UWM Holdings Corp Q3 FY2022 Earnings Call

Good morning! My name is Rob, and I will be your conference operator today. At this time I would like to welcome everyone to the UWM Holdings Corporation’s Third Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. 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 third 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, and thank you everyone for joining us. Today we are excited to be hosting this call as the Number 1 Overall Mortgage Lender in America. There has never been a 100% wholesale lender that has earned this title, and we are very proud to be Number 1. What a great day for the UWM family, our team members, our mortgage broker partners, and our investors. Well, I didn’t know when, but I was confident this day would come because, as I continue to say, brokers are the best place for customers to get a loan and the wholesale channel is the best place for a loan officer to work, and that is why we are Number 1, together as a community with our brokers. At this point, I would hope everyone realizes we consistently deliver on what we say. We said we’d dominate the purchase market, and we just had our best purchase quarter of all time at nearly $28 billion of purchase volume. We believe the combination of brokers and the real-estate partners, coupled with UEM efficiencies and technologies make for a championship combination for the American consumer. We told you when we launched All-In, in March of 2021 that this decision would help the broker channel grow and ultimately our share of the channel. Some questioned us and thought we would lose brokers and market share. However, the exact opposite has happened. I estimate that our share in the wholesale channel in the third quarter will be the largest ever recorded in history. I believe we’ll be north of 40%, perhaps even closer to 50%. Most recently, we told you our Game On strategy would separate us even further from our competitors. Since the start of Game On, we have had thousands of loan officers try us for the first time, experiencing our technology and our service, and quickly realizing that partnering with UWM can help them win in any market. We said that loan officers would migrate from retail to wholesale this year and accelerate during Game On; this has happened. We estimated over 17,000 loan officers joined the Mortgage Broker Channel this year, about half of them coming directly from the retail channel. These are the highest numbers we’ve ever seen since tracking this data. We also told you that it would be better for us to focus on growing our market share organically instead of by acquisition. How has that played out? I’ll tell you, this has played out extremely well. There were a lot of uncommitted wholesale lenders in the market, and with Game On, some of them decided to exit because of their lack of efficiency and lack of commitment to the broker community. There are many committed wholesale lenders in the market that are doing very, very well, and brokers have so many choices, over 50 great wholesale options to choose from. However, I want to make one thing very clear: The decisions we make continually force every wholesale lender competing in the wholesale channel to level up their game, which is a massive positive for every broker and consumer in America. Many people expressed their disbelief that a company only fighting for two out of every 10 loans, UWM, and the broker channel, could ever be the largest lender in America. Here we are, the Number 1 overall mortgage company in America—about one year after I first publicly said that this was a possibility and we would do it. One other thing we’ve talked about that also sets you apart is that we’ve never had and never will have layoffs. We don’t need to lay off people to control our expenses. Year-to-date, we’ve made about $1 billion in one of the most difficult mortgage environments of all time. We did this by leaning into technology, our operational efficiencies, things such as BOLT and other technologies built from scratch here at UWM. We are about people and family in our culture; layoffs have never been on the table and never will be. But controlling our expenses and managing our cost per loan is always a major priority at UWM. We told you that dividends would continue, and I am happy to announce that for the eighth consecutive quarter, we will pay $0.10 per share, which right now represents over a 10% annual yield. Now I’m going to tell you what else is going to happen. We are in the best strategic position we’ve ever been in at UWM because brokers are growing, our competitors who are uncommitted to the channel are struggling, and retail is falling apart, just like we said it would. I am very confident that sometime in the very near future, whether it’s 2024, 2025, or 2026, we’ll have years just like 2020 or even better. We are excited about the future, and we are in a great position to dominate. We’ve been questioned about All-In; we’ve been questioned about Game On; we’ve been questioned on whether we’d ever be Number 1, whether that would continue, whether we win and purchase, whether the broker channel will grow. I don’t know what else to say, but what we have said would happen has happened. Maybe, just maybe, there really is one elite mortgage company in America, one CEO, and his leadership team that really is in the weeds of the business and knows the business better than the rest. Who knows? That’s what we believe. I hope you’re starting to believe it as well. All right, let’s get into the third-quarter highlights. We closed about $33.5 billion in production for the quarter, handily beating our guidance. $27.7 billion of this was purchase volume, 24% higher than last quarter. I described our purchase performance last quarter as dominant, and 24% more is even more dominant. Again, we averaged about $24 billion in purchase for the last six quarters. We are winning in the purchase market. I’m also proud to say we delivered $325.6 million of net income for the quarter, with a gain margin of about 52 basis points, which was within our guidance. I’m still confident we’ll average about 75 to 100 basis points for the full year, as I’ve been saying all along. We continue to deliver world-class service levels. Our NPS is plus 88 for the year, and our speed of close is nearly twice as fast as the rest of the industry. In addition, we delivered fully diluted earnings about $0.13 per share. Andrew will provide more color on some of these numbers in a few minutes, but I want to dig deeper into the long-term perspective of Game On. As a refresher, Game On is a long-term investment in our business in the broker channel. We launched it on June 22, and this strategy will help brokers and UWM win long-term as partners together. We know with brokers having the best technology, service, and partnership, they have what they need to win. But now, with a massive pricing advantage, they will grow and recruit even more loan officers and continue to build their real estate relationships. This is a winning combination, and brokers are winning right now, and Game On is a big part of it. Just like the All-In from March of 2021, Game On received criticism from our competitors and other industry pundits. It’s undeniable that Game On has been a massive success for the broker community. Brokers are adding loan officers faster than we’ve ever tracked. As I said earlier, brokers have added over 17,000 loan officers this year to our channel, with a good number of those coming in Q3. At UWM, since the launch of Game On, we’ve also converted nearly 12,000 loan officers that have never worked with us before or haven’t worked with us in a long time. We are winning with these new clients that are trying us for price and working with us because of how great we are from a service, technology, and partnership perspective. The broker channel is growing; loan officers are joining the broker channel, and Game On is a huge part of this. As you can tell, I’m fired up about how far we’ve come and where we are going. Our business in the broker channel has never had more momentum than it does right now, and we’re going to continue to grow together. I’ll now turn things over to our Principal Financial Officer, Andrew Hubacker.

Thanks Mat. As Mat discussed, we’ve remained profitable in this environment as reflected in our reported net income of $325.6 million in the third quarter. Our Q3 results benefited from increases in the fair value of our MSR portfolio due to rising primary mortgage interest rates, but our total origination volume for Q3 was very strong as Mat mentioned, of approximately 12% sequentially from Q2. Our servicing portfolio also remains very strong, with a total UPB of approximately $306 billion, as newly originated and retained MSRs have largely kept pace with sales and payoffs to date in 2022. With a very low delinquency rate and high asset quality, our MSR portfolio is stronger than ever and continues to provide balance to our business model, a recurring quarterly cash flow stream, and a strategic source of additional liquidity. Speaking of liquidity, we took steps in Q3 to further improve our liquidity position, which allows us to continue to strategically invest in both the wholesale channel and in growing our market share. In early August, we entered into an unsecured line of credit with our principal shareholder with available borrowing capacity of $500 million. In late September, we entered into a line of credit secured by certain of our MSRs with available borrowing capacity of $1.5 billion. Neither of these facilities have been drawn upon as of the end of Q3, and we ended Q3 with approximately $2.9 billion in total available liquidity, including over $800 million of cash and self-warehouse and $2 billion of available borrowings under our secured and unsecured lines of credit. This is a significant enhancement to our liquidity position for Q2 and the beginning of the year. Excluding the impact of an increase to our representation and warranty indemnification reserves recorded in Q3, total expenses were down sequentially in Q3 despite the increase in loan production. We continue to be focused on staying disciplined with cost management in the current origination environment and are comfortable that more aggressive cost reduction actions are unnecessary and would be shortsighted. As noted in our earnings release, the board again authorized for the eighth consecutive quarter a regular dividend to be paid to our public shareholders for Q4. We continue to be comfortable with the amount and timing of the dividend, and believe it is appropriate to continue to reward our stockholders. Okay, I will now turn things back over to our Chairman and CEO, Mat Ishbia for some closing remarks.

Thanks, Andrew, I appreciate it. Before turning to your questions, I want to reemphasize a few things. Almost all things that we have talked about publicly since UWM went public, whether the predictions or interpretation of the market of the business have come true, and I talked about some of those things earlier in the call. We are dedicated to the broker channel and we have been, and the channel will continue to grow as we have been discussing. While it’s great to be Number 1 overall, we’re just getting started. There’s a lot of upside ahead, and I’m so excited for the next three to five years and what we’re doing here together at UWM and with our broker partners. And with that being said, we expect our fourth quarter production to be between $19 billion and $26 billion and our margins in the range of 40 to 70 basis points. I want to take a second to thank our amazing team members and clients. Being Number 1 is a testament to all of you and your hard work. While we certainly celebrate this great achievement and all of our progress, we have a saying here at UWM, which is ‘Never Relax.’ I believe we are in the best strategic position we have ever been in, yet we will keep going and keep winning together. You can count on that. We’re now glad to take your questions. I’ll turn it over to the moderator.

Our first question comes from Doug Harter at Credit Suisse. Your line is open.

Thanks. Mat, I think you mentioned that you would expect your market share within the panel to be around 50% this quarter. How do you think about where that could go in kind of both the short and intermediate term?

Yeah, thanks. I said I think it was over 40% and maybe as high as 50%. I have said before, I think we can be 50% of the market in wholesale. Can we be more? Probably could be. The reality is as the broker channel grows, it will be harder to be that big a percentage of the market share. There are a lot of other wholesale lenders that are doing well, and at the same time, there are a lot of brokers. You’ve got to commit to a lot of people to work with you, and so we’re doing really well. We feel great about our market share and the growth. A lot of the reason our market share is growing at the level it is, is that a lot of the brokers that partner with UWM are growing faster than the rest of the market and succeeding. They are really winning in the purchase market. Right now, that’s the game. It’s a purchase market. So we feel great about the market share perspective of UWM, but most importantly focus on the mortgage broker market share and how that’s growing because that’s the key to success. As the brokers grow, loan officers add to the channel. We’re going to keep winning right now and you guys have seen that. But in 2024, 2025, and 2026, when all these loan officers have left the retailer and the broker channel, it’s going to make 2020 look like hopefully just an average or a good year.

And then, can you talk about the stickiness of kind of customers that you’ve brought in during the Game On initiative as that eventually rolls off, the stickiness of that volume or brokers that you brought in?

Yes, well we’ve done a similar thing in 2019, and we see a high percentage of the people that start working with us stay working with us. Whether they stay doing three loans a year, six loans a year, twelve loans a year, or twenty loans a year, that all determines based on how big of an originator they are and how much they buy into some of the tools we have. So the stickiness factor is a big part of it, but the reality is Game On is much more of a strategic play to help the channel grow. If UWM’s market share goes from 40% or 50% down to 25%, but the mortgage broker channel remains at 40%, we’re doing more business overall. We’re going to grow with the channel. That’s the focus. It’s less about UWM, although UWM is winning. I told you guys we’d win when rates go up because we win in purchase. We are not only dependent; we’re not a one-trick pony on refis. We’re focused on All-In strategic business. We’ll do refis, but in the purchase market, the broker channel, that’s the focus, and that’s what wins in all market cycles. Of course, in the refi market like other things win but in the purchase cycle, this is the game plan that wins, and it’s winning for us right now.

Thank you, Mat.

Your next question comes from the line of Jay McCanless from Wedbush Securities. Your line is open.

Hey, good morning! Thanks for taking my questions. So when I look at the originations in the quarter, your government purchase origination is up about 70% versus last year and up over 30% sequentially. Are you guys managing the servicing on that paper, or is someone subservicing it for UWM?

Yes, thanks. All of our originations are up quite a bit quarter-over-quarter, including government. Obviously, it’s in line, but yeah, we subservice with two subservicers right now, and we’ve been doing that for years, and that’s continuing, and those guys do a great job for us. We have a whole team here that oversees it and works with them to make sure we help out with any consumer issues, but everything is great. Our delinquency rate is really the thing to focus on, not only our government or conventional. I think we have the best MSR book in America. So if you look at the MSR book, it’s not the biggest, but it’s the best for loan quality, delinquency, and FICO score, and we have the best MSR book in America, and I believe we are starting to see some of that, and that will come through for years because of the WAC and current rates.

You stole my next question, Mat. That’s what I was going to ask you about delinquency trends, but then also just starting with some of the distress we’re starting to see—just wondered, how are early payment trends looking on the government book?

It’s looking fantastic. Our business is, like I said, significantly better than the market on all the metrics I look at from a delinquency perspective. Remember, we’re one of those lenders that don’t chase volume by going low on quality. A lot of my competitors, almost all my competitors go too low. For instance, a 580 credit score, we don’t do that; we stay at 620. We don’t do certain things to chase volume, and that sounds good right now. People are like, oh! Chase volume and the more profitable loans, yes, but in two years, three years, four years, you’re going to have delinquencies and a lot of different issues that we’re not focused on. We’re not only focused on being the biggest, which we are, the Number 1 overall lender, but being the best lender in America, and we think we’ve had that title for a long time now.

Sounds good. Thank you.

Thank you.

Your next question comes from the line of Bose George from KBW. Your line is open.

Hey, good morning! Actually, I was wondering about the Game On program. How long is that likely to continue? And what percentage of your loans participate in that program?

Yes, I mean it’s a strategy, so it’s not a percentage of our loans that fit into it. So all of our loans are focused on the same strategies as our whole business. How long will it last? Well, with the returns and success we’re seeing with it right now, with the loan officer conversions, it’s lasting longer than maybe we had expected. Obviously, we’re extremely profitable even with that mindset, so we’re feeling really good about it, and I know a lot of competitors and a lot of retail lenders would love for us to stop. But the reality is their loan officers are joining the broker channel because the broker channel is better for loan officers, and Game On is just, you know, not only showing it but accentuating or highlighting it because everyone already knew that. So right now, Game On is a massive success. We’re going to continue with that until we decide to change that. I don’t have a deadline or a date on that, but I look at pricing and margins multiple times a day.

Okay. Great. Thanks, and then just in terms of your volume, your guidance for Q4 suggests a decline versus the market, and 3Q obviously took a ton of share. So just curious if there’s anything to read into that or if it’s just a broad range that you’re providing for your guidance?

There’s nothing to read into it. There are two things you should know. One, obviously we went up significantly when everyone else went down, so you’re looking at it relative to our current number. But second, what I would mention is purchases in the fourth quarter and first quarter—the people that only focus on refis don’t matter, month or quarter or part of the year. Purchases are a little different, so that’s why you’ll see a bit of a decline in the purchase volume overall. But in general, we feel really good about not only our volume in the fourth quarter but also into 2023 and not only maintaining the Number 1 overall lender spot but actually growing our market share and growing our lead.

Okay, great. Thanks a lot.

Thank you.

Your next question comes from the line of James Faucette from Morgan Stanley. Your line is open.

Hi! Thanks for the time this morning. Mat, can I just ask you a quick follow-up to the previous question? What are your underlying assumptions for what the market will do, particularly in purchase in the December quarter?

Well, I mean obviously, you know I’ve said it probably before, you know that I thought that the end of the third quarter and beginning of the fourth quarter will become more of a buyer’s market—that’s what’s happening, right, the market has softened. So now there’s a lot more opportunity where sellers are chasing the buyers. It was reversed just six months ago. So purchase will be slower. Obviously, in the Northern States winter and also with kids in school, people don’t buy houses in December as often as they do in August—that’s just obvious stuff, so we’re prepared for that. We’ve done this for years and years, and so we feel really good about it. Our purchase volume was $27.7 billion, which is our highest reading of all time. I think our purchase volume alone was bigger than every other mortgage company in America, combined purchase and refi. So purchases are down a bit? We’ll do a little bit less business than we did in the third quarter; that’s not a concern at all. We’re really focused on continuing to grow market share, helping the brokers win, helping more loan officers join the broker channel and getting ready to dominate in 2023, 2024, and 2025.

Thanks for that, and then looking to the longer horizon, Mat, can you give us an idea of how much room you think there is to improve efficiencies in mortgage servicing? Do you see the risk that the number of loans requiring more labor-intensive servicing could increase as borrowers deal with those modifications and foreclosure activity, and can you bring incremental efficiencies there to further help your opportunities in that longer horizon?

Yes, I don’t see that at all. I don’t really—I’m not concerned about that. Do I think there will be more delinquencies if the recession hits? Of course. But you have to realize, our book and our quality of paper is just not the same as everyone else. The age of our book, along with the WAC and the quality of our paper makes it, so we have a lot less of those concerns. Will delinquencies in the market go up with a recession? Yes. Will things happen in the market? Yes. But from an efficiency perspective, what we’re doing on the servicing side, I don’t see any massive incremental costs or expenses that will hurt us in any way that’s material.

That’s great. Thanks a lot, Mat.

Thank you.

Your next question comes from the line of Kyle Joseph from Jefferies. Your line is open.

Hey, good morning. Thanks for taking questions. Just want to get a little bit more color on what’s going on in the broker channel. You know, obviously we saw a number of participants announce they were exiting, but you’re talking about taking share. So does that mean just essentially the players in that existing market are taking an even bigger piece of that pie?

Yes. The wholesale lenders that are committed to the channel are leveling up their games like we are, helping brokers win, doing more than just being a wholesale lender. The 2005 version of a wholesale lender, the 2015 version of a wholesale lender was to throw a rate sheet out and close the loan for the broker. That’s not the game anymore. People that were uncommitted who thought they could just throw a rate sheet out and get loans from a wholesale broker aren’t sticking around because they can’t compete at that level. If you’re not going to invest in technology, help brokers grow, help train brokers, assist them from a compliance perspective, help them build their business and marketing strategies, and help them succeed, you’re not going to win in wholesale. That's the standard to play, and a lot of people don't want to pay that entry fee, and so if they are not around, they are not around. There are so many wholesale lenders that are around, starting to level up and do great things for brokers, and I love that. I love it. I love when UWM’s market share goes down in the wholesale channel because I know when that's happening, that the other wholesale lenders are doing great things and, secondly, the broker channel is a lot bigger than it is today, which is a win-win for everybody.

Great! Thanks very much for answering my question.

Thank you.

Your next question comes from the line of Priya Rangarain from RBC. Your line is open.

Hey guys! Thank you so much for the call. Can you get started maybe on fourth quarter? Your guidance is based on the historical market share or the market share that you see in the third quarter?

You know, I'm not exactly sure what you're asking. You're saying our guidance is based on what I believe we're going to do, and so obviously understanding the purchase market, understanding our market share, and understanding our perspective—that's where I try to give you as much accuracy on where I think we'll do from a production and gain-on-sale perspective. So that's kind of where the guidance comes from. At the same time, we focus on, I guess, keep saying the broker channel. We have an extreme amount of liquidity. Our MSR book is extremely strong. Our delinquencies are extremely low. We feel really good about our position in the fourth quarter and, more importantly, in ’23, ’24, ‘25, and beyond. So I think that's hopefully that answers your question. If not, clarify it for me.

Got it, no. I was just trying to see whether you can outperform just as you did in the third quarter, but this is helpful, thanks. The second thing is, you guys have talked about 70 to 90 gain on sale margins like on an annual basis. Just given that your gain on sale guidance for fourth quarter continues to remain in the 40 to 70 range, should we think that next quarter, like in 2023, you will revert back to the 70 to 90 range, or should we expect continued lower gain on sale?

You know, I haven't made that decision yet, Priya. What I've always said is that in wholesale, margins of 75 to 100 are kind of the bottom level I see. I think I said that even earlier in my call. Seventy-five to 100 was kind of the low-end range in wholesale, and we're going to be in that range this year, right? So we feel confident with that. Obviously, the first half of the year, margins were a little bigger; the second half a little lower. I don’t even count the gain on margins. It’s like dropping margins; I consider that an investment long-term. Whether you want to think about it as research and development or marketing expense, it’s building the business for the long-term rather than focusing on what we make this quarter. But I know everyone looks at it their own way. We're thinking long-term right now, and so whether the margins. I gave the 40 to 70 basis point range, we’ll be within that range, and between 75 and 100 basis points on a yearly basis—that's what we're doing. But it's a long-term investment. I told you guys last time the gain on investment is going to—we’re going to spend a couple of hundred million dollars. Instead of acquiring companies, we're going to spend a couple of hundred million dollars, and you're going to see it come out of my gain on sale. If you flip that around and say, what's that going to return? It’s going to return multiple, multiple times on that because the broker channel is going to grow, and UWM will grow with it.

Got it. And just one last question: On the MSR line that you guys have drawn, how long will you keep that liquidity, and would you use it for share buybacks? How should we be thinking about that? Thank you.

Yeah, we're focused on liquidity. We look at everything from share buybacks. Obviously there’s a floating thing, so we can’t really do that for bond buyback debt like we look at all aspects of the business at all times. Andrew does a great job in the finance team helping us make those right decisions, but right now we feel really good about our business and where we stand right now. We're going to continue to focus on originations, building our servicing book, helping the mortgage brokers grow and succeed, and grow their market share. When that happens, we'll continue to make decisions around our liquidity. But liquidity is key, and we have a massive amount of liquidity right now, and we feel really great about our position. Thank you.

Thank you.

Your next question comes from Courtney Bahlman from Barclays. Your line is open.

Hey guys! Thanks so much for the question, and congrats on the results. Just a quick one for me on leverage. You guys have pretty consistently kept non-funding debt to equity at about a half to three-quarters of a turn. Should we think about this as the sweet spot moving forward and how you are managing the balance sheet?

Yeah, no, thanks for the question. You know, that's what we're at right now. Obviously, we feel really comfortable in that range. Could we go higher? Absolutely, we could go higher than that. I think almost everyone is a lot higher than that in our market and just in the industry in general, but we feel really good about where we stand. We manage liquidity very closely, we manage our debt, and all the ratios that you're speaking of and probably more very closely, and Andrew and his team do a great job. Anything you want to add to that, Andrew, you feel?

No, I think you covered it well.

Great.

Awesome! Thanks. And then just one follow-up on the MSR front: How are you guys thinking about retention moving forward? I know you mentioned you remain acquisitive, but how are you thinking about what types of MSRs you'd want to acquire? You open to Ginnie bonds, or would you say that you're more focused on conforming?

Well, we're not really acquiring MSRs, so that's not really our game. What we're doing is originating loans, and we originate agency loans, usually Fannie, Freddie, and Ginnie, and depending on what the focus is at UWM and what our brokers are looking for, is what we deliver. So I don't know if you missedpeak or misunderstood your question, but we're not acquiring MSRs. We originate MSRs at the highest level in the industry. I think people try to buy our MSRs, obviously, and we're much more efficient at originating than even if we were to buy them, so we just focus on originating. Buying MSRs is not our game, but continuing to build our business is.

Nope, that's great! I misunderstood, thank you.

Thank you.

And your final question comes from the line of Kevin Barker from Piper Sandler. Your line is open.

Good morning. Thanks for taking my questions. I just want to follow-up, how much MSR did you sell in the quarter, and could you give us an idea of whether that was a seasoned portfolio or newer production that you're selling?

Yeah, most of the stuff we sell is usually over 12 months. I don't know the exact details of it, but we sold about, let's call it between $20 billion and $25 billion in the third quarter. If we look at servicing sales as an opportunistic way to bring in cash, we don’t really need to do it. However, we look at all things and we're always checking the markets and seeing what's going on, and we feel really good about our position, and our MSR book is extremely valuable right now.

It seems like the higher interest rates have definitely pushed up MSR values, but we've seen—like we hear the market softened or it seems attractive to be buying MSRs compared to purchase. I mean, are you seeing fairly strong bids, or is there a flow program that you're using to continue to have decent bids on the MSR sales that you’re doing?

Yeah, our MSR sale bids are extremely high, actually, and very strong with a lot of people coming to us. You have to remember, our MSRs—people don’t want to buy MSRs from someone if they don’t think they are going to be around for the rep and warrants to be there for the long term. Everyone knows we are going to be around and strong, and so that actually gives—it makes the supply in the market less because there are only so many lenders that people feel confident buying big portfolios of MSR from, but we are one of those and we feel really good about our position on that. So MSR bids have actually been very strong. We feel good about it, but at the same time, we haven’t really been acting on much of it because our servicing book is fantastic. We don't need the liquidity. We have a lot of liquidity right now, and we feel really good about just focusing on our core business of helping mortgage brokers grow and win and continue to originate at the highest level in the country, which is what we’ve been doing.

Okay, and then your gap earnings were really strong. You definitely have a lot of liquidity, access to MSRs, but it appears like on an operating basis, it's still negative cash flow, which is not surprising just given the environment. But I mean how long do you feel that you can continue to operate on a negative operating cash flow excluding MSR sales, given that it is a tough environment out there?

Yeah, I really don't think it's that tough of an environment. So, you know, I think it's obviously tougher than it was last year, but last year wasn’t real, and people that were succeeding last year doing 90% refi are finding that out now. So Kevin, like my perspective is, cash flow is a different thing than income. We're extremely—we're profitable running the business right now in the way we are running it. Operating income, we had a $236 million fair value increase; we made $325 million. We're making money right now running our business, and I'm very confident in that going forward. On the cash flow side, wholesale lending is always negative. Cash flow has been forever, always has been, always will be, and that’s why liquidity is such an important part to dominate in the wholesale channel, and so we feel great about where we're at. We're going to continue to focus on running the business, originating, helping brokers grow, helping brokers succeed in this market, and taking market share, and it’s been working for us. But thank you for the questions, I appreciate it.

Thank you.

And this will wrap up the Q-and-A portion. I would like to turn the call back over to Mat Ishbia for closing remarks.

Yeah, thanks a lot. I appreciate all the questions and people joining the call. Hopefully, you're understanding a little bit about our business and understanding what we're trying to do. We really appreciate all the support and positivity, and we're going to continue to grind and work hard over here at UWM to help mortgage brokers win, help UWM win, and take good care of our team members, brokers, shareholders, and everyone alike. So thank you for the time. Have a fantastic day! Talk to you next quarter.

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