetration.
Speaker Change: Now, let me remind you that over the last two years, we step back from correspondent to some degree because we correctly anticipated that dislocation in the bulk market and we allocated most of our capital the that opportunity where option adjusted spreads for seasoned pools, where historically attractive.
Speaker Change: However, at the same time, we're launching initiatives to level up our correspondent platform since we knew the cycle will eventually turn.
Speaker Change: Much of our work focused on developing a more granular pricing models, allowing us to win the right loans at the right prices.
Speaker Change: Additionally, we went through an exhaustive review of our client relationships and found ways to deepen penetration.
Mike Weinbach: We made several process improvements to speed up cycle times. We rolled out a new client portal, and we also took specific steps to improve capital markets execution. At the same time, we've remained disciplined with respect to credit risk and manufacturing quality, and we have no plans to loosen standards.
Speaker Change: We made several process improvements to speed up cycle times, we've rolled out a new client portal and we also took specific steps to improve capital markets execution.
Speaker Change: At the same time, we've remained disciplined with respect to credit risk and manufacturing quality and we have no plans to loosen standards.
Mike Weinbach: Looking ahead, we see an opportunity to grow significantly and correspond. Given our cost leadership is a scaled servicer and our industry leading recapture, we should be the best buyer of MSR is not only in the bulk market, but in all markets.
Speaker Change: Looking ahead, we see an opportunity to grow significantly in correspondent.
Speaker Change: Given our cost leadership as a scaled servicer and our industry, leading recapture we should be the best buyer of MSR is not only in the bulk market, but in all markets.
Mike Weinbach: To sum up, third quarter is to give you a strong hint as to the potential we have in our originations. As we look ahead to 2025, we expect our originations to make a much larger contribution to the company's overall financial returns. Having said that, as you know, there's a timing difference between revenue and expense recognition, and the funding costs associated with strong rate locks in the third quarter will be recognized in the fourth quarter. Additionally, mortgage rates have backed up since September, reducing some of the opportunity to help customers with rate and term refinances.
Speaker Change: To sum up third quarter should give you a strong hand to the potential we have in our originations and as we look ahead to 2025, we expect originations to make a much larger contribution to the company's overall financial returns.
Speaker Change: Having said that as you know there is a timing difference between revenue and expense recognition and the funding costs associated with strong rate locks in the third quarter will be recognized in the fourth quarter.
Speaker Change: Additionally, mortgage rates have backed up since September reducing some of the opportunity to help customers with rate and term refinances as.
Mike Weinbach: As such, we've got you for now to a more normalized level of profitability in fourth quarter with pre-tax originations income in a range of 45 to 65 million.
Speaker Change: As such we would guide you for now to a more normalized level of profitability in fourth quarter with pretax originations income in a range of $45 to $65 million.
Kurt Johnson: With that, I ended over to Kurt.
Speaker Change: With that I'll hand, it over to Kirk.
Kurt Johnson: Thanks, Mike. Good morning, everyone. I'll start on slide 11 with a brief recap of our financials. To summarize, net income was 80 million, which included 246 million in pre-tax operating hours. Offset by $126 million, negative MSR mark, net of hedges, and adjustments of $6 million, which consisted of $4 million in transaction costs related to the final onboarding of customers from the Home Point acquisition. And a $2 million loss associated with equity investments. I would point out that corporate debt interest expense increased from 67 to 75 million sequentially, reflecting two months of interest expense from the senior notes issued in August.
Kirk Johnson: Thanks, Mike and good morning, everyone.
Kirk Johnson: I'll start on slide 11, with a brief recap of our financials to summarize net income was $80 million, which includes $246 million in pre tax operating earnings.
Kirk Johnson: Offset by a $126 million negative MSR, Mark net of hedges and adjustments of $6 million, which consisted of $4 million in transaction costs related to the final onboarding of customers from a home point acquisition.
Kirk Johnson: And a $2 million loss associated with equity investments.
Kirk Johnson: I would point out the corporate debt interest expense increased from $67 million to $75 million sequentially, reflecting two months of interest expense from the senior notes issued in August.
Kurt Johnson: Starting in the fourth quarter, you should model 79 million in quarterly corporate debt interest expense to account for the full impact of the new issuance. During the quarter, we marked down the MSR by 415 million due to lower interest rates and expectations for higher CPRs, leading to a quarter evaluation of 148 basis points of UPB or a 5.1 multiple of the base servicing strip. This was offset by $299 million in hedge gains, which equates to 70% coverage, which was within range of our 75% target ratio.
Kirk Johnson: Starting in the fourth quarter, you should model $79 million in quarterly corporate debt interest expense to account for the full impact of the new issuance.
During the quarter, we marked down the MSR by $415 million due to lower interest rates and expectations for higher <unk>, leading to a quarter end valuation of 148 basis points of <unk> or a $5 one multiple of the base servicing strip.
Kirk Johnson: This was offset by $289 million in hedge gains, which equates to 70% coverage, which was within range of our 75% target ratio.
Kurt Johnson: Now, if you'll turn to slide 12, I'll comment on credit quality, which has been focused recently for certain consumer lenders. But you'll see our high quality mortgage portfolio is performing very consistently, with MSR delinquencies up slightly by about 8 basis points to 1.1%. That's extremely strong performance. The slight increase is being driven by FHA and VA collateral, which is something we've been expecting and planning for, and which is why we've limited the FHA and VA to only 18% of our MSR portfolio. Also, we've chosen very high quality collateral where customers have low note rates and large equity cushions.
Kirk Johnson: Now if youll turn to slide 12.
Speaker Change: Comment on credit quality, which has been focused recently for certain consumer lenders.
Speaker Change: So youll see our high quality mortgage portfolio is performing very consistently with MSR delinquencies up slightly by about eight basis points to one 1%.
Speaker Change: That's extremely strong performance the slight increase is being driven by FHA and VA collateral, which is something we've been expecting and planning for and which is why we've limited the FHA and VA totaling 18% of our MSR portfolio.
Speaker Change: Also we've chosen very high quality collateral where customers have low note rates and large equity cushions and the result of our selective. This is evident in the chart on the lower left where you can see our ginnie portfolio is outperforming the industry by a considerable margin.
Kurt Johnson: And the result of our selectiveness is evident in the chart on the lower left, where you can see our Jenny portfolio is outperforming the industry by a considerable margin.
Kurt Johnson: Well, we don't try to forecast overall consumer credit cycles. We have deep experience managing delinquent books, and if the environment were to turn more adverse, we believe Mr. Cooper and our investors would be extremely well protected.
Speaker Change: Well, we don't try to forecast overall consumer credit cycles, we have deep experience managing delinquent books and if the environment were to turn more adverse we believe Mr. Cooper and our investors would be extremely well protected.
Kurt Johnson: Lastly, turning to slide 13, I'll update you on our key balance sheet metrics. We ended fourth quarter with record liquidity of 4.1 billion, up from 3.2 billion in the second quarter driven by the issuance of $750 million in senior notes, as well as 750 million of incremental MSR financing capacity. You'll notice that our unrestricted cash balance has been gradually rising, consistent with our internal policy, which sets our liquidity target at the sizeable multiple to all regulatory requirements. Other positive liquidity metrics include the fact that nearly all our MSR and advanced lines are now turned out to 2026, and two thirds of them are fully committed.
Speaker Change: Lastly, turning to slide 13, I'll update you on our key balance sheet metrics.
Speaker Change: Ended the fourth quarter with record liquidity of $4 1 billion up from $3 2 billion in the second quarter, driven by the issuance of $750 million in senior notes as well as $750 million of incremental MSR financing capacity.
Speaker Change: Youll notice that our unrestricted cash balance has been gradually rising consistent with our internal policy, which sets our liquidity target at a sizeable multiple to all regulatory requirements.
Speaker Change: Other positive liquidity metrics include the fact that nearly all our MSR and advance lines are now turned out to 2026.
Speaker Change: And two thirds of them are fully committed.
Kurt Johnson: Our capital ratio, as measured by tangible net worth assets, and in the quarter at 27.9%, down about 50 basis points from last quarter, but still above our target range of 20 to 25%. The gradual pace at which we've deployed our excess capital over the last year speaks to our discipline stewards of investor capital, as we seek the highest returns available to us in the bulk and correspondent channels while continuing to repurchase shares as well. Now, let me remind you that the reason we center ratings for our target capital ratio is that the mix of assets on our balance sheet shifts, depending on the environment.
Speaker Change: Our capital ratio as measured by tangible net worth to assets.
<unk> 2007, 9% down about 50 basis points from last quarter, but still above our target range of 20% to 25%.
Speaker Change: The gradual pace at which we've deployed our excess capital over the last year speaks to our disciplined stewards of investor capital as we seek the highest returns available to us in the bulk and correspondent channels, while continuing to repurchase shares as well.
Speaker Change: Now, let me remind you that the reason we set a range for our targeted capital ratio is that the mix of assets on our balance sheet shifts depending on the environment.
Kurt Johnson: If we grow our originations business in 2025, as we expect, you'll see a higher mix of loans held for sale on the balance sheet. And accordingly, our capital ratio might well move into the middle of our range, or even towards the low end. This is because we set higher capital levels for MSRs than we do for loans. Regardless of the ratio, unsecured note holders, rating agencies, and other stakeholders will continue to benefit from a solid balance sheet, robust cash flows, a disciplined enterprise risk management framework, and our industry leadership position.
Speaker Change: If we grow our originations business in 2025, as we expect you'll see a higher mix of loans held for sale on the balance sheet and accordingly, our capital ratio might well move into the middle of our range or even towards the low end.
Speaker Change: This is because we set higher capital levels for <unk> than we do for loans.
Speaker Change: Regardless of the ratio unsecured note holders rating agencies and other stakeholders will continue to benefit from our solid balance sheet robust cash flows disciplined enterprise risk management framework and our industry leadership position.
Kurt Johnson: I'll wrap up now by commenting on the outlook. Clearly, this was an exceptional quarter with 16.8% ROTC. As Mike pointed out, in the fourth quarter, we do expect a slightly lower level of earnings in both servicing and originations. But we continue to anticipate 2025 ROTC at the midpoint of our 14 to 18% guidance range based on a growing contribution from originations, further operating leverage in servicing, and a precision from the FlagStar Mortgage Banking acquisition. With that, I'd like to thank you for joining us on today's call and for your interest in Mr. Cooper.
Speaker Change: I'll wrap up now by commenting on the outlook.
Speaker Change: Clearly this was an exceptional quarter with 16, 8% our OTC.
Speaker Change: As Mike pointed out in the fourth quarter, we do expect a slightly lower level of earnings in both servicing and originations.
But we continue to anticipate 2025, our OTC at the midpoint of our 14% to 18% guidance range based on the growing contribution from originations further operating leverages in servicing and the accretion from the flagstar mortgage banking acquisition.
Speaker Change: With that I'd like to thank you for joining us on today's call and for your interest in Mr. Cooper and now I would like to turn the call back over to Ken for Q&A.
Unknown Executive: I'd now like to turn the call back over to Kevin for Q&A. Thanks, Kurt, and D.D. If you could now start the Q&A session, please. Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster.
Ken Posner: Alright, Thanks, Kurt and DD.
Ken Posner: <unk>, if you could now start.
Speaker Change: Q&A session place thank.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Terry MA: And our first question comes from Terry Ma, a Parklaze. The line is open. Hi, thank you. Good morning. I think you mentioned the 45 to 65 million dollar pretext guide for originations in the fourth quarter was kind of the new normalized run rate. That's right.
Speaker Change: Okay.
Speaker Change: And our first question comes from Terry MA of Barclays. Your line is open.
Speaker Change: Hi, Thank you. Good morning, I think you mentioned the $45 million to $65 million pre tax guide for originations in the fourth quarter was kind of the new normalized run rate.
Mike Weinbach: Can you maybe just talk about the drivers there? Yeah, thanks, Terry. It's Mike. So that's right, 45 to 65 million guide. And this has been a challenging quarter to guide for because, as recently as the middle of September, we had mortgage rates below 6%, and now they're running over 6.5%. And so, as we look ahead, we still see a lot of momentum in our direct-to-consumer business driven by some of the enhancements that we've made. We still see a lot of opportunity if rates are higher and there's less opportunity for rate-term refinances for cash out and home equity.
If that's right can you maybe just talk about the drivers there.
Speaker Change: Yeah, Thanks, Terry it's Mike.
So that's right $45 million to $65 million guide.
Speaker Change: And this has been a challenging quarter to guide for because as recently as the middle of September we had mortgage rates below 6% and now theyre running over six 5% and so.
Speaker Change: <unk>.
Speaker Change: As we look ahead, we still see a lot of momentum in our direct to consumer business driven by some of the enhancements that we've made we still see a lot of opportunity if.
Speaker Change: Rates are higher and there's less opportunity for rate term refinances for cash out in home equity and just to share with you.
Mike Weinbach: And just to share with you, over 80% of our customers have more than $50,000 of tapable equity in their homes, and more than 60% have 100,000 plus. So we see a lot of opportunity regardless of environment, and the guide for this quarter is heavily dependent on what happens with rates. But we feel good about the progress we're making in the business regardless. And if you think about it and we've talked about it a lot, I mean the impact of our balance business model will certainly kick in, right? If we do see, you know, rate stay at this level, obviously servicing will benefit significantly.
Speaker Change: Over 80% of our customers have more than $50000 of capital equity in their homes and more than 60% have 100000 plus.
Speaker Change: So we see a lot of opportunity regardless of environment and the guide for this quarter is heavily dependent on what happens with rates but.
Speaker Change: But we feel good about the progress we're making in the business regardless.
Speaker Change: And if you think about it and we've talked about it a lot.
Speaker Change: The impact of our balanced business model, we will certainly kick in right. If we do see.
Speaker Change: Our rates stay at this level, obviously servicing will benefit significantly and so.
Mike Weinbach: And so that's how we think about it. It's purely a function of, you know, what our pre-pay is going to look like. What's the opportunity set, and which is why we're guiding that level. But servicing, again, given the balance business model, would certainly benefit if rates stay at this level. Got it. That's helpful.
That's how we think about I mean, it's purely a function of what our prepaid is going to look like what's the opportunity set in which.
Speaker Change: That's why we're guiding that level, but servicing again, given the balanced business model would certainly benefit if rates stay at this level.
Speaker Change: Got it that's helpful and I guess is there any color you can provide on what you saw in the quarter within the DTC channel versus maybe expectations I would have thought in terms of volume increases in the third quarter DTC might have come in a bit stronger in correspondent a little less strong, but any color you can.
Mike Weinbach: Now I guess is there any color you can provide on what you saw in the quarter within the DTC channel versus maybe expectations? I would have thought, in terms of volume increases in its third quarter, DTC might have come in a, you know, a bit stronger and corresponding a little less strong. Any color you can provide there? Yeah, sure. I'll start, and then Jane Kirk can add on. And you know, it was an interesting quarter. It was almost like two halves beginning the middle of August when rates started to drop. We saw a significant shift towards rate term refinances.
Speaker Change: Slide there.
Speaker Change: Yes, sure I'll start and then Jan Kurt Ken.
Speaker Change: Can add on and it was an interesting quarter was almost like.
Speaker Change: To have this began in the middle of.
Speaker Change: August when rates started to drop we saw a significant shift towards rate term refinances and to put that in context.
Mike Weinbach: And, you know, to put that in context, the what we were seeing in terms of locks was probably 70 to 80% higher than what we were seeing in the period before that. Again, with rate term refinance, purchase held steady, grew slightly, home equity stayed relatively consistent through it, cash out refinance stayed relatively, relatively consistent to slightly up. Within the corresponding business, it was probably had less to do with rate and more to do with some of the changes we've been making across the business. We feel really good about the growth opportunities we have in the corresponding business as the most efficient best servicer and being one of the top players in the industry in terms of recapture.
Speaker Change: What what are you seeing in terms of locks was probably 70% to 80% higher than what we were seeing in.
Speaker Change: In the period before that again right term refinance.
Speaker Change: <unk> purchased held steady grew slightly.
Speaker Change: <unk> equity stayed relatively consistent through a cash out refinance stayed relevant relevantly relatively consistent.
Speaker Change: Slightly up.
Speaker Change: Within the correspondent business it was.
Speaker Change: Probably had less to do with the rate and more to do with some of the changes we've been making across the business. We feel really good about the growth opportunities we have in the correspondent business as the.
Speaker Change: As the most efficient best servicer and being one of the top.
Speaker Change: Players in the industry in terms of recapture we don't see any reason why we shouldnt be a much more significant player in the correspondent business. We've made changes to our pricing models, we have doubled down on our client relationships.
Mike Weinbach: We don't see any reason why we shouldn't be a much more significant player in the corresponding business. We've made changes to our pricing models. We've doubled down on our client relationships. We've made changes to our capital markets execution. And I think you saw that Maccorder, and I think you should expect to see that continue. Yeah, I mean, I think it's a simple way to think about it is, when you look at recapture, we're close to 70%, right? And which is awesome. And so I think the direct consumer team did a great job, came in kind of, you know, in line with where we would expect.
Speaker Change: <unk> made changes to our capital markets execution, and I think you saw that in the quarter and I think you should expect to see that continue.
Speaker Change: Yes, I mean, I think a simple way to think about it is when you look at recapture were close to 70% right and which is awesome.
Speaker Change: So I think the direct to consumer team did a great job came in kind of.
Speaker Change: In line with where we would expect.
Mike Weinbach: And again, as I said earlier for rates, you know, go in a different direction and move down; they'll kill it. And so recapture is quarter who we are; we've been doing it for decades, and we would expect great things, you know, from that channel. And to my point, on Correspondent, look, at the end of the day, we are, we think the lowest cost servicer. We think, as I mentioned, we have the best recapture. And so we should be the best buyer of MSRs. So there is massive opportunity in a correspondent channel. And we will take advantage of that.
Speaker Change: And again as I said earlier if rates.
Speaker Change: Going a different direction and move down they'll kill it.
Speaker Change: And so recapture is core to who we are we've been doing it for decades.
Speaker Change: And we would expect great things from that channel and to Mikes point on correspondent look at the end of the day. We are we think the lowest cost servicer.
Speaker Change: We think as I mentioned, we have the best recapture and so we should be the best buyer of Msr's. So there is massive opportunity in the correspondent channel and we will take advantage of that.
Kurt Johnson: And I don't know, Kurt, did you want to add anything? I mean, I would just out on Mike's comment for Correspondent, and it's true for DTC as well in terms of, you know, execution on the capital market side. You know, Jay mentioned in our excellent recapture. And we do. But we look also at, you know, at speeds and investors. And we look holistically at execution. And we need to, you know, be cognizant with the speeds that we're generating, particularly around Jenny May securities, to maximize our ongoing opportunities there. That's a great point.
Speaker Change: I don't know Kurt did you want to add anything or.
Kurt: I would just add on mikes comment for correspondent and it's true for DTC.
Speaker Change: Well in terms of.
Speaker Change: Execution on the capital market side.
Jay Bray: Jay mentioned are excellent recapture and we do them, but we look also at.
Speaker Change: Speeds and investors and we look holistically at execution and we need to.
Speaker Change: Be cognizant as the speeds that we're generating.
Speaker Change: So we round Ginnie Mae securities to maximize our ongoing opportunities there.
Speaker Change: It's a great point.
Unknown Executive: That's helpful. Thank you.
Speaker Change: Got it that's helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: Okay.
Mark Devries: And our next question comes from Mark DeVries of Deutsche Bank. Your line is open. Yeah, thanks.
Speaker Change: And our next question comes from Mark Devries of Deutsche Bank. Your line is open.
Jay Bray: Let's hope that you can discuss kind of the latest state of the pipeline for bulk servicing acquisitions. There's still anything out there that could really move the needle for you guys. And also just discuss flexibility you have to do more deals, kind of post Flag Star. Looks like you had a significant capacity and unused lines during the quarter. So the liquidity really shouldn't, or should remain strong, you know, after the deal. And your tangible net worth, the assets should still be kind of at the high end of your target range. So just, could you just discuss opportunity and flexibility in that market?
Mark Devries: Yes. Thanks.
Mark Devries: I was hoping you could discuss kind of the latest state of the pipeline for bulk servicing acquisitions. There is still anything out there that could really move the needle for you guys and also just discuss flexibility you have to do more deals kind of post flagstar. It looks like you added significant capacity on unused lines during the quarter, So liquidity really shouldnt sure.
Mark Devries: Remained strong after the deal and your your tangible net worth to assets should still be kind of at the high end of the year.
Speaker Change: Right. So just could you just discuss opportunity and flexibility in that market.
Jay Bray: Yeah, it's a good, great question, Mark. I think look, you know, we, we now flag star, you know, we feel like we're in a great place that'll close in the fourth quarter, which is obviously a significant bulk acquisition. When you look at the landscape now, I mean, you know, a couple of years ago, we anticipated a disruption. We acted on that. And, you know, we've grown a portfolio almost 75%. So now, I think the track record kind of speaks for itself. As you think about the landscape today, clearly, as we pointed to in the last call, it has slowed down.
Speaker Change: Yes, Great question, Mark I think Luke.
Speaker Change: We announced flagstar.
Speaker Change: We feel like we're in a great place that will close in the fourth quarter, which is obviously a significant bulk acquisition. When you look at the landscape now.
Speaker Change: A couple of years ago, we anticipated disruption we acted on that end.
Speaker Change: <unk> grown our portfolio almost 75%. So I think the track record speaks for itself as you think about the landscape today clearly as we as we pointed to in the last call. It has slowed down I think some of that is just seasonality.
Jay Bray: I think some of that's just seasonality. We have acquired a couple of small pools, you know, kind of slightly less than 10 billion recently. So there's still activity. We're going to participate in that activity, and we would expect it to pick up, you know, the first half of next year. And, you know, the bulk market's always going to be there, right? And we are the best buyer of bulk. And so I think, you know, we'll, you know, be opportunistic, and when the returns make sense, you know, we'll play there appropriately. From a capacity standpoint, you get to nail in hand when we have plenty of capacity. We've been very intentional about increasing our lines, you know, very intentional about having drive powder to act when appropriate.
Speaker Change: Have acquired a couple of small pools kind of slightly less than $10 million.
Speaker Change: So there is still activity.
Speaker Change: We're going to participate in that activity and we would expect it to pick up in the first half of next year.
Speaker Change: The bulk market is always going to be there right and we are the best buyer of bulk and so I think.
Speaker Change: We will be opportunistic and when the returns make sense C&I will play there appropriately from a capacity standpoint, you hit the nail on the Ham and we have plenty of capacity, we've been very intentional about increasing our lines.
Speaker Change: Intentional about having dry powder to act when appropriate and so we feel great about that.
Jay Bray: And so we feel great about that. And when you look at our, you know, change when that worth asset ratio, plenty of room there. That will come down slightly, I think, in the fourth quarter because of Flagstar, but still plenty of room to move and play a room to act.
Speaker Change: When you look at our tangible net worth asset ratio plenty of room there.
Speaker Change: Come down slightly I think in the fourth quarter because of flagstar.
Speaker Change: Plenty of room to move and play room to act.
Jay Bray: The other thing I would say is, when you think about sub-series, you know, we think we're, there's going to be some wins there as well. And so we're, continue to be excited about that channel. You know, we've partnered with strong financial buyers and strong originators, so that flow will continue. But we expect, you know, new clients there, too. So a lot of good things to come, I think, on both fronts.
Speaker Change: The other thing I would say is when you think about sub servicing we think there's going to be some wins there as well.
Speaker Change: And so we continue to be excited about that channel we are partnering with strong financially.
Speaker Change: Figures and strong originators, so that flow will continue.
Speaker Change: But we expect new clients there too so while a lot of good things to come I think on both fronts.
Mark Devries: Okay, great. When I think about your past approach to the correspondent, I describe it as being a little bit more opportunistic. But am I right in interpreting your comments today?
Speaker Change: Okay great.
Speaker Change: What do you think about kind of your past approach to the correspondent disc.
I describe it as being a little bit more opportunistic.
Speaker Change: But am I right in kind of interpreting your comment today is is it seemed like you know I feel like you have a real reason to win in maybe a more committed kind of participant in that channel and look to take share longer term.
Jay Bray: Is it seeming like, you know, I feel like you have a real reason to win and maybe a more committed participant in that channel and look to take share longer term? 100%. I really believe. We're always going to be very, very good stewards of deploying capital. And so we're going to look at, you know, what are the best opportunities in the marketplace? But as we, you know, look at our position, again, from a cost of service standpoint, from a retention standpoint, we should be, and I think are the best buyer of MSRs in any channel.
Speaker Change: 100%.
Speaker Change: We believe I mean look we're always going to be very very good stewards of deploying capital and so we're going to look at what are the best opportunities in the marketplace.
Speaker Change: But as we.
Speaker Change: Look at our position again from a cost of service standpoint from a retention standpoint, we should be and I think are the best buyer of Msr's.
Jay Bray: And correspondent presents, you know, we've been in it for years and we think we can definitely take more share of their. We will take more share there. And we think there's opportunities to grow it in a significant way.
Speaker Change: In any channel and correspondent presents.
Speaker Change: Been in it for years, and we think we can definitely take more share there we will take more share there and we think theres opportunities to grow in a significant way.
Unknown Executive: Great. Thank you.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Eric Hagen: One moment for our next question. And that will come from the line of Eric Hagen with BTIG. Your line is open. Hey, thanks. Good morning. When we compare the adjusted EBITDA and the sources and uses of cash flow on the last two slides of the deck, you know, what are the key differences maybe between those figures? And which do you feel like is a better reflection of the cash flow that you guys managed the business? Thank you.
Speaker Change: One moment for our next question.
Speaker Change: And that will come from the line of Eric Hagen with <unk>. Your line is open.
Speaker Change: Hey, Thanks, good morning.
Speaker Change: When we compare the adjusted EBITDA in the sources and uses of cash flow on the.
Speaker Change: Last two sides of the deck what are the key differences maybe between those figures.
Which do you feel like it's a better reflection of the cash flow that you guys manage the business. So thank you guys.
Kurt Johnson: Hey Eric, it's Kurt. I mean, I think that the answer is the sources and uses of cash flow are how we manage our acquisition strategy and cherry purchase on the go for basis. So the last chart really shows kind of what we're looking at from a true free cash flow perspective. After you talked about kind of the recapture and what's available for, you know, whether it be correspondent or, or or other acquisitions, both acquisitions or share repurchases. Okay, got you. That's helpful.
Speaker Change: Hey, Eric it's Curt.
Speaker Change: The answer is the sources and uses of cash flow or how we manage our acquisition strategy and share repurchases on a go forward basis. So the last chart really shows kind of what.
Speaker Change: What we're looking at from a true free cash flow perspective. After you talked about kind of the recapture and what's available or whether it be correspondent or other acquisitions bulk acquisitions or share repurchases.
Okay got you.
Kurt Johnson: One more on cash here. I mean, it looks like the cash flow amortization was 234 million in the quarter. Do you have an estimate for what that number is following the onboarding of Flag Star? Would you say it's like proportional? And is there a good way to benchmark that figure going forward for changes in mortgage rates? Yeah, I mean, we don't give guidance for that, Eric, but yeah, I mean, I think proportionally, right, the Flagstar acquisition will probably add, you know, call it between 50 and 70 billion dollars of MSRs against our existing 600 plus billion.
Speaker Change: That's helpful. One more on cash here I mean, it looks like the cash flow amortization was $234 million in the quarter do you have an estimate for what that number is following the onboarding of flagstar.
Speaker Change: Say, it's like proportional and is there a good way to benchmark that figure going forward for changes in mortgage rates.
Speaker Change: Yes, I mean, we don't give guidance for that Eric, but yes, I mean I think.
Speaker Change: Proportionally the Flagstar acquisition will.
Speaker Change: Probably.
Speaker Change: Yes.
Speaker Change: Call it between 50 and $70 billion.
Speaker Change: MSR is against our existing 600 plus billion and the stratification of the portfolio is about the same as our domestic MSR.
Kurt Johnson: And the stratification of the portfolio is about the same as our existing and some approaches. So kind of a pro rat. Okay, great. Thank you guys very much.
Speaker Change: So kind of a pro rata.
Speaker Change: Okay.
Speaker Change: Great.
<unk>.
Okay, great. Thank you guys very much.
Unknown Executive: Thanks.
Giuliano Bologna: Thank you. One moment for our next question. And that will come from the line of Juliano Belogna with compass point. Your line is open. Ben. Good morning. You know, congratulations on the continued strong performance. As a first question, yeah, the I'm curious about is, you know, you've had, you know, some pretty incredible operating leverage on the servicing side, you know, sellers who just benefit from some of the other lines are effectively flat, you're over here, well, UPB's up, you know, 30 percent. You know, going forward, curious, you know, how much more operating leverage you think you have and, you know, how much slower, you know, you're operating from space, you know, should probably grow versus your UPB going forward.
Speaker Change: Thanks, Eric.
Thank you one moment our next question.
Speaker Change: And that will come from the line of Giuliano <unk> with Compass point Your line is open.
Speaker Change: Good morning, Congratulations on the continued strong performance.
Speaker Change: As a first question.
I'm curious about is you had some pretty incredible operating leverage on the servicing side sellers Theyre just benefits and some of the other lines are effectively flat year over year or <unk>.
Speaker Change: 30%.
Speaker Change: Going forward I'm curious how much more operating leverage you think you have and how much slower youre operating some space.
Speaker Change: We should probably grow versus youre UTV youre going forward.
Mike Weinbach: Yeah, thanks, Giuliano. The short answer is we think we have a lot of continued opportunity. So this isn't a one-time event; it's a result of a continuous strategy of investing and perfecting the platform. And we believe we've really built a scalable servicing platform. And the things that we showed you, like age and IQ and in some of the other investments we're making, we think are going to allow us to continue to be more efficient. And we expect to continue to grow, but to be able to continue to manage expenses as we do it. And so we really see the scale benefits as we're getting larger. Our cost per loan to service has been coming down, and we expect that trend to continue.
Speaker Change: Yes, Thanks Giuliano.
Speaker Change: Okay.
Speaker Change: The short answer is we think we have a lot of continued opportunity. So this isn't.
Speaker Change: One time event its a result of <unk>.
Speaker Change: <unk> strategy of investing in perfecting the platform.
Speaker Change: And.
Speaker Change: We believe we've really built a scalable servicing platform and the things that we showed you like agent IQ and <unk>.
Speaker Change: And some of the other investments, we're making we think are going to allow us to continue to be more efficient and we expect to continue to grow.
Speaker Change: But to be able to continue to manage expenses as we do it and so we really see the scale benefits us as were getting larger our cost per loan to service.
Speaker Change: As Ben.
Coming down and we expect that trend to continue.
Jay Bray: Yeah, and if you think about it, I mean, all the investments that we talked about are, you know, we're maniacally focused on the customer experience, and certainly focused on driving that cost per loan down. I think Mike had said this on a previous call, but if you reduce your handle time by 10 seconds, that's over a million three in savings. If you reduce your calls, you know, by 10% because you're delivering such a great digital experience to the customer, that's over 10 million in savings. And so I think we're in the early earnings of this.
And if you think about it I mean, all of the investments that we talked about.
Speaker Change: We're maniacally.
Speaker Change: <unk> focused on the customer experience.
Speaker Change: Certainly focused on driving that cost per loan down.
Speaker Change: I think Mike had said this on previous call, but if you reduce your handle time 10 seconds.
Speaker Change: Over $1 million III in savings if you reduce your calls.
Speaker Change: By 10%, because you're delivering such a great digital experience to the customer.
Speaker Change: Over 10 million in savings and so I think we're in the early innings of this and J Jones run servicing and his team.
Mike Weinbach: And Jay Jones, who runs servicing his team, you know, are excellent and look at identifying opportunities. And so, you know, I think Julian, we've got a long way to go and we'll continue to drive cost per loan down with a great customer experience. And just to connect the final dot on what Jay said, so what we're showing with the way we're deploying AI technology in servicing. And frankly, we plan to do the same thing in our originations business. But for the servicing example, when our customer service team is taking a call, you can see how the AI is now pulling information forward that they'd otherwise have to go look for.
Speaker Change: Our excellent and look at identifying opportunities and so I think Julien.
Speaker Change: We've got a long ways to go and we will continue to drive cost per loan down with a great customer experience and just to connect the final data on what Jay said, so what what we're selling with the way we are deploying AI technology and servicing and frankly with plan to do the same thing in our originations business, but for the servicing <unk>.
Speaker Change: <unk>.
Speaker Change: When our when our customer service team is taking a call you.
Speaker Change: You can see how the AI is now pulling information power that they would otherwise have to go look for and have an average call. It 10 minutes. We think there is probably two to three minutes that are spent.
Giuliano Bologna: And if an average call is 10 minutes, we think there's probably two to three minutes that are spent looking for information to be able to help deliver a great experience. So the customer, we then going to be able to deliver a better experience by having it faster, but just connect the dots to what Jay said in terms of what 10 seconds of time saved on a call is in terms of dollars. And if you can save two to three minutes, it really starts to make an impact. That's very helpful. I appreciate that. And then think about the only origination set, maybe more focused on DCC, but you know, from a processing perspective, you know, most of them are switching from a process the same amount of seconds or versus, you know, cash out refives in a given period.
Speaker Change: Looking for information that would be able to help deliver a great experience for the customer we think going to be able to deliver a better experience by having a faster, but it's just connect the dots to what Jay is that in terms of what 10 seconds.
The time saved on a call out is in terms of dollars and if you can save two to three minutes.
Speaker Change: It really starts to make an impact.
Speaker Change: That's very helpful. I appreciate that.
Speaker Change: Thinking about there on the origination side.
Speaker Change: Our focus on DTC, but.
Speaker Change: Yes.
Speaker Change: From a processing perspective.
Speaker Change: Most of our stations on a process, it's a matter of seconds or versus cash out refis. During a given period I'm curious if you know.
Mike Weinbach: I'm curious if, you know, how impactful it is to switch, you know, volume from second millions that might have just higher gain on sale ratio, but switching that volume to more cash out refi or rate term refi, you know, we're, you know, the dollar balance is probably, you know, four times the size and you know how much incremental, you know, value that you can help you take that or, you know, earn a salary that can help you take that over the next two quarters. Yeah, I mean, I think you hit the nail on the head, right?
Speaker Change: How impactful it is to switch volume from second lien higher.
Speaker Change: Higher gain on sale ratio, but switching that volume to more cash out refi or rate term refi.
Speaker Change: The dollar balances.
Speaker Change: Port emphasizing how much incremental value I can help you that copper earnings power that can help to pick up over the next few quarters.
Speaker Change: Yes.
Speaker Change: You hit the nail on the head.
Jay Bray: Our rate term re-five margins are a little bit lower than our cash out re-five margins and certainly our secondly margins are are pretty tremendous and I think, you know, might, might can speak to it, but the team does a really tremendous job from from a marketing perspective. Obviously, any customer that calls us, we're going to do their lot, right? But from a marketing perspective, being able to pay a pivot on a dime based on where rates are to really drive kind of the volumes that we want to see between those three different products, depending on where the rates are.
Our rate term refi margins are a little bit lower than our cash out refi margins and certainly our second lien margins are.
Speaker Change: Our pretty tremendous and I think Mike can speak to it but the team does a really tremendous job from a marketing perspective, obviously any customer that calls us we're going to do their long right, but from a marketing perspective being able to pivot on a dime based on where rates are to really drive kind of the Vale.
Speaker Change: But we want to see between those three different products, depending on where the rates are.
Jay Bray: You know, Mike talked about the number of customers who are who who have 50 K 100 K plus of tapable equity. You know, rates have backed up 60 basis points since the end of the quarter. And with that, our strategy is pivoted, and our rate locks volume remains really, really strong. Yeah, and I'll just add, if you think about when, when, when we talk to a customer, we're just trying to help them find the best product to meet their needs. Sometimes that's a rate term; we find sometimes it's a cash out; we find sometimes it's a second.
Mike talked about the number of customers, who are who have 50, K 100 K plus.
Speaker Change: Tangible equity.
Speaker Change: Rates have backed up 60 basis points since the end of the quarter and with that our strategy has pivoted and our rate locks volume remains really really strong.
Speaker Change: Yeah, and I'll just add if you think about.
Speaker Change: Yes.
Speaker Change: When it when.
Speaker Change: When we talk to a customer we're just trying to help them find the best product to meet their needs and sometimes at the rate term refi and sometimes it's a cash out refis, sometimes it's a second.
Jay Bray: And so the, you know, we're going to do whatever is best for the customer, and that'll change depending on the interest rate environment. The thing that I think is exciting about our direct to consumer business is, during this very difficult last couple of years for the industry, where it was very difficult to be profitable in the business, we were still profitable. We continually have been investing in the platform, and those, that, that combined with more and more of the originations being done at higher rates, and we've shown, you know, 20% of our customers are 6% plus, is created a bit of a coiling spring in the DTC business.
Speaker Change: And so.
Speaker Change: We're going to do whatever is best for the customer and that will change depending on the interest rate environment.
Speaker Change: Thing that I think is exciting about our direct to consumer business is during this very difficult last couple of years for the industry, where it was very difficult to be profitable in the business. We were still profitable we continually have been investing in the platform.
Speaker Change: And those.
Speaker Change: That combined with more and more of the originations being done at higher rates than we've shown 20% of our customers are 6% plus.
Speaker Change: <unk> has created a bit of a coiling spring and in the DTC business.
Mike Weinbach: And what we saw for a brief period in the third quarter, when rates came down, is that we were able to react very quickly in a data very meaningful impact on our profitability, and rates are back up a little bit right now. And so we might see more cash out in seconds than rate term, and so we're guiding a little bit lower for this quarter, but still higher than what we were earning at the last time we were at those levels. We have more portfolio growth that's coming, particularly when we close the AgStar acquisition, and we've been steadily building capacity throughout the year in anticipation of this.
And what we saw for a brief period in the third quarter when rates came down as it were able to react very quickly and it had a very meaningful impact.
Speaker Change: On our profitability.
Speaker Change: Rates are back up a little bit right now and so we might see more cash out in seconds, then rate term and so we're.
Speaker Change: Guiding a little bit lower for this quarter, but still higher than what we were earning it.
Speaker Change: Last time, we were at those levels, we have more portfolio growth thats coming, particularly I'm only cause.
Speaker Change: <unk> acquisition.
Speaker Change: And we've been steadily building capacity throughout the year in anticipation of that so I think what the third quarter showed us we can move really quickly and.
Giuliano Bologna: So I think what the third quarter showed is we can move really quickly, and it's very profitable when we do so. And as we look to next year, we're not making predictions on rates, I think other than that will fluctuate, and we'll be prepared, regardless of what happens with rates, to make sure we're doing the right things for our customers, and our balanced business model, make sure that we're delivering good returns for shareholders. That's very helpful, and then hopefully a much quicker and simpler question, because I thought the call will have a little bit on my side.
Speaker Change: And it's very profitable when we do sell and as we look to next year, we're not making predictions on rates I think other than that they will fluctuate.
And we'll be prepared regardless of what happens with rates to make sure. We're doing the right things for our customers and our balanced business model and make sure that we're delivering good returns for our shareholders.
Speaker Change: That's very helpful and then hopefully much.
Speaker Change: A much quicker and simpler question.
Speaker Change: Okay.
Speaker Change: Ill cover a little bit on my side.
Giuliano Bologna: When you talk with the kind of numbers for servicing and regimentations, those that include any impact from Flagstar and then as a little bit of follow up on curious, you know, if there any if you have the expectation is, you know, closing later or sooner, you know, in the fourth quarter for the Flagstar Foundation. So, Giuliano, great question. Yes, thanks. The guidance does include the impact of Flagstar, and we do anticipate that it'll close earlier in the fourth quarter than later. But, but I'll obviously we're just guiding to the fourth quarter cause. That's very helpful.
Speaker Change: When you talk about the guidance numbers for servicing and originations.
Speaker Change: On the impact from <unk>, and then I was hoping to follow up I'm curious to know if there are any.
Speaker Change: The expectation of closing later or sooner in the fourth quarter for the Pfizer transaction.
Speaker Change: So Julian Great question, Yes. The guidance does include the impact of Flagstar.
Speaker Change: We do anticipate it will close earlier in the fourth quarter than later.
Speaker Change: But obviously, we're just guiding to a fourth quarter close.
Unknown Executive: I appreciate it. I will jump back in here.
Speaker Change: That's very helpful. I appreciate it I'll jump back in queue.
Bose George: Thank you. One moment for our next question. And that will come from the line of Bose George with KBW. Your line is open. Yeah, good morning. Just wanted to go back to the correspondent versus bulk discussion.
Speaker Change: Thank you one moment, Sir our next question.
Speaker Change: And that will come from the line of Bose George with <unk>. Your line is open.
Speaker Change: Hey, guys. Good morning, just wanted to go back to the correspondent versus bulk discussion I mean, it tends to be a market share in correspondent is it fair to say, it's likely to remain at the levels. They did this quarter or even potentially improve as the bulk opportunity.
Jay Bray: I mean, it's up to be a market share in correspondent. Is it fair to say it's likely to remain at the levels of this quarter or, you know, or even potentially improve as the bulk opportunity, you know, largely played out? I guess is that what you're suggesting. No, I don't think the bulk opportunity is played out. Bose, I think you've been doing this a long time, and we have to. So we, I think there'll be plenty of opportunities to participate in the bulk market going forward. But that will have been flow as we've seen over the past.
Largely played out I guess is that what you're suggesting.
Speaker Change: No I don't think.
Speaker Change: Opportunity has played out Bose I think you have been doing this a long time and we have two so I think there'll be plenty of opportunities to participate in the bulk market going forward.
Speaker Change: But that will ebb and flow as we've seen.
Jay Bray: I think on the correspondent. I think we will be able to grow that beyond what you saw in this past quarter. And that would be our intention. I mean, again, when you look at it, I would say number one, the capital deployment. We're always going to be very disciplined. So, you know, look at where the best opportunity is, but we believe. You know, the correspondent franchise that we built is very strong. We like the returns in that channel. And we expect to grow it beyond what you saw in this previous quarter. And so we're, you know, we were very bullish on the opportunity there.
Speaker Change: Over the past I think on the correspondent.
Speaker Change: I think we will be able to grow that beyond what you saw in this in this past quarter.
And that would be our intention again.
Speaker Change: When you look at it I would say number one because of the capital deployment, we're always going to be very disciplined. So we'll look at where the best opportunity is but we believe.
The correspondent franchise that we built is very strong we like the returns in that channel and we expect to grow it.
Speaker Change: Beyond what you saw in the previous quarter and so.
Speaker Change: We're very bullish on the opportunity there so we think that.
Jay Bray: So we think that, you know, that we will grow it, you know, significantly beyond what where it was in the end of past quarter.
Speaker Change: That we will grow it.
Significantly beyond where it was in this past quarter.
Unknown Executive: Okay, great. Thanks.
Unknown Executive: And then actually just a little question on the corporate expense line item. I couldn't recall; was there some one time last quarter, and this is a 72 million this quarter, you know, more of a normalized run rate. I think it's 53 not 72 million versus 39 million last quarter. And yes, you're, you're cracked. Some, some one time that there was a little bit of one time benefit last quarter called to the tune of two or three million. But we do anticipate the queue for it will go down back to sort of the $40 million level and run rate that it had been before.
Speaker Change: Okay, great. Thanks, and then if I could just.
Speaker Change: Question on the corporate expense line item.
Speaker Change: Good recall was there some one time last quarter and this is a $72 million this quarter more of a normalized run rate.
Speaker Change: Bose, it's Curt so.
Speaker Change: It's good.
50 $372 million.
Speaker Change: Versus $39 million last quarter, and yes, Youre correct.
Speaker Change: Some one time.
Speaker Change: There was a little bit of a onetime benefit last quarter call. It to the tune of two or $3 million, but we do anticipate that in Q4. It will go down back to sort of the $40 million level run rate than it had been before there were a few one time cost that came through this quarter as well.
Kurt Johnson: There are a few one time. And that cost that came through this quarter as well. Thank you.
Speaker Change: Okay perfect. Thank you.
Eric Hagen: One moment for our next question. And that will come from the line of Eric Hagen with BTIG. Your line is now. Hey, thanks for taking my follow-up. I actually want to ask about the Genie May capital rules. How do you see the market responding when those take effect? I mean, I imagine you guys are well capitalized relative to the standards, but do you think the implementation of those rules could catalyze bulk service and trades or MSR evaluations to be disrupted or not? Anyway.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And that will come from the line of Eric Hagen with <unk>. Your line is now open.
Eric Hagen: Hey, Thanks for taking my follow up I actually want to ask you about the Ginnie Mae capital rules, how do you see the market responded when those take effect.
Speaker Change: You guys are well capitalized relative to the standards, but do you think the employer implementation.
Speaker Change: The implementation of those rules could catalyze bulk servicing trades or MSR valuations to be disrupted or no anyway.
Kurt Johnson: Hey, it's a good question. Yeah, I mean, the Genie May risk-based capital rules came out almost two years ago now. And yes, we've been following and monitoring closely, works friendly, well capitalized based on kind of all the guidance that and we stay sort of closely in tune with Genie in terms of any kind of changes that they plan on making to those guidelines. Will it be a catalyst for more MSR sales, look potentially? I mean, I think that Genie themselves that there were two or three based on their calculations that were undercapitalized to the three servicers.
Speaker Change: Eric.
Speaker Change: Good question.
Speaker Change: Yes, I mean, the Ginnie Mae risk based capital rules came out almost two years ago now and yes, we have been following and monitoring closely we're extremely well capitalized.
Speaker Change: Based on kind of all the guidance and we stay closely in tune with Jenny in terms of any kind of changes that they plan on making too.
Speaker Change: Those guidelines.
Speaker Change: It will be a catalyst for more MSR sales.
Speaker Change: <unk> I mean, I think that.
Speaker Change: <unk>.
Speaker Change: Jenny themselves that there were two or three based on their calculations that were under capitalized two to three servicers I think we've seen one public had indicated.
Kurt Johnson: I think we've seen one public that had indicated that they were as well. So yeah, maybe we'll drive some Genie May bulk sales, and we actually have seen Genie May activity, which has been really, really modest actually in terms of bulk sales. We've seen a little bit more activity in the Jenny space as the years progressed.
Speaker Change: They were as well so yes, maybe we'll drive some some ginnie Mae bulk sales and we actually have seen J.
Speaker Change: Ginny Mae activity, which has been really really modest actually in terms of bulk sales, we've seen a little bit more activity in the ginnie space as leaders.
Speaker Change: <unk>.
Unknown Executive: Great. Thank you, guys. Thank you.
Speaker Change: Great. Thank you guys.
Kristen Love: One moment for our next question. And that will come from the line of Kristen Love with Piper Sandler. Your line is open. Thanks. Good morning, everyone. Just with your 14 to 18% ROTC target for 2025. Can you just speak to some of your assumptions? What could get you to the higher end of that range? In the prepared remarks, you mentioned the origination segment, making a bigger impact in 2025. Servicing has been that 80% plus range of pre-tax and is expected to be in the fourth quarter as well. So just curious, what kind of level would you expect that to be in 2025 to get to the higher end of that range or even above that as origination makes the bigger impact?
Speaker Change: Thank you one moment for our next question.
Speaker Change: And that will come from the line of Kristen <unk> with Piper Sandler Your line is open.
Speaker Change: Thanks, Good morning, everyone, just with your 2014% to 18% our Aro TCE target for 2025 can you just speak to some of your assumptions what could get you to the higher end of that range in the prepared remarks, you mentioned the origination segment, making a bigger impact in 2025 servicing has been in that 80.
Percent plus range of pre tax and is expected to be in the fourth quarter as well. So just curious what kind of level would you expect that to be in 2025 to get to the higher end of that range or even above that as originations makes a bigger impact.
Kurt Johnson: Yeah. Good question. I think that the answer is we've said we're very comfortable in the middle of the range already. And so I think going up into the higher end of that range, there are a lot of things that could catalyze that. I think originations and kind of periodic episodes like we had in August and September where originations volumes go up because their borrowers that are in the money, I think could could help drive that. I think that more code or, sorry, more subservicing volumes, which, you know, Jay talked about earlier, we've got a healthy pipeline of subservicing, and keep in mind subservicing does not deploy any capital for us.
Speaker Change: Yes.
Speaker Change: Good question.
Speaker Change: That the answer is we've said, we're very comfortable in the middle of the range already and so I think going up into the higher end of that range. There are a lot of things that could catalyze that I think originations.
Speaker Change: Originations and kind of periodic episodes like we had in August and September were originations volumes go up because the borrowers that are in the money I think could could help drive that I think that more.
Speaker Change: Sorry, more sub servicing volumes, which.
Speaker Change: Jay talked about earlier, we've got a healthy pipeline of sub servicing and keep in mind sub servicing does not deploy any capital for us. So it's true fee based income I think that could catalyze and drive earnings up into the higher end of the range.
Kurt Johnson: So it's true fee-based income. I think that could catalyze and drive earnings up into the higher end of the range. And then, you know, candidly, rates stay high and speeds come down and the Fed is not as aggressive as maybe a lot of people think they're going to be. We don't have the six rate cuts back to drive us into the higher end of the range. We think that there are a lot of opportunities to drive us into the higher end of the range and really not much that would drive us down into the lower end of the range.
Speaker Change: And then.
Speaker Change: Candidly if rates stay high and speeds come down and the fed is not as aggressive as.
Maybe a lot of people think they are going to be and we don't have this fixed rate cuts that could drive us into the higher end of the range. So we think that there are a lot of opportunities to drive us into the higher end of the range and really not much that would drive us down in the lower end of the range.
Jay Bray: Range.
Jay Bray: And I just said, you know, sorry, I agree with everything Kurt said and just remind everybody, you know, we came into the year introducing this 14 to 18% range. Through this year, we'll probably operate at the 15% level. And we've seen momentum; we have, you know, like a little bit. We ended the back of our balance business model with everything that we've done this year. And so this quarter ended up a little bit higher because the size of the originations market and the fact that we recognize revenue at the point of lock. But again, I think if you take a step back, we feel comfortable that regardless of where the rate environment is, our balance business model is going to allow us to operate in the middle point of that range.
Speaker Change: And I'll just add.
Speaker Change: Yes.
Speaker Change: Sorry, if thats been there.
Speaker Change: Agree with everything <unk> said and just remind everybody we came into the year introducing this 14% to 18% range through this year, well probably operate at the 15% level.
Speaker Change: And we've seen momentum we have.
Speaker Change: Thanks.
Speaker Change: A little bit.
Speaker Change: When did the back of our balanced business model with everything that we've done this year and so this quarter ended up a little bit higher because.
Speaker Change: Yes.
Speaker Change: The size of the originations market.
Speaker Change: The fact that we recognize revenue.
Speaker Change: Point of lock.
Speaker Change: But again as I think if you take a step back we feel comfortable that regardless of where the rate environment as our balanced business model is going to allow us to operate in the middle point of that range.
Kristen Love: And, you know, given when we trade as a multiple of book and a multiple of earnings, generating midteens, are we off of the balance sheet parts of our business. As Kurt mentioned, we have a number of capital light fee-based revenue streams from subservicing, special servicing, and some of our other businesses, and the opportunity that's there on the origination business. You know, we're excited as we look ahead to next year. Great. Thank you. Appreciate all that color. Definitely makes sense.
<unk>.
Speaker Change: Given where we trade is a multiple of book and a multiple of earnings generating mid teens Roe.
Speaker Change: The balance sheet parts of our business as Curt mentioned, we have.
Speaker Change: A number of capital light fee based revenue streams from sub servicing special servicing.
Speaker Change: Some of our other businesses and the opportunity that's there and the origination business.
Speaker Change: <unk>.
Speaker Change: We're excited as we look ahead to next year.
Speaker Change: Great. Thank you I appreciate all that color and definitely makes sense and then just digging a little bit deeper on recapture can you discuss your positioning in the cycle compared to prior cycles, you mentioned technology AI and other areas.
Mike Weinbach: And then just digging a little bit deeper on recapture. Do you discuss your positioning in this cycle compared to prior cycles? You mentioned technology, AI and other areas. And do you expect these areas to drive higher or maintain your current recapture rate, but you see that already. Just a little more color on what you're doing on the tech side for Recapture would be great. Thank you. Yeah, I think, look, we're 100% think that we're going to do better. I mean, when you look at the investments we've made, you know, from a process standpoint, it's delivering a better customer experience.
Speaker Change: Do you expect these areas to drive higher or maintain your current recapture rate, but are you seeing that already.
A little more color on what Youre doing on the tech side for recapture would be great. Thank you.
Speaker Change: Yes, I think look we're 100%.
Speaker Change: Sure.
We're going to do better I mean, when you look at the investments we've made.
Speaker Change: From a process standpoint.
Speaker Change: It's delivering a better customer experience we are confident in our cycle times, we are carrying additional capacity now kind of as we speak.
Mike Weinbach: We're confident in our cycle times. We are carrying additional capacity now, kind of as we speak, and continue and plan to continue to do that. You know, I think that's going to contribute to consistent, if not higher, recapture than, candidly, you know, when you look at our analytical capability, the marketing capability, the models that we've built around propensity. I mean, all those have just gotten better over time. We've got a super talented team there. And so we look, and we're looking at this, you know, at a customer level and scoring at a customer level. And so we feel very good and very confident that we'll be able to maintain and grow recapture and really any cycle.
Speaker Change: We continue and plan to continue to do that.
Speaker Change: I think thats going to contribute to consistent if not higher recapture then candidly when you look at our analytical capability the marketing capability. The models that we built around propensity in all of those have just gotten better over time, we've got a super talented team there and so.
Speaker Change: When we look I mean, we're looking at this at a customer level and scoring at a customer level and so we feel very good and very confident that we'll be able to maintain and grow our recapture.
Speaker Change: And really any <unk>.
Kristen Love: And it's going to be dependent on what the customer ultimately, what's the best thing for the customer, but the investments we've made are definitely going to drive better results. Thank you. I appreciate you taking my question. Thank you.
Speaker Change: Cycle.
Speaker Change: It's going to be dependent on what the customer ultimately, what's the best thing for the customer, but the investments. We've made are definitely going to drive better results.
Speaker Change: Thank you I appreciate you taking my questions.
Unknown Executive: I'm showing no further questions in the queue at this time.
Speaker Change: Thank you I'm showing no further questions in the queue at this time I would now like to turn the call over to Mr. Jay Bray for any closing remarks.
Jay Bray: I would now like to turn the call over to Mr. Jay Bray for any closing remarks. We really appreciate everybody joining us and look forward to further conversations. Thank you.
Jay Bray: We really appreciate everybody joining us and look forward to further conversations thank you.
Unknown Executive: This concludes today's program. Thank you all for participating. You may now disconnect. Thank you very much.
Speaker Change: Okay.
Speaker Change: This concludes today's program. Thank you all for participating you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Sure.