NRZ - Earnings call transcript Q1 2021

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Operator

Good day and welcome to the New Residential First Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. I would now like to turn the conference over to Kaitlyn Mauritz, Head of Investor Relations. Please go ahead.

Kaitlyn Mauritz

Great. Paul. you, Thank everyone. morning, And good I'd like the us for for thank Residential's First you New Call. joining Quarter today to XXXX Earnings

here this NewRez; reference supplement to call and this Nierenberg, the Michael Silverstein, President Nick earnings Financial today we morning. Throughout CEO Residential Baron Bruce New me the NewRez. Officer; of President; Chief Santoro, posted are our CEO that Williams, morning, was of and website our Joining Chairman, are going to

so, I'd now. done you to If presentation already you've encourage download the not

release the certain supplement to Before are Michael, I reports I'd These turn statements and I'd differ like the nature, factors forward-looking risk today filed and earnings annual review encourage actual call and with uncertain over our you to to and review to regarding point will from out in statements the contained their materially statements. forward-looking our disclaimers be SEC. may statements, quarterly by results. the press that in

In non-GAAP these addition, financial I'll call A Michael. measures measures comparable with to directly element. our we'll of And can over call. today's GAAP earnings the most be that, reconciliation found measures in the during turn discussing be to some

Michael Nierenberg

for thanks us. Thanks, morning, everyone. Caitlin. Good And joining

What an been. and difference and than One announced in look has acquisition $X ago, As we're a am ahead. the $X.XX. super uncertain. year we our vaccines and Today, at super future just raising with demand, back, $X.XXX I Caliber excited year around a at one stock feel pool trading healing handle, excited and year look is have it's of We're the back billion. of world we lies what and a to XX% a was continued what been. I and for capital US more NRZ our

business investment quarters. had business good lines operating and Our

are grow and Looking that world Caliber. company with feel create ahead, financial services earnings a to we poised we class

the of possibilities The gets the in capital company environment The operating landscape reckoned NewRez sheet team. strengths with and difficult both will play Caliber on balance more our us side, will combination with our the the be with. are talent into to organizations, leadership endless. for create a base, the As great teams, competitive great and

be nobody out our and and us. than advantage lower purchase retail build to take other rolling With for focused remain significantly will We volumes that on markets to better be presence the homeowners great scenario has to positioned will Caliber there housing products is on this that robust, expected refinancing created. of the

business will offset NewRez consolidation in to The business expected at higher the sales. the more around will the potential leading addition The to made more MSR earnings margins rates, flow continue gain will take look as more well we leading of the ahead, up rates strides the and Caliber of to we industry to investment is origination as recapture see have advantage capital positioned shrink. great higher we and and will mortgage higher cash They our lower As lead charges with rise on in for MSRs go way. earnings. sale

deals. will the pre-COVID. since With single the called grows as call segments, $XXX non-GFC GFC We grow. The certain over market largest quarter saw footprint continues we million again. shrinking the EBO business in benefit in business to mortgage The

both culture and see. the at important that to hope our And will continue the excited back to on. turned we have with thing great that for Caliber we're and non-QM to volumes help is others. NewRez, need us the is We sales organization One really and

US. look rolling We will those communities We lending help to soon. to be out programs all working the on forward around

we than history. company our any front, capital at better equitized in the On are point

we that X. advantage I'm take retain on go posted supplement we page the forward, now to been see going to ahead. refer higher of online. I'll levels of to we liquidity any begin will which opportunities As the of has

think rolled in company we billion about So, paid when NRZ, out you since the in we've dividends. XXXX, $X.X

is Our $X.X billion. equity today

has cap return From And is assets XXX%. shareholder around sheet. total perspective, $X.X our billion billion. our and market today, in sheet $XX.X on balance been a Our of balance

of rates are rights. largest mortgage as that the We up the non-bank Again, of go owner one servicing assets will interest few rise.

side, we On billion $XX.X XX are $XXX.X originator. And quarter first income, volume, million. the non-bank a Pre-tax for top NewRez. origination

little company $X.XX we from at all income, and portfolio this. three, end Page And Page to servicing earnings million. or QX. UPB $XX.XX. is transaction. a origination Dividend book gained X.X%. of time Dividend remained per $X.X GAAP $X fee of X.X%. of $X.XX. not On income, our Net share. know, $X.XX X.X%. over our And That's our Core X At book a the QX, mortgage equity, the diluted raised or of economic diluted shareholder segments. lot $XX.XX. QX, total the servicing cash $XXX.X of during up of $XXX.X yields the the million a share. we Pretax again, hand, then, top return $XX.XX. as really you net servicing return, Book $XXX.X $XX.X servicer. value, book Again, from Pretax spend value the March, side, highlights. I'm billion. at billion. on end and non-bank end March, going the per of at the billion And income, earnings, end same And QX value from XX $XXX.X XX.X%. million on $XXX announced million when walk. Caliber value, million

we about talk talk company that we as more obviously, bit excited at beyond back and a As we past equitized we've bit about in little look comments, we X, highlights. look quarter we never the and transaction. page more quarter, capital, We'll what earlier at announced the super We're our a forward. you my Caliber. that to go When little When history. referring our been did in about QX

value, $XXX since business, the first a quarterly of unencumbered back billion is the we at That assets, of number billion $XX.X $X.X our When in which cash. record rights, for is have turn again, billion $X on, quarter. went go believe I a us. was of Call shareholder about million again, strengths. us, end pulls to We origination highest grow plays will strategy, our starting this we look return go the minute the continuing certain in return values, for out of QX a that book to by those called think bought cumulative extremely XXXX. We our On a want look to amount We're that label forward about market EBOs. we and redeliver economic grow to of of to business re-deal talk that and $X.X billion we deals. as private the we forward. in We back And as when about X.X%. talk spend do I GFC business. the economic X.X% – quarter When and think forward again start in we into up well our investment areas. our grew landscape

So, we again, when as you and think very first activity, talent you portfolio side, is And excited Call investment the when as think go think be million call that'll about about our business REIT think we're accretive us The to a MSR forward. on $XXX back sales that. liquidity. quarter. that in we about back. about the And super And take need as of MSR it marketplace. contract. likely we're gain are about you well. think to history, to from are more sales profitability poised to a excited advantage in Originators asset if standpoint, margins as on rise our we're going continue to the we sale

largest side. the non-QM we very make rolling again about you origination I what's The combination originators come. and non-QM marketplace. on non-QM think started mentioned of portfolio, the excited securitization to On and business, investment the Maersk And about should one our in earlier front. our of NewRez the when we're us

single the family about rental this past. the haven't in spoken On side, I

X, investment look are pipeline Ginnie purchased quarter, We Mae to looking on and at agency about business that's business. have to forward line grow. XX% during EBO funded, we that EBOs. of again, those grow securities, of page about expect $XXX And homes, to to then a continuing portfolio, XX% the to front, a already just of we that our of the million On billion $X.X we continue X,XXX

million of mentioned, have of quarter and forward we've XXXX. dollar of down have page, on give The That already look about our MSR you business basis. $XXX and a from and on think we our surpassed how mostly non-agency as we the prices go investment the quarter, $XXX we X, first sense million have $XXX bottom securities, in non-agency a of sold perspective legacy front. portfolios. this deals. just the highs the Post credit a of even our part could see you should a a and Page stack quarter During the grew the million called rebounded capital of I in in residential as that QX, loans portfolio saw we SFR

MSR we the point Just things come couple a saw lot do we values while out rise One to in to first there's here. more a believe there. quarter, is,

massive have and to perspective, lead flow. lower not amortization cash that will expect which we the speed forward seen We going a from slowdown more

from fairly First the rates fourth QX. of for end markets. our bank common at the financing the forward once capital And And of amortization quarter. the which front. transferred, to on that'll SMS the side, the go XX% into sheets increase bank as robust the from at up look you our at in quarter move our portfolio, quarter, XX% sheets look X.XX% we a everything's continue balance business financing around on markets. was still overall NewRez mortgage MSR X.XX% portfolio, theme capital MSR we to When business Servicing balance When and is be servicing into versus our the we our

there. we group On a has continue The the recapture front, done rates. our mentioned grow great to recapture job I

higher you about the as as see again, MSR north up portfolios refinancing to assets we will and at we and think rise. have we NRZ, from of forward. you're $XXX Page earlier rates. end we my we better quarter, flow go Caliber the XX%, XXs, If of of is going think XX, QX, in where our billion rates the get markets are to in that and rates one the higher continue comments, Referring the better as about again, think that think contract, company the for MSRs as you earnings benefited few and first go a back the portfolio to of cash more are about MSRs lot low we

some go as the of of forward. in side, will And that side do then the can page, the what on the sensitivity page at market values. our to implied changes what book values tables do to rates, the bottom we part multiples will left right on that see bottom recapture You overall

end $XX.XX again, of So, book at QX. value the

dead a rates collateral horse, $XXX and to that right values we rise, forward quarter. again, as to go Call think book continue first increase. the we beat of business, in million As calls not will

about we to during or have think we change Still call legacy did quarter. legacy balance $X relatively real forward. expect sold to we sheet spend history. business at company called increase lot continue $XXX the from year, not and business billion we a securities There's of material that it. to recall look back COVID I'm last this on as sales go already Page of today. as back going period, non-agency XX. We million as Again, loan non-agency We some March our time small our of the we the no business. you loan to if

we Dodd that which for total sheet billion, that have bonds $X.X Our about XX% is balance to hold of risk Frank. are around retention

the went servicer down Actual not talk quarter-over-quarter. page lot about. On a to advances side, really advance XX,

Caliber. way. ton to We start positioned well that about who's now talking extent page business. the little of acquisition capacity. a to a bit I'll the handle sitting down anything the is Again, to excited. that have left. over section to XX, road, the Starting of of that turn again, super increased Baron our And chunk my comes I'll we're operating a this event on

Caliber the think of the combination to compete in industry. and I anybody put us position will NewRez against in a

I what aspirations. high have of would lot We a call

a referred times footprint, XX%. there. network, front, about on to the third Merrill north a up on the rates X hope When couple they're and Industry sheet. retail to in as I Caliber about the herd, recapture retail thundering like we think we know their the close leading $XXX of From thundering purchase number a about the you One balance think about We currently thinking of quarter. roughly I MSRs. that highlights think when folks of herd. we retail is to This in you our are billion and as retail is, Just had book. a this. as like earnings and Caliber the of price this model standpoint,

markets fair in amount out, the come from are up I a first quarter. Refinancing fair a off have quarter. the fourth rates As pointed amount

the a there's this You're to Caliber once larger as this think what I branches When So, about that. side. retail much very network deal there's Caliber well market. mean? advantage roughly are does closes we companies to with side as asset few see positioned of purchase to going continue on that on the the are great generation, XXX we take And again, think

We are out we could road, imagine rolling business off products that and more going to the to have network. consumer and I a the be more point, leverage at retail down some system.

we industry do our lack we of history to us on, from about all that, about and in has here SpringCastle talent. I of our and combination this support think the are think company. go organizations forward. mortgage as and growth these of some the couple The could meaningful When two a past way possibilities suffered what If Fortress capacity, we early we think grow available scale of over our again, you years give need a and at OneMain with talent, with endless

that – you spent On and companies look we technology. north a forward look bells quite the us mortgage to investment. valuations look that When There's $XXX side, our theoretically mortgage the we of same we I changing companies these of game that at million. that. well mortgage about reason as whistles combined about think my technology mind, on the are think be of technology on company no think technology around better forward origination of all can't that some frankly, there's in lot or and the and front, I

be So, shareholders. we excited going company, our we're that. transaction, very, our for our then and very think overall, about to accretive very about the when employees it's And

and income This to here. So is and CAGR. $XXX – originator by very goes non-bank XXXX. excited in scale Page very, volume. XXX retail off. purchase of rolling Pretax think just refinancing sixth retail this Fifth rates. Again, snapshot non-bank a locations. And lender retention back about XXX,XXX as really largest very – a XX% XX. the Roughly million markets customers the a XX% of you platform. kind important Caliber. XXXX stat largest on

I from the presentation transaction, super complementary now the models, think go turn where I'll Baron. again, overall, we about business the and to So, excited here. over

Baron? So,

Baron Silverstein

the in stages while I'll the objectives All Caliber will on and turn goals XX going echo NewRez Mike. to origination slide efforts. that's right. we're just companies combine also Thanks, have morning, upside our integration discussions, two accelerate to everyone. platforms. we're sentiment, and Good early for Mike's significant opportunity and servicing our the the really excited And of the we to believe and about

our As wholesale, our providing channel, XX%, business for correspondent leveraging our mortgage improve or by in our is Caliber's both the our increasing both channels scale, to JV this our provide strategies. feel for in our the distributed just Mike the the transformational consumer going we're footprint, talked follow. special that's franchise rates recapture of will our to customers be And about, great in slide shows, as with expanding direct retail more expanding both months life growing forward franchise, in we support in technology. platforms servicing and to strong models non-QM in the also further along growth looking And capacity combination long-term to penetration Transaction platform, talent, servicing strategies. while direct-to-broker companies. Whether details our alignment and to a over

a operating results. slide of little on to bit color NewRez XX, the give turning So,

our quarterly pull-through and great a quarter fundings for First quarterly lock quarter record of was platform, record including adjusted origination volumes. XXXX

decline we the with compression the For XX% compress quarter-over-quarter. of the Primary February. is margins reason quarter division, ended first peak rate with decline million income, a margin we saw as $XXX the in pretax along move for

business, the focus talked in players of earnings initiatives all performance to the pressure a for a something closing made our on we of remained our look each is larger company. excited during moves We've we're grow goals about on really call. our $X.X seen is loans. which hold. continued the remains XX% I This due we And to a the When sector. in is prior stabilization this other seasonal the in continued quarter. the typically taking channel April, demand to wholesale, the largest funding in from December every long some month, of competitive of NewRez than channel added March, In and for our at volume are capacity the we've year, about sales under in margins starting However, has channels meet term had last many key first operational as January. and our rest than and in we huge and NRZ JV that the billion the changes efficiencies and the of quarter, Direct-to-consumer quarter progress slower opportunity given and in the slowdown

JV purchase and we're as also seeing purchase volume has refinances Our channel down. slow been driven historically more

channel, the correspondent MSRs April picked has our purchasing in base. our a our Regarding buying with million platform to opportunistically get with month. $XX compressed, market dynamics And ever month had all per pre-COVID relaunch of our %X.X continued while customer at non-QM to being our back to new to record and up wholesale our loans, $XXX we another sales evaluate our saw our to the we'll over branches. in adding begun March grow now pick product adding momentum, relationships, customers, by channel, billion. of new million margins our channel, We're over offerings, out funding we've steam. with locks billion up continue we quarter, mortgage building our channel broker have of teams largest goal have In of correspondent levels to of And $XX

So in performance, when other quarter, we funding think about of I units terms first and evaluate metrics for to saw great we the our our performance progress. both use

I and we quarter the Turning market as tide XXXX. market grown all conditions to origination in all But production have slide mortgage share to companies to agnostic growth lifts Meaning, last as this well. rising to want that slide highlight XX, continues showed as boats. do profitability be

more channels. is However, At we're and is successfully end XX% platform our our market we grown the grow our has not market have focus we've our but across share. market do in share our only a quarter-over-quarter. of capturing across our to can the overall demonstrated ability first what can playing origination for. changes share. And volumes, that continue We X.X%, profitability. our quarter, to that's also believe And which Small share on big our impact growth market

one to to importance on awareness also earlier portfolios, of only platform our increase changes statistics, that I XX% the continue process plan performance be with our build this the get direct-to-consumer and recapture, being, that further the X.X better the NewRez. refinance our can million seen reflects quarter. proves we first some of the page mentioned to out have recapture our of to with customers largest continue recognition consumers, on We message build quarter-over-quarter. as of customer have our of in servicing hold to at And we retain is The side connecting that loyalty. our brand to quarterly and that right will as and better taken grow. in The get brand goal. And over we out recapture as the homeowners want execute a

of comments. our highlighted slide I the direct-to-consumer performance to Moving already earlier my in XX.

done you of performance. job reiterate adjusted left that volume turn $X.X and to volume in in our billion, channel, up that and Pull-through lock a this fundings top can just see quarterly which chart. billion. $X.X Increased to great However, we've drives the growing recapture

to see continue margins The DTC in compression We quarter-over-quarter. margin April. increased slightly

the margins the quarter. of and quarter. that month mentioned, will did reduction tech had So, XXXX, remainder in each to the customer offset in March expectations our funding again our to acquisition of some in business the are I also so may expect month the come. for And new changes months efficiencies. in and We entered that of refinance improve for flatten expansion largest as the structure We've to and processing volumes

XX. Turning slide to

expenses. related a the the a ended with decline. to PTI XX% in at both accruals servicing first last For part pretax quarter end division, adjustments that large for The million in were income, the year $XX.X and seasonal decline we reason primary to in the released in is of reduction

due the quarter-over-quarter the context, aggregate and on which our bottom a to ended homeowners And our and in to X.X was PTI to with $XX first in We more achieve servicing represents cost pickup For help COVID portfolio approximately retain we quarter billion the employ line of quarter quarter-over-quarter. right, of see UPB servicing $XXX which normalization impacted slight mitigation customers loss XXXX per of approximately their modest you'll an to growth P&L. million a efforts loan terms third million solution home. service, is and

over growth continued XXX,XXX worth homeowners last are special from slide XX, think significant their challenges helped XX,XXX services. highlighting testament team. their COVID upgrade we We the It moratorium. to navigate job slide slide, forbearance it's the best continue XXX,XXX as borrowers summary The announced, was of this strength is homeowners important in it's forbearance. special showcase the refinanced continue well forbearance, expect from and strength XX, or of loans Jack and in Mortgage in and industry. it's platform Navarro the Moody's just of servicer recognition on the provide the these business resolved do the progress the seen full. to one to have On pandemic, important our further best-in-class the me, Fitch costs our special to to to Act both our team an business. after our first servicing since paid to their in the outstanding recognized end of through services this a and we've Since our special terms our Servicing resolved are and Shellpoint COVID in CARES the I we've special foreclosure On and

are to numbers do help line Our so with but good far, to the industry more homeowners. in and work out

over Now, to with Mike. turn back I'll it that,

Michael Nierenberg

don't – why for turn Operator, the up open you it Q&A. over and back to we'll lines

Operator

Instructions]. [Operator

from with Capital Markets. Our come first Lee Kenneth question RBC today will

Kenneth Lee

bit funded Just color one expected wondering saw Thanks. could you origination the share wonder quarter. the if around could on more quarter. a the And on the volumes, factors what of you provide volumes if just that's in origination key some second the you perhaps just driving

Baron Silverstein

Just of context of keep mind a lag certain to channels. And say our context or the more the in in channel days funded closing. between volumes, right, in depends from or there the – origination, in that locked on is of XX XX

this, seen we've about is, volume what a as we seen talked Michael decline risen. in overall think refinance and have have our rates I briefly

probably to or numbers are down Our XX% close about refinance XX%.

on leveled say to And into we stabilization, I kind in of as what where margins rate what market. of depending are of see say normalized interest environment, April, volume. that of we've would of the more starting little the month a I a I a happens terms perhaps bit And so, the in funded before, context hopefully, mentioned and on

Kenneth Lee

you right And helpful. just Wondering I just call Very some may, now. of follow-up, key favorable the the factors could rights. environment one about just the around if talk if driving

Michael Nierenberg

a markets, look putting you mortgage bond it and We've of not the think trading, has frankly. non-agency business, at pretty for right the call lot loan the out clear, we're When we a lot where of are here quite do with risk assets been returns not great. spread look us securities as are you the to non-agency for capital markets. at In

forbearance you call robust look however, business pricing, at, really asset and we drivers here at forward what's to billion go you $XX our from look call expect been. And of $XX happened we the rights at having billion with what we As have as that's on. to the again, business, look rates, call remain

Operator

question And JMP our Trevor come will Cranston next with Securities. from

Trevor Cranston

that You you more was normalization into some provide of maybe wondering if a mentioned couple dig I context of margins sale gain bit times. a little where for could guys as for and the would where they first margin business? the of just origination what seeing think you're overall today guys you margins in you or what versus were normalized generally, quarter, a on

Baron Silverstein

mid as coming It depends channels direct-to-consumer seeing and I XXXs. say, the the or low we're we framework. I competitive has the would our a seeing retail on JV context margins you each compress, at seen on in, channel, our sub-XXX. look margins the that in of the channels given to seen. about, we're mid as month really month. continue channels been, tell that different The channel, the declines And now somewhat to we TPO basically volatile over XXXs. talked we've we've then, margins are And the pressures in

products really, wholesale that rolled very, it's between So, And for push a we to and margins partnership as us make there's franchise. the that's decline on a And steep get been for the our to sure it's side. big Michael us, continues within in very, Caliber alternative overall talk channel. on about out and as very the that why so non-QM well important us focus to

for, you points, basis basis would how XX they've point it have a flattening around that tell I you of attach is On and just you hoping bit more are a I we're overall. of we little side, out the we are and kind flattened down seen comes they with channel where also to of And what that that correspondent XX to would probably around tell definitively the range your range. margins. splits really But how

Michael Nierenberg

that. on further comment One

we with normalize about retail and network XXXX channels, the thinking the so-called where coming about we three important from profitability you margins to channel think a important are areas us, would mean levels, are you retail Baron saying about us. channels so You the I industry. JV to just combination of when markets of but to those forward channel, and when a kind always go to lot is profitability you is any probably as The think about refinancing the of from NewRez and and it standpoint. expect think very think back Caliber standpoint, our or we nature Doesn't of then sticky a think, refers and to in off, about And when out getting for retail direct-to-consumer very I'm the channel. the we're

Baron Silverstein

think just the market. on perform channels depending differently I the actually can

right? multi-channel can market. is So, the actually having underperforming, you in be can beneficial, even strategy other one So if outperform the

Trevor Cranston

And origination the offset you parts a guys there's published from the last One showed benefit business. was increasing. the was on amortization And two quarter, that then, MSRs lower there. rates less big and obviously, table from moving income earnings

seen the as we've feel like core level the that rates rise there of an numbers, origination MSR in Just showed those overall versus you magnitude actually on I which side had is has or $X.XX think changed that either the that benefit earnings side. interest chart, anything you curious, about

Michael Nierenberg

seen the the haven't from in benefit amortization first standpoint an We quarter.

little and has valuations MSRs. think, activity roll quarter, standpoint, of peers you today agency which be cash our gain published bit, a few many one that's think profitability going will the a and friends when they're lead origination, on our refinancing first look The plus the been seen we've While XX agencies least, the the But ago didn't down are number. We're percent. to a by there, at difference, as sale assets they've lower an there's as a and as overall where have come then from came XX% of back. versus gave and less as back XX%. number you will higher guestimation industry markets, more refinancing off if margins clock this you get at forward, probably up in we I flow. will to now, I Because go be Baron securities, should we years in, or go we reported, out we and MSR right where widened

While value that the rates side mortgage are up, the absolute of a is lower. bit asset little on agency

by go expect So, you down. against And see as to us, and think book going about I real value overall from XX% lift agency our hedges of as you're to down an I have securities from a But standpoint, when bit, go forward, some well. amortization we that slows as industry amortization we that little impacted, think slow forward. we

Operator

Wedbush. And Coffey Henry will come our next with question from

Henry Coffey

Just with asking Trevor what about. to continue was

are watching the issues that amortization really pull looking seeing of and there Or factors just month going, terms every kind where as where is we be speeds are should checking as easy agency it at? of your other In rates are?

Michael Nierenberg

think don't increase to been that MSRs. past amount think We'll where vocal our impaired refinancing right is. We We The XX% with material. portfolio. that population how to been portfolio out refinance to – of government our it's now. the the the new try to came We've billion going past. about in for money. still the is eligible we And impact in of haven't about We're of in the credit pretty we origination have on think $XXX that some a that able portfolios, see the folks programs they're really, that the

So, I it, part of think is Henry, the factor.

little we'll to bit just try part as other mortgage say get and refined rates more rates. is, a And forward that. XX% I right now, would The and on monitoring go we

team and percentage we a about higher forward think teens, you were look from higher their that forward of on will at book number marks XX% portfolios, channels. our the we and MSR the a recapture latter slow of much guess, Caliber down. their part higher We north as probably part recapture towards mid-XXs now the from when do I in XXXX. NewRez of amortization and the go have look values we that And earnings job on the at percentages, other more, is, The Sanjeev done into team with his increasing to

Henry Coffey

with you And hedging MSRs many respects are the agencies. in

So, going to be contribution one from the Is to a amortization to on and there's be basis, should of there. or it? total of that real MSRs the thinking not one is contribution some about going sort but related to the yields – how real we

Michael Nierenberg

Well, it's both. kind of

$XX billion give We take, $XX or mortgage have, position. agency or billion

against from that we that, where of a hedging payers compliance. our on we're that has book. swaps to and perspective amount do Some of effectively we compliance REIT out [indiscernible] meaning a agency Against have have that, with material

So net-net, we're short.

higher specified P&L out lead book play P&L a swap P&L P&L on MSR up, That MSR will you the up. our you lead and So, and of first on when values, then at little rates that a to book. look saw bit our a will the in mortgage increase And down agency an in quarter to positive obviously. lower swap P&L

Henry Coffey

about you finally, then excited a haven't in long And opportunities been investment time.

in I like going back to to much opportunities, rental, going to all the family single into we anybody as raised ultimately is recently transaction? books. new matter to tried how the be March were for capital retained go bargains just investment and the rectify really didn't of into think Caliber which going kind of How much is the

Michael Nierenberg

product. here, create us all higher way I with that's of Caliber about with the that already that again, little We're great. produce that been the has great think the stuff we not fruitful. Obviously, we the pretty all folks, lot think have that any point, vocal our by investment opportunities pulling EBO could not at bit, on really will think When engine of we've to product your To back I now, going us. the times. seeing we about some been have The pretty means. the or the of a for we world, the been have that Henry, now. sheet capital interesting They're balance a way amounts right footprint opportunities GSC

We have large Ginnie extremely never however. player, been

put on of going plenty be is friends better we're our I But thinking capital our deploy of to as patient, requirements to to have be take at some higher rate some times all business, will then, operating capital going So, for out advantage about the we're have And the from peers away point, us higher there environment, we opportunity MSR we all, example, originators mortgage and on what to go going had and that in think, space. capital results a there forward. be business. think hand give to at

which the is that poised and of gain we think MSRs. on if margins is result rates, to continue capital higher sales about REIT sale. we lower the possible? sale itself as of be what's on very that that And There think higher will gain needs contract, So, to from benefit

Henry Coffey

operating tell that business? an is family something to Or you rental the going that how about Can Is business? single work? me

Michael Nierenberg

Yeah, us. for it's small

A about stuff certain us really who's funded. is that of work markets. We Mississippi. markets markets. The Atlanta, We're lot third XX in in have homes. with party, for doing X,XXX We're we we're in a are some our And currently top Now, operator. Houston, Florida.

So, buy home it's We'll to prices, monitor homes small not quite buy frankly. This now. homes. just to is

early acquisitions good. been our this business have think in I

on good. average I stuff been now, is about has our performance X.X%. Our rate this cap think unlevered Right

We have good financing on it.

So, real with shift the in the it that. see how on certain we'll We're about continuing United pretty excited prices go in rise business we rental as to expect But we good markets, States it to goes. a think be We the forward. very home side.

team on a business. have We that good allocated that's really working to

Operator

come next our will question Bose And George from KBW. with

Bose George

go Actually, on back wanted on sale margin. the I the to questions gain to

points. think, noted sub quarter? that the now the like, I you TPO is margin Where quarter fourth and Baron, that, XXX basis last was

Baron Silverstein

basis of last XXX third end XXX. that Last another you, basically, above the that. quarter, quarter, And I points we ended would almost tell into to the you're close basically of end the quarter, double it at was – then,

XXX about quarter. really you dropped So, basis points per in

Bose George

a update just I like take big value pretty Can we then, an on other marks, MSR some MSR just book see did some related the on question, quarter-to-date? And companies the get marks.

lower the little others, for of I portfolio versus does – make lack subdued if market it MSR wondering, was a at peers? your part versus of the more the I look So, sort or prepayability the the of

Michael Nierenberg

with start me mark. the Let

We little were expected. think people what see as to than Prepayments on higher March XX% high even of we in go expect came faster When forward. the than fairly thought. amortization, about levels that marks we March saw increase I to portfolio people dramatically bit a in

of is do count thing. be as think this think us they'll forward. I off, date deal for again, to we what's higher we we be going this XX% a and to go part lead going come as go overall, as really forward, slower earnings But, is because we core speeds a that is big to

value, go in core the that'll on earnings third I marks we think obviously. will we really, back go kick about think a our and getting So, But – forward third of up help to that'll basis, higher book quarter fourth to much XXXX. start as quarter to hope, in,

book value, value? some why adjustments you don't walk Nick, Nick's Regarding through just in of book the here.

Nick Santoro

thing additional from you performance from one book factor The standpoint, a Bose, is end need value to quarter unchanged. is in issuance. relatively the share

$X.XX. down book our by bring So, approximately that will value

Operator

Eric will And our next question come BTIG. from with Hagen

Eric Hagen

of basically just one when at MSR were framework I on one of speeds at look XXXX end for and carried value at for When the X. to around the how lows, their good maybe MSR that think valuation. at a another about the we think the the was as multiple Maybe MSR proxy

robust of more valuation when is you think quickly? have the something a back XXXX, you you because from that area more right exceed note recapture that that could else of that sort sensitivity is presentation, even that? we kind so, think guys about I drive overall Or that near value going framework And there Xx now. that Or to think forward get can upside and the the in it

Michael Nierenberg

good really a question. It's

back sheet that I on we think we mix very, our XXXX, time are was where than if different go had at to you product now. the very balance

or originating, you a gross in production So, – think you're MSR. about if That's when like I first think the that. newer quarter rate something X.XX our was

If probably X.XX, you MSR think X.X about multiple. it's today, that a

had If days, to you so think multiple. MSRs, we probably old back the a to going more legacy at XXXX, X

quarter a back that it. more those the XXXX, will will but go fourth fair as stuff the So, us I mortgages and think of on these forward, as up there's just lower think you than amount not X go seasoning that XXXX much have multiple. legacy The more respectively because going up, originated were to the to and going rate of first in quarter way production more

X course it's So, it Will it year? getting that No. I to I think happens likely. that happen the today? over think of very multiple, doable? is the back Absolutely. Do

Eric Hagen

much compares origination warehouse issued how NewRez separately, did warehouse did through some funding there some Caliber you volume think And and I last week. say the you bank guys of economics talk quarter? to funding securitized now? right last how deal Can it

Michael Nierenberg

we On front, – all we did to But not. time. talk the think spoke way the Obviously, I Caliber I to the Sanjeev.

they would Caliber for I be were to in the something the XXXX. to origination their side, comparable expect year On what volumes

So, In that when something billion, in page, billion to range. look billion. it $XX it's take was probably that about XXXX, you at give $XX or $XX

the So, side. that's on Caliber

side I'll – the warehouse On it. talk let the around of to some math Baron

– one forward. and will goal be exposure the – Our to real as we our to counterparty any limit will have company be about we as amount a going this to of continue business think

more business stuff capital the our we the the in better put becomes. out that So, markets,

a funding. quarters, The are about of the funds better extremely away think advance This provisions. does are were stuff of versus provisions prior and mark-to-market. getting mark-to-market bank from have real mark-to-market but this rates we vocal couple the in better, the cost actually I on

don't Baron, you add So, I know to want there. anything if

Baron Silverstein

banks. we markets very cost with the get the The that, transactions, And effective it's key committed three-year favorable obtain tell for right, more our real cheaper here that warehouse rate, us talked my for our able especially than at a than is I to of what Right? Michael about, in you, attractive bit little we're platform. benchmark and And as bank a we financing. from context background, financing, prior doing how very, very accretive capital is will

We that bank to to But committed obtain and going financing there. financing, us. try we three-year the important have to look that. are to diversify still always are partners can going Those to we're extent to do

Operator

come next question our with Kevin will Barker Sandler. And Piper from

Kevin Barker

funded your adjusted the pull-through on and pressure demand quarter, slightly quarter-over-quarter? What be X% up bit in volume, recognizing direct-to-consumer. that locks of seeing you partly a volume for to channels there other to only mentioned little quarter-over-quarter You in is down due the second decline going were refinance are

Baron Silverstein

right very And We we that focused perspective much look as return each recapture channel still on number money. are significant On overall now. we're of consumers in volume. on opposed our focusing a at necessarily have an direct-to-consumer, from to the

today million I save can about, month. at the have $XXX approximately I still of that, Michael that in today's consumers We prior for calculation us a interest as in-the-money think talked consumers a in-the-money quarters think rates.

So, new into acquisition. we having of as franchise context look we the expand at that continued direct-to-consumer and our customer growth upside do

US. to Our the that's see seen JVs about, purchase with business partnerships across down. that we've as are slow a already going but realtors And talked definitively with refinances our

about So, the more including we as TPO non-QM. just wholesale a our still how at a look believe correspondent third-party matter at And we of to to we're our and talked correspondent. accretive point, it's business and we maximizing franchise. is opportunistically through channels, ROE really this our And

Michael Nierenberg

we other talks The volume that thing, – Kevin, on perspective, know about everybody about care always front volume, I making a is from money. and

we're And to money, shake so, if we where really more do less volume out. that's going and we make

other vehicle a go rates about we the if going correspondent is good that's The days, spread in to for the old business, up. MSR the thing when to you you're us is, you think back are believe compression seeing which creation – go

of amount the we about in there, do loan. think we when closed essentially, a buying volume So, you're

we'll two, from P&L that from think overall standpoint, market one, continue market. monitor, but, to about as direction standpoint something a a the rate we that's So,

Kevin Barker

mortgage look that that And look relatively seems at capacity to gives year the demand. competitors as seeing market direct-to-consumer we're And year. still good then, we continued several of at you channel lower origination can continue it your levels confidence maintain dynamic gain share is we non-bank this build through move profitability. a definitely What on take with where have building? margins to like And capacity type and to sale of XXXX XXXX when was post-crisis

Michael Nierenberg

So, so-called Two, team have the great obviously and a leadership the to we Caliber company. a what refer reasons they great herd. the is, thundering one I it's transaction, of did one

efficiencies, market that's I So side. a lot something It's P&L, volumes – we to going think not that think about to real really when going technology we be to about the is see purchase you're around and important real us. more think,

the stay. business to working think are doesn't mean It on, scale, you a forward mortgage is We you to are a off And going initiatives by currently here talk same the about volumes to sheer I squeeze. anywhere do little near bit, because over housing I lot to continue do loans have And of down getting at come closed we're the going about do dramatically. when quicker. volumes we refinancing people see that volumes as some margins business. Think think XX%, point, rolls if if go go pretty market our

XXX plus of have We billion MSRs.

volumes. to situated on NewRez of that side as the – is perfectly coupled so think the done a have Caliber take growing I you'll do has what recapture actually are we the and That we go business very think, their mortgage low side on see advantage I We rates market which stay. are virtually lower to forward. velocity origination both here with,

it flows. mortgage his is But a a And think we valuation here it's we David dollar peers market. the episodic mortgage whether us to we're it and when as the – and be we real whether always undervalued, stay. Jay think Cooper and all honestly. the relates P&L multi-trillion business be other out market. But a about business, that know of I companies, it's there, to and or It's it huge It's think product.

long And so, to come stay. but having think is volumes may matter. come capacity to everybody term, may I off, off, it's And going P&L here

Operator

next Guiliano come our Point. will question with And Bologna Compass from

Guiliano Bologna

MSRs And at curious could pre-recapture? December get are bit of about May point, recapture you pretty of of itself some more offset that impressive, benefits, be I numbers were which Caliber way happens. the there immediate. include a towards of performance I that that the could could also that wrong of Caliber on of when thinking little do assumptions recapture from starting also, I the was off for we from any think closes could the if million am was additional and The one Caliber's billion recapture portfolio looked over time. But part And get calculate obviously you upside, tack-on It the it? that any the a push your February. the time entities, core assumptions there. transaction embedded two a $X.X core is to transaction second not XX. merge had input that bit the there? And kind I is the may those for billion is two bring assuming your they But over portfolio, if performance little and if recapture of $X.X a more, then, that lift bit different when portfolio that I be know portfolio. or you going over recapture areas – curious things transaction, be could was higher accretive. Caliber I the $XXX guess your benefits plus at direction over to One, before those of all dilution your little end was, the than kind good in secondary. Is And to way not the if of twofold. your

Michael Nierenberg

as billion, of Why ask the start don't you XX/XX. to end the we question. we can't portfolio, I that repeat Caliber the with when The portfolio? Caliber quote $XXX that's of

box. So, the works, it's way the a transaction closed

from relates a all so it The so-called assets $XXX perspective. that just these no formula that's put percentage get we recapture sheet closes, it $XXX that. as once balance into that have billion, to there's So, we billion,

to both be. to and both that's billion on frankly, the think and about closes, recapture We quite what an our the production assume it, you will lift portfolio as to Caliber companies up from, think some don't are I and what and overall rate, the bring have exactly our sides billion from profile. – know amortization for $XX of earnings get that net percentages we will kind be transaction that is. overall business integrate be together call standpoint significant and of that going the company Caliber going you does, will our and income $XX As rate if of our MSR recapture

see Caliber a transaction, It believe we our in back accretive, you think when transaction. But But I why listen won't want as highly some number. don't a past, stream. and we I is no make possible. back get I the money go this that I much specific the to earnings may to goal for shareholders much of higher our our short announced we if have reason obviously calls. as to to other is done

Guiliano Bologna

realize sense. about, there And makes convoluted. book benefits adding any post-merger, very I higher was, direction impacts That I question different maybe a is bit that if was and, be curious those analysis, the that value little values the your which essentially of the value higher. MSR fair similarly MSR coming that your into up. And would [indiscernible] assumptions MSRs could over side for assets recapture on moving also, push Caliber What

Michael Nierenberg

all. value changed assumptions One on this haven't just related everybody to any any lift just think pointed the today and we We correctly, and about book as your our recapture and at think quarter, of thoughts? can Caliber out, from Nick going get about we're share $X.XX you to any thing, the when why model book second franchise don't you so value

Nick Santoro

there's approximately value to As $X.XX to earlier, issuance. the that book mentioned the expectation Bose I share is on related dilution

or of the lift addition, haven't $X.XX. core a in as book into of any going we terms dilution recapture Caliber the in mentioned anticipated in And factoring is from earnings be Michael factored impact mark. In on earlier, to book,

Operator

And Mark our from next question Barclays. with will come DeVries

Mark DeVries

Can then how of that kind kind light for to you? market talk legal kind of finally, market, of it in particularly bigger opportunity, since think And the a just develop QM really originating limited stack think non-QM may what's growth framework of that ever kind you highlighted of That you how don't for safe to same could that the loans, harbors? the returns changing make fact up to have may QM was the whole the about the you of originations. big what be created. opportunity in has You been be slow you just

Michael Nierenberg

need. started the short, is is capacity. industry reason two up the The of combination capacity will the us quite frankly, it hasn't we companies give The

you to the process is, XXXX of enough there when on market was non-QM much with nature the about not thing agency other production the side, think quite folks, The origination loans. frankly, so in

about be business. looking I And, it I the has expect non-government As would pretty product, what before. and alluded month. call at $XXX low. to refinancing we a Baron, there that's you there like, We've guaranteed of off think, need a him for very to been before. been our think million and a thinking, product, I'm non-QM Caliber coming volumes part significant

prudently pretty a profitability around has ability loans But process grow to space. it's try – business. and it's standpoint, really will we been capacity. So, the governor the to From that a profitable

where past, some in issued we something dollar been take, COVID I assets those were to back trading, if We've XXX, the those that we for of $XXX think, have and XXX, in million and called our debt, us to give in around range. prices an And on others sale you of asset deals $X.XX. go loans. crisis, ones tough those March, alluded or the couple weeks

good as obviously, seen, for business dramatic the having us in production be it's you've as as well us. so-called really a products these So, think on for more And soon think the pricing. great want us, a us, retail to we capacity, That'll drive help recovery I get Caliber, going out profitable to I network as possible.

Guiliano Bologna

the some assets create being for as you that REIT an also Do opportunity see to hold? credit to

Michael Nierenberg

Absolutely.

think a we be of there's on and shouldn't to no you working the as roll OneMain the we're profiles. side. reason about type is able from marketplace this consumer retail to different well There network, come no his things, why business. different about they shouldn't – team, the we'll and through if Obviously, Caliber credit think be as – be the But able One NewRez into we evaluating out why a on reason products Sanjeev banking management even background. now

force side. have We the a NewRez sales on great

Guiliano Bologna

me. for last one Just

be targeting you compress, as returns you margins you'll bulk of acquisitions originator gain think sale the do think on those MSR what back to about do coming more acquisitions? kind for As opportunity

Michael Nierenberg

a be We when together. companies we have the huge come machine thoughtful. production have Obviously, two to

that. saying, mindful X% And in or double I With with been proper So, the we'll take We've of we're give out of always there financing, digits. unlevered. stay numbers. those kind probably think you're

that's So, of part it.

and have about capital. about we of acquisition The middle DC we to sheet to and and an governors balance how are our think other part in and think about think in the is we friends

some in MSR sales. industry, there. opportunities be to advantage two, around the a taking there's about of, come things But our we be position one, think want way So, to any that obviously, to supportive but, of

Operator

Michael session. like question-and-answer any This to will conclude Nierenberg our for I'd back over turn the remarks. to closing conference

Michael Nierenberg

We And call give morning us have. results a this questions. Have I appreciate to for Stay everybody's our on spring. And you as will look all Thanks. great the I time we That's Any good and holler. follow-up, a forward. soon. go producing forward well. to shareholders talk

Operator

conference attending presentation. now Thank for The has you today's concluded.

this at You may time. now disconnect your lines

Rithm Capital (RITM) 5 May 212021 Q1 Earnings call transcript