UWM Holdings Corp Q1 FY2022 Earnings Call

Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the UWM Holdings Corporation First Quarter 2022 Earnings Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there'll be a question-and-answer session. Thank you. Blake Kolo, you may begin your conference.

Good morning. This is Blake Kolo, Chief Business Officer and Head of Investor Relations. Thank you for joining us and welcome to the first quarter 2022 UWM Holdings Corporation’s earnings call. Before we start, I would like to remind everyone that this conference call includes forward-looking statements. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued this morning. I will now turn the call over to Mat Ishbia, Chairman and CEO of UWM Holdings Corporation and United Wholesale Mortgage.

Thanks Blake. I appreciate it. And thank you all for joining the call today. Before we start, I really want to thank everyone at UWM for their continued commitment to providing the best-in-class service to our clients and the brokers and congratulate our brokers for adapting and winning in this current market. On every earnings call, I've emphasized how important a strong purchase business is to the health of any mortgage lender and why UWM’s business thrives when rates rise. A purchase-heavy market magnifies the winning combination of broker expertise and UWM's speed, technology, and service. We are now in that market where you can easily identify the winners from the rest. This environment will propel the broker channel to the next level. It's simple. The broker channel is the best place for loan officers to work, and brokers are the best place for consumers to obtain loans. These two facts drive our strategy at UWM and demonstrate why we will succeed in this market and really in any market environment. The purchase market is where we are today, and that is the key. As our first quarter results illustrate, we have a lot to be excited about. 2022 feels a lot like 2018, the last year when rates rose substantially, and lenders had to figure out how to operate in a new environment. We were very profitable back then, while most lenders weren't, and you will see that same story play out this year; Q1 was the beginning of that story. We closed $38.8 billion in production for the quarter. That is almost what we achieved in the whole year of 2018, which showcases our massive scale and growth we've experienced in the last four years. More importantly than that volume number is that our production is only down 21% when comparing the first quarter of 2021 to the first quarter of 2022. I invite you to compare our year-over-year first quarter Q1 results – to first quarter 2021 to 2022 comparison with any lender in the country as proof of the strength of our business. This trend will continue in 2022, but beyond that, the $19.1 billion production of purchase volume is the largest first quarter in our 36-year history here at UWM. This is a significant number by anyone's standards. We believe we will do even more in the second quarter of 2022. We are confident that UWM will continue to be the number one purchase lender in America and eventually the number one overall lender in America. We delivered $453.3 million of net income for the quarter with a gain margin of 99 basis points. That $453.3 million represents $0.22 per share, which demonstrates very strong earnings across the board. Additionally, only $170 million in that $453 million is a fair value adjustment to our MSR portfolio. Thus, our business is very strong with our MSRs and without the MSR value write-up. Now, let's talk about a couple of other focuses: scale, optionality, and the broker channel. First, on scale, our technology is superior. What we've provided for mortgage brokers so they can succeed in this market is better than what retail lenders have. This is helping brokers win. One of our major technologies, BOLT, is a prime example. It's the best underwriting platform in America. We've seen a 50% adoption increase just from the fourth quarter to the first quarter. That's substantial, and that will continue to grow. You will see the BOLT story play out more in Q2, Q3, and Q4, because not only does it drive productivity higher for underwriters, but it also lowers overall costs and enhances our quality across the board. More updates on that are coming soon. Also, regarding optionality, let's talk about MSR values. Our MSR book is one of the best in the country. Our weighted average coupon (WAC) is at 3.04%, up from 2.94%. Our values and our MSR book remain strong because we originate substantial business every quarter, even after selling some MSRs, which I'll reference in a moment. The reality is this: our MSR book is robust and when rates are low, we originate a significant amount of business with high gain margins. When rates go up, we’ll still originate considerable business on the purchase side, and our MSR values will increase as well. We’re very proud of where we are: 36 years in business, and we’re going to succeed regardless of the market. Lastly, I want to mention one other thing about loan officers. The broker channel continues to grow. This has been our message for years, and it’s really happening right now. Loan officers are leaving retail to join brokers, which is going to benefit UWM. Consumers are recognizing it. Realtors are understanding that they should turn to mortgage brokers, and brokers are winning. In 2021, 35,000 unique loan officers submitted loans to UWM, and we believe more unique loan officers will submit to us in 2022. This is a strong indication of the growth of the broker channel in UWM. Now, Tim Forrester, our CFO, is unable to be here today, so I’m going to provide some insights from his perspective regarding some of the business aspects that we have discussed as they relate to our financials before I take your questions. So quickly, as Tim would emphasize, we experienced 56% year-over-year growth from a purchase perspective, which is massive and a significant part of our success. If you notice, income increased, a lot of that is linked to our business, but also our interest expense decreased because we’re utilizing cash to help us generate more cash. That’s crucial for our success. It’s very important that we continue managing our expenses. We have complete control over this, and we feel great about our current position. Our expenses may appear higher year-over-year, however, in reality, they were lower. A couple of things to note: There’s a reversal of about $20 million from Q1 of 2021, which actually reduced our numbers last year when they were, in fact, higher. Also, there was a change in presentation accounting for about $13 million this year that impacted that figure. Additionally, don’t forget, our servicing book is about up 50%. So there's about $26.7 million higher in servicing costs. If you take that out, our actual costs are down. We are successfully managing our costs, and we are optimistic about our cost structure as it is, which is a significant contributor to our profits. Regarding our assets, coming from the first quarter versus the fourth quarter, you may recall that in October of 2021, the new conforming loan limits were released. Therefore, our assets appeared bloated at approximately $22 billion at the end of last year. Many people may comment on it, but it normalized back down to around $10 billion because we held many loans in the PLS market as well as Fannie and Freddie loans to boost profitability, which we will see in the fourth quarter. However, those assets have been normalized, and you’ll observe our roughly $10 billion figure out there. Another point regarding MSR sales, as I mentioned earlier, we sold some MSRs amounting to about $73 billion and brought in liquidity of $872 million as of April 1. That doesn’t impact our P&L significantly, but our liquidity is in a solid position across the board. Having strong liquidity is crucial, which is why we are once again continuing to pay out a dividend. We have done so for six consecutive quarters. We will keep paying the dividend. Our Board feels strongly about it. We want to reward our shareholders, and our dividend is very robust, and it will continue to be so. We feel great about that, as the dividend has been announced for the first quarter. As you saw in the earnings release, it outlines the dates along with when we will pay it out. Now, before I turn it over to questions, I want to emphasize a few points: Our scale enables us to win in any market. The balance sheet is solid. Our MSR portfolio is strong, as it is the best MSR book in the industry. Our business model allows us to remain proactive. The migration of loan officers to the wholesale channel is accelerating, just as I have previously stated, and it will continue to grow moving forward. Please observe how we sustain production over time and continue to succeed. As I mentioned, the dividend demonstrates our commitment to return cash to our shareholders. For the second quarter of 2022, I estimate our production will range between $26 billion and $33 billion, and our gain on sale margin will be around 75 to 90 basis points. It will be another fantastic quarter in Q2, and we look forward to seeing many of you here at UWM headquarters for our UWM Live event, where around 5,000 of our clients will be present to discuss growth, and we’ll be there, excited. Tony Robbins will be here. I plan to speak about several things, and I look forward to it. Now, let’s turn it back to the moderator for questions, and I am happy to answer any questions about UWM, the business, or the marketplace in general.

Thank you. We’ll take our first question from Doug Harter with Credit Suisse. Your line is now open.

Thanks. Mat, I was hoping you could talk a little bit about the gain on sale margin for the first quarter. It was above expectations. Just kind of what drove that for the quarter?

Yes. Thanks, Doug. As we’ve talked about before, we control our margins here; we're not reactive to the market. We control the market. I mentioned in my last call that 75 to 85 is the bottom, and we’re obviously not going to go below those numbers. We felt good about where margins were. A lot of other players still have a long way to come down, and that’s where we differentiate. The purchase market is a lot less rate-sensitive from a margin perspective, so we feel strong in our position right now, and we believe margins will not drop below the numbers I’ve indicated. We strive to be consistent with that for every quarter I’ve been part of these earnings calls.

I guess, just following up on that comment. What do you see differently in the second quarter that could cause margins to come back down to the range you had previously given for the first quarter versus where they came in?

Once again, I feel strong about where our margins are. I want to ensure we guide to the point where we won't go below 75, as I pointed out during the call. Also, in the earnings release, we indicated 75 to 90 is where I feel confident. However, there are many factors that could affect our margins, but we also face competitive pressures from other firms. We have felt those competitive pressures already, and we control our margins— typically they follow us, not the other way around. Therefore, once again, we will choose to position our margins differently. However, that’s not the major indicator of our profitability; there are many factors affecting our profitability in the 75 to 90 range. I feel really confident going forward.

All right. Thank you, Mat.

Next, we’ll go to Henry Coffey Jr. with Wedbush. Your line is open.

Good morning. Thank you for putting up another great quarter. A couple of issues and questions. Number one, you’ve made the well-received comment that you weren’t reducing staffing like so many others are, as originations obviously are trending lower. What mechanism do you have in place to keep operating profitability up without...

Thanks, Henry. Our culture is key to our success. I know many of you will be out here at UWM Live, where you’ll see our 5,000 clients in attendance. You’ll also see our campus with all our people here in growth and success. The reality is, the question you’re asking is how can we do what others cannot? It’s because of technology and efficiencies. We will be extremely profitable, as I mentioned last quarter. As long as we run our business the way we intend, with a focus on the purchase market, we will succeed. Others have been overly dependent on refinancing for so long that their costs ballooned, leading them to reduce their workforce. We did not do that. We didn't have to scale up the staff because our technology did not require it. Therefore, we can sustain our staffing levels without compromising profitability. As you observed in the first quarter, I indicated in the fourth quarter that we would be highly profitable, and as you saw, we were, and we will continue to succeed without needing to reduce team members. That's not who we are, and we remain committed to ensuring a prosperous working environment for our employees.

In terms of measuring the migration from retail to broker channel, you have your own metrics, focusing on the unique brokers you are working with. Can you place that 35,000 in historical context for us? How much has it grown over the last few years? Secondly, do you have any thoughts on how we can track that as outsiders? I mean, is there any one source we should examine to monitor this data on a monthly basis or something?

I’m not aware of any excellent external sources for that. The reality is... I agree, which is why I was asking. It’s so backwards-looking, with the data appearing so far back. I don’t have a great data source to present besides my own growth figures. We had 35,000 loan officers last year, and I believe we will conduct more business with additional loan officers this year. So if the overall volume in the market decreases, but we engage with more loan officers, that’s an encouraging indicator that loan officers are turning to the broker channel. That’s our consistent message over the years. I think someone from Wells Fargo even commented and showed how the broker channel’s loan officers have risen, reflecting the fluctuations seen in 2007 and 2008, yet rising to perhaps the highest levels ever recorded. This trend is becoming increasingly evident in the market.

Yes. No, we all have the IMF data that shows that. But what I’m wondering is what your numbers were a year or two ago so we can gain some understanding of your growth and expansion.

I don’t have that figure on hand, but I can find it for you. Please feel free to follow up with Blake Kolo, and he’ll provide you with that information.

Yes. I’ll reach out to Blake. And finally, in terms of evaluating profitability, you are looking at market share and volume, and assessing your ability in the purchase market, all of which are showing strong results. Do you have any key metrics that we should be watching? Not short-term, but long-term in terms of earnings or ROE? I think you’ve demonstrated that you have control over gain on sale margins. What are your thoughts on the business’s eventual earnings in terms of dollar amount, per share figures, or ROE?

Yes. Of course, you can do the math and see what we’re aiming for. We have our dividend, which I’ve communicated for a while, as we’re highly confident in paying it out—$0.40 per share for the year. We’re disbursing $0.10 quarterly, totaling $640 million annually. We will exceed that easily. Clearly, the first quarter indicates that we’re trending towards generating over $1 billion this year. I’m quite confident we are profitable throughout all cycles. I indicated last quarter that we would be highly profitable, and I believe the first quarter further proves that. I also believe the second quarter will be very strong. You will observe this trend throughout the year because we are confident in our performance and growth amidst challenging environments that other firms may not be equipped to manage, especially in a purchase-focused market. I think the first quarter clearly exhibited that, and you will see more of that in Q2.

Thank you.

Next, we’ll go to James Faucette with Morgan Stanley. Your line is now open.

Hi. This is Sandy Beatty, actually speaking for James. How are you thinking about— I know you provided a little bit of commentary here — capital allocation, particularly in terms of the balance between liquidity, capital returns, and even buybacks, all framed within the context of internal investments, particularly in technology as originations decrease throughout this year?

Yes. We are currently in a strong cash position, and we feel good about that. We intend to continue paying dividends, as I have already stated. We always need to strike a balance regarding the best use of our cash. We prioritize rewarding our long-term shareholders, and we’ll persist in doing that at the existing stock price. I believe it is among the most attractive investments based on our dividend yield. Our investors will benefit from collaborating with UWM and being shareholders. Additionally, we evaluate various opportunities to use our cash most effectively for our company, shareholders, and clients, with numerous initiatives we aim to pursue moving forward.

Got it. Thank you. And just one quick follow-up, can you elaborate on the strength in purchase? Any specific data you’d like to highlight regarding close times, etc., in terms of share gains, and how you might expect that to track over the remainder of the year?

Yes. There are many components related to the purchase business that others don’t fully grasp. Many businesses focus primarily on refinancings, which I believe leads to misconceptions regarding operational success. While we do handle refinances, our primary domain is the purchase business. It involves much more complexity, engaging not just a borrower and lender, but also two title companies, two realtors, and appraisers frequently. You need to excel in every aspect to expand your market share in purchases. That’s why we have been the number one purchase lender for two consecutive years. This will be the third consecutive year where we reach that accomplishment. There are many nuances involved, and it's not straightforward to shift focus to only purchases or purchase leads. Many other companies currently trying to do so will encounter challenges. As we’ve seen in the first quarter, it’s more complex, and you're going to see those trends manifest in the future. The broker channel continues to dominate the purchase market, and we serve as the primary partner for mortgage brokers.

Got it. Thank you.

Thank you.

Next, we’ll go to Kevin Barker with Piper Sandler. Your line is now open.

Good morning. Thanks for taking my questions. You mentioned several items that were not core expenses this quarter. Could you reiterate those? You went through them pretty quickly. What would you view as a core quarterly operating expense estimate for the first quarter?

Yes, I didn't state they weren’t core expenses. I was highlighting that the anomalies from Q1 to Q1, so when it looks like our expenses went up, they actually didn’t; they went down significantly. I’ll list them so you have an idea: One was a $19.6 million, or about $20 million contingency reserve reversal in G&A from last year, leading to fiscal deflation; another one was a $13 million change in presentation regarding loan-production income. The more significant point was that our servicing book has increased by 50%, totaling around $200 billion to over $300 billion. These servicing expenses are simply aligned with being in that position. There were a couple of other factors I didn’t mention, simply because detailing them was unnecessary. But overall, we are proficiently managing our expenses, and we are extremely excited to continue forward with our cost structure as is. While maintaining high profit margins remains feasible, we expect to succeed in this market, even with profit margins at their current levels.

Okay. And regarding capital questions, your debt-to-equity ratio is now below 2, like at 1.6x with tangible common equity ratios nearing 29%. You seem very overcapitalized from that standpoint. Is there potential for strategic acquisitions or other structural changes to take advantage of the capital base you currently hold?

Yes. We feel really confident about our capital base, cash position, size, scale, and structure. We are exploring opportunities to leverage that. There are ample opportunities in the market. We’ve built our business organically and will continue to do so, yet we consistently evaluate additional prospects. That flexibility is one of the key advantages of working with a cash-rich firm and having a solid operational structure right now.

Okay. Thank you very much.

Next, we’ll go to Michael Kaye with Wells Fargo. Your line is now open.

All right. Good morning. I wanted to chat more about the Q2 gain on sale margin. I understand there were pricing improvements to brokers in April, as well as the implementation of a price matching program in May. How much of that is affecting your future margins, and what is the strategy behind these pricing adjustments? Is this more of a push into the purchase market?

Yes. Thanks for the question. We implement various incentives and opportunities frequently, not every month, but fairly regularly. We had one in the first quarter as well. My guidance regarding all these strategies is that none of them will materially impact the guidance we’ve provided. We feel very strong about the volume, and we’re primarily focused on helping brokers succeed while also applying pressure on some competitors to ensure our brokers can thrive. That’s the primary goal now—supporting brokers in winning, converting retail loan officers to brokers so they can enjoy more success than they previously experienced in the retail sector, which ultimately expands their market share.

Okay. And I know you’ve emphasized no layoffs are planned, but how much benefit do you see from employee attrition over time? For instance, how many employees do you have today? How low could that number drop by year-end just based on attrition alone?

Well, we are still hiring people. Our situation differs from others in the industry. We are continually looking for top talent to join our company. Of course, attrition comes into play, as some employees will leave or relocate, but in general terms, that won’t influence our costs to a significant extent. Our costs are currently in a solid position. Our profitability remains excellent, and we feel very optimistic about our business. Hence, while attrition could affect numbers short-term, it is not part of our current strategic considerations. We are optimistic about maintaining our staffing levels and even hiring new talent to foster continued success.

Okay. Thank you very much.

Thank you. Next, we’ll go to Steve DeLaney with JMP Securities. Your line is now open.

Thanks. Mat, congratulations on the strong quarter. Could you remind us, you often reference the organic movement of producers from retail to wholesale. It’s evidently occurring, but could you also update us on the regional infrastructure that UWM has established nationwide to facilitate that process?

Yes. Thanks for the question, Steve. I appreciate the support. We have a dedicated procedure and team aimed at assisting brokers around the country and helping loan officers transition seamlessly. Many loan officers we discuss in our updates are those who leave one retail company to set up their own brokerage; however, many others may simply move from one retail lender to join a different broker without starting a new shop. As such, we have structure and teams in place, along with partnerships, throughout America to help materialize these changes. We observed a significant increase from Q4 to Q1, and the momentum is ongoing. It resembles a snowball effect: a loan officer finds that they are better positioned at a mortgage broker shop, offering better rates and superior technology than a retail lender. That reality supports the growth of our mortgage broker channel, and we are engaging in many productive conversations and establishing teams to facilitate these transitions.

Mat, can you provide the current broker relationship headcount?

The number of brokers using our services is what I tend to monitor closely rather than just the total broker count. While I don't currently have it in front of me, I believe the number is around 11,000 brokers. The main figure I focus on is the number of $35,000 to $40,000 or $45,000 loan officers. Nonetheless, I am primarily concerned about how many are actively using our services—a key segment of which sums to 35,000 last year. More loan officers will be submitting business to us this year, which is the most crucial aspect of our focus, rather than just tracking the total number of brokers.

Thank you.

Thank you. Next, we’ll go to Brock Vandervliet with UBS. Your line is now open.

Thank you. Good morning. Just to clarify, Mat, did any of the special items you referenced in conjunction with expenses occur within the salary benefit line, or was the $160 million a solid number?

No, I consider that number to be solid at $160 million.

I just – you're guiding for another material decline in volume in Q2, given where mortgage rates stand. This is a cyclical business. I don't understand why you're not conducting more layoffs at a more rapid rate.

That’s why I’m the CEO. I feel fairly confident about our current procedures. We made $453 million in the past quarter; that’s why I’m here and you’re on the other side of the table. The fact is, our profitability will remain strong going forward; continue following our progress, and you'll come to appreciate how we navigate challenges. Shareholders appear pleased with our direction and cultural integration and engagement as we aim to foster positive relationships with our team members. Some may think it’s short-sighted to save $5 million a month, leading to $15 million quarterly, amounting to $60 million yearly—a figure that might seem substantial. But if we preserve our team members, provide them exceptional support, and cultivate the culture we champion, when July of 2024 arrives, and rates dip, a potential $400 million gain that month is lost. You can save $200 million over the next two years, but costs associated with losing the talent and opportunities come into play. I chair the team and we are dedicated to executing our plan and value our employees tremendously. That’s part of our strategy.

All right. Thanks for the questions.

Next, we will move on to Kevin Barker with Piper Sandler.

Hey, Mat, just wanted to follow up. If I exclude the MSR fair value change, I'm arriving at an operating income around $57 million or approximately $0.04 per share, slightly below the dividend amount of $0.10. Do you believe you can sustain operational earnings, excluding fair value marks, equivalent to approximately $0.10 per share where the dividend stands today? Additionally, what other main drivers do you see aside from maintaining margins at the current level?

Yes. Once again, you are not accurately looking at fair value change, which was $170 million. We are highly confident and will continue outperforming expectations. Our dividend payouts are assured, and those questioning our dividend payments lack understanding of our business. That's understandable because the current stock price reflects such active sentiments. We feel extremely confident that we can pay the dividend from our earnings. The first quarter shows promising numbers, which will result in the same for next quarter, reassuring all stakeholders of our performance at UWM. We remain steadfast in our operational profitability, and at these levels, we will show robust results.

Okay. Your guidance implies a decline in production income of about $100 million. Assuming the everything remains equal, except servicing perhaps with lower amortization expenses, where do you anticipate making up for the decline in production income on the income statement? Would it mostly translate into other income streams, or can we expect interest income to significantly rise due to higher rates?

There are various potential income sources you may not be aware of, along with standard interest income. However, I believe the main factor will be interest expenses decreasing because we can maintain solid cash reserves. There are many pieces involved, and once again, the key element is our total cost to originate. Tim Forrester, who’s not here today, has mentioned that our cost to originate is superior to anyone else in the industry, driven by our tech investments. This benefit will manifest. In contrast, while others lower their margins, we do not need to follow a similar fate. Lastly, our servicing book remains strong, and we also generate revenue there. We aren't tethered to fair value marks to be profitable; we operate profitably and efficiently during various operational contexts.

One final inquiry: Have you considered potentially bringing servicing in-house? If so, when would that timing look like?

Yes, that's a valid question. We've explored the option of bringing servicing in-house, estimating that it could save us a few million dollars, among other opportunities. However, we also have various other investments in technology that we prioritize more. I frequently discuss this topic with our risk team as we evaluate the advantages of switching servicing in-house. The decision hinges on where we direct our focus in the future.

Thank you, Mat.

Thank you.

Thank you. Next, we’ll go to Henry Coffey Jr. with Wedbush.

Hey, good morning again. Thank you. You provided the fair value markup number. I didn’t write fast enough. Can you reiterate it?

I stated about 170. I believe it's actually 172 exactly but 170 million is the figure I used earlier.

The discussion on dividends presents an interesting point of view showing its significance to everybody involved. There are a couple of mechanisms at play since you hold two classes of shares— the D shares and A shares. Hence, you could potentially defer the dividend on the D shares while maintaining the dividend on the A shares. If I'm correct, this offers considerable flexibility. Have you considered altering the terminology surrounding the dividend structure to boost confidence in that figure?

Yes. Your comments regarding our capital structure are accurate. I can’t fathom how we could instill more reassurance than affirming that I, as Chairman and CEO, will consistently pay out the dividend. That is a continuous commitment we’ve honored each quarter, and I have said that repeatedly. People can establish certainty as we keep the dividend flowing. I continue to express that and the first quarter results verify this sentiment. I want our shareholders to witness that we are cash strong, and our commitment to delivering dividends remains steadfast. I also regularly consult with our board, and we engage in discussions about strategic trajectories, with a unified vision for growth. The idea of cutting the dividend or even altering its nature is beyond my considerations.

When imaging the continued success of the business, there’s a notable amount of momentum occurring here. From a capital perspective, what do you primarily need it for? Is it purely to hold MSRs for a while, or with the origination business yielding profitability, what specific capital needs arise as you move forward?

Yes. The key principle is cash is king. Thus, we ensure we maintain cash for flexibility and seize opportunities as they come our way. We inform strategic investments in technology and various growth strategies, among others. It’s ideal to possess more cash than otherwise; however, sharing that with our shareholders firmly remains a priority, reiterating our commitment to dividend payouts along with future allocations. We view cash as a resource for flexibility, essential for tackling deals as they arise. These sentiments explain why we appear relatively cash-rich, allowing us to reward shareholders equitably moving forward.

Great. Thank you.

Thank you.

Next, we’ll go to Bose George with KBW. Your line is open.

Hey guys. Good morning. I want to follow up on the gain on sale discussion. Did the gain on sale margin trend downward throughout the quarter? I'm curious if the Q2 guidance is aligned with what you observed in March?

No, it didn’t trend down throughout the quarter. We felt positive about our margins, and I still do. There are several moving parts, and we want to ensure that you have confidence that everything relayed in the call will be accurate. We feel quite good about the range of 75 to 90 basis points as everyone else works to cut margins. The outcomes should reflect our success, as we appear to thrive even amidst challenging landscape.

Okay, great. Thanks. Additionally, I would like to return to the MSR mark; in the release you refer to the $390.98 million change in the fair value. You mentioned $170 million as a mark; does that $390 million encompass the MSR degradation as well? I thought this number pertained solely to the MSR mark.

Yes, 170 million is the number you’re looking for. The $390 million figure includes different components, reflecting multiple factors at play. To clarify, this encompasses various other transactions. Although we marked up our MSRs in tandem with our contemporaries, the figure of 170 million reflects what we achieved in our $450 million profit.

Okay, great. Thanks.

Thank you for your inquiries. I appreciate the insights shared, and Blake Kolo and our team will be available for any follow-up questions. That concludes our Q&A portion. I will now turn it back to the moderator.

This wraps up the Q&A segment. I’d now like to return the floor to Mat Ishbia for any closing or final remarks.

Thank you for your time today; we appreciate your support and look forward to our next earnings call. Have a great day.

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