Greetings, and welcome to the Home Point Capital third quarter 2022 financial results call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lesley Alli. Please go ahead. Thank you, operator. Welcome to Home Point's third quarter 2022 earnings call. Joining me this morning are Willie Newman, President and Chief Executive Officer, and Mark Elbaum, Chief Financial Officer. During our prepared remarks, we will be referring to a slide presentation, which is available in the events section of the Home Point investor relations website. Before we begin, I'd like to remind you this call may include forward-looking statements which do not guarantee future events or performance. Please refer to Home Point's most recent SEC filings, including the company's annual report on Form 10-K, which was filed on March 17, 2022, for factors which could cause actual results to differ materially from these statements. We may be discussing certain non-GAAP measures on this call, which management believes are relevant in assessing the financial performance of the business. These non-GAAP measures are reconciled to the nearest GAAP figures in Home Point's earnings release, which is available on the company's website. Now I'd like to turn the call over to Willie Newman, President and Chief Executive Officer. Thanks, Lesley, and good morning, everyone. During our prepared remarks, I'm going to discuss the environment, which is becoming increasingly challenged. I'll also discuss how we continue to take action to support Home Point's long-term sustainability and success in the wholesale channel. After that, Mark will provide more details on the results for the third quarter, as well as some initial insight into the fourth quarter. We'll then open the call to take your questions. The mortgage industry has been impacted by severe market volatility over the course of the year, and those challenges intensified in the third quarter. From interest rate movement to capital markets volatility to an industry that is still significantly over capacity, the result is the most challenging origination market since the financial crisis. At Home Point, we have taken proactive steps to best position our company for both the current environment and long-term sustainability through significantly reducing expenses, building liquidity, and focusing on margins over loan volume. We communicated on our last earnings call that we weren't afraid to get smaller. During the third quarter, we took action to reduce our expense base by over $100 million annually. We have been ahead of the industry curve in this respect and will continue to calibrate our costs to the environment. Our objective is to get back to operational profitability as quickly as possible while preserving the upside opportunity in wholesale. In addition, we continued making progress in creating additional liquidity and divesting of non-core businesses. Most notably, we signed a commitment to sell substantially all of our Ginnie Mae servicing. This sale will add over $110 million in liquidity. In addition, we completed the sale of our ownership stake in Longbridge Financial in early October. This, added to our prior non-core divestitures, MSR sales, and operational consolidations, has resulted in a strengthened liquidity position. From a balance sheet perspective, in addition to enhancing our available liquidity, we are seeing historic lows in prepayments in our servicing portfolio. Industry prepayment models establish a floor at 6% annual prepayment. In September, we experienced a less than 5% annualized rate with a continuing downward trend. This provides support against a challenged origination environment. On the origination front, we continue to see support for our decision to focus on wholesale. Based on all available data, we are continuing to see rapid migration of loan originators into brokerages. Since January 2021, almost 17,000 loan originators have joined our broker partners. In the third quarter alone, our broker partners added over 2,700 loan originators, which raised our access point to over 53,000 originators nationwide. This movement, which we expect to continue for the foreseeable future, especially as rates remain elevated, creates an expanding opportunity for Home Point. Why is this migration accelerating? Simple. The benefit to consumers of working with a mortgage broker. With an over $9,400 per loan advantage provided to consumers in 2021 and the sustainable efficiencies built into the broker wholesale process, we are confident that broker market share will continue to grow. We are well-positioned to benefit from that trend. With our sole focus on the wholesale channel, we are optimistic about our long-term prospects. In the interim, we will remain highly focused on taking the actions required to navigate this extremely challenging market. With that, I'd like to turn the call over to Mark. Thanks, Willie, and good morning, everyone. As we continue to navigate through these challenging market headwinds, Home Point remains focused on executing on our plan, investing in key areas of our business to bolster our efforts within the wholesale channel while managing our expenses and liquidity. We've included in the presentation and earnings release our standard period-over-period financial results. I'm going to focus my discussion on a handful of key metrics. We'll be happy to answer any questions you have regarding the financial results following our prepared remarks. The rapid rise in rates had a significant impact on purchase demand as vastly declined consumer sentiment kept many people on the sidelines. That drop in demand coincided with our decision to strategically focus on margins over volume. As a result, our quarterly funded origination volume was $4.1 billion and gain on sale margin attributable to channels for the third quarter was 51 basis points, up from around 35 basis points in July. In addition to the expense savings Willie mentioned, which we expect to accrete in the fourth quarter, we took steps to optimize our financing facilities by proactively terminating warehouse lines of credit with two lenders and allowing a third to mature without renewal as origination volumes necessitated. During the third quarter, we maintained a strong liquidity position, completing divestments from non-core operations and assets. Notably, we finalized the transition of our in-house service platform to ServiceMac, which converted a fixed cost into a lower variable cost and provided increased flexibility. A few key expenses materialized in the third quarter, impacting our financial performance. Related to our expense reduction efforts, $13.4 million of severance costs contributed to our total expenses in the quarter. The capital market spread deterioration that we saw last quarter further widened in Q3, resulting in a material charge to our inventory held for sale outside of agency execution, as well as our repurchase reserves. As Willie mentioned, we completed the sale of our investment in Longbridge on October 3, 2022, for a price of approximately $38.9 million. We recognized an impairment of our investment of approximately $8.8 million during the third quarter. Also during the third quarter, due to deteriorating market conditions, we saw a significant decline in our market capitalization and recognized a goodwill impairment charge of $10.8 million. Before I finish my prepared remarks, I would like to briefly discuss our forward action plan and financial outlook. As we look at the fourth quarter of 2022, we see a slight easing of margin pressure that has existed through the first three quarters of the year, but do not expect to see them back at normalized levels. In addition, we expect market seasonality, increased rates, and issues with housing inventory and affordability to continue to pressure origination volume until at least the middle of 2023. Proceeds from our sale of Longbridge to Ellington Financial and our fourth quarter MSR sale will serve as an additional source of liquidity. We will continue to optimize our operational efficiency while concentrating on our wholesale-focused model. We will continue to monitor the MSR market for opportunities to additionally enhance our leverage and liquidity positions while prioritizing the growth of our gain on sale margins. We believe that our sole focus on the wholesale channel will enable us to create long-term value even in a reduced volume environment. That concludes our prepared remarks for this morning. We are now ready to turn the call back to the operator to take your questions. Operator? Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star then two if you would like to remove a question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please while we poll for questions. Our first question is from Doug Harter of Credit Suisse. Please go ahead. Thanks. I guess as we look into the fourth quarter, you know, the combination of the MSR sale plus the Longbridge sale, you know, what are you thinking about uses for that additional cash? You know, and in that construct, how are you thinking about, you know, kind of right sizing or optimizing your capital structure? Yeah. Thanks, Doug. At this point, we're going to maintain kind of as liquid a position as possible. We may pay down some of our leverage that we have against our MSR. You know, we could look at buying back some of our debt, but at this point we're gonna maintain a position that's as liquid as possible. Got it. I mean, I guess, I mean, at what point do you kind of look to use some of that liquidity? You know, what would be the point that you know that you would utilize some of that, maybe try to take advantage of some of the discount that the unsecured are offering in the market to you know to kind of lower the debt cost and improve leverage? Sure. I think for us, we're really looking at what market conditions are, and considering the volatility in the market, we feel like being more liquid is better than kind of using that liquidity in a place where we're not able to get back to it. That said, to your point, there is an opportunity to optimize buying back some of the debt, and we'll continue to evaluate that. Mark, I don't know if you have anything to add to that. No, that's exactly how we're looking at it, Doug. Liquidity is better. We wanna be able to maintain as much runway as possible, and so the way to do that is to make sure we have adequate liquidity to continue to navigate through things. Very mindful of where the bonds are trading and the discount that's available. It's certainly on the table and will be evaluated. At this time, liquidity is gonna be the priority. Okay. Thank you. Our next question is from Rick Shane of JP Morgan. Please go ahead. Good morning, guys. Thanks for taking my questions. First, in terms of the Ginnie Mae sale, how much UPB is coming off the books? Mark, you want to take that? Sure. It's going to be about $8.1 billion of notional. That'll be the amount that will be coming off the books. Got it. Is there a gain associated with that? You talked about the cash income, but given where it's marked, should we assume any gain in the fourth quarter? No, I wouldn't assume a gain. We were able to sell it at roughly our fair value. We marked it to where it needed to be by then in the third quarter. I would expect to not see a gain. There might be a slight loss due to transaction costs and things like that that we would incur in the fourth quarter, but that would be what I'd expect. Understood. Thank you. You made the comment that, from a margin perspective, it feels like things are starting to stabilize modestly in the fourth quarter. You also highlight the excess capacity in the industry. I'm curious, as we enter what is generally or seasonally a weaker quarter, there's still excess capacity. What do you think is driving that stabilization of margin? Is it just the industry starting to rationalize, pricing? Is it reduced interest rate volatility? What do you think is contributing to that? Yeah, Rick. I think there's a couple things. One is, obviously margins, especially in the wholesale side, have gone down pretty materially. We feel like, you know, based on what we're seeing out there, that it's kind of a stabilization at, I'll say, around the lows. Second, though, more specifically is our strategy, which is to really kind of keep margin more constant and let volume be the variable. Mark, maybe you should talk a little bit about what we saw in October. Yeah, sure. I mean, there's a couple things that we're seeing. Number one is we reported 51 basis points of margin. If you'll recall, July, we reported about 35 basis points. There has certainly been some upward momentum there. Then, October, our margin attributed channels will be about 72 basis points, or was about 72 basis points. That's what we're seeing. As far as what's contributing to it, a lot of it's our own focus on margin over volume. And we're able to capture that margin. That's what we're seeing just, you know, in the marketplace right now. Got it. Then, one last question. Obviously, there's been a drag on the net gain on sale reflecting repurchases, et cetera. A lot of that is driven by the denominator effect. How long, especially given how much volume compressed in the third quarter, should we assume the denominator effect will continue to create that drag? Mark, you want to take that? Sure. There's going to be another couple quarters of it. It's really hard to know for sure. You know, you're right, there is this denominator effect, which is that where the loans we're repurchasing now are coming from a period of time where we had a lot more volume than we are doing now. Volumes are going to be, we think, pretty depressed here in the fourth quarter into the first quarter. Maybe by the second quarter, we start to see some recovery. At that time also, we will have worked through a lot of the inventory. It could be another quarter or two. Got it. Hey, I appreciate the clear answers in a challenging environment. Thank you. Thank you. Our next question is from James Faucette of Morgan Stanley. Please go ahead. Thanks. This is [Sandy Bi] for James. A question on the path to profitability. How are you thinking about that? What inning are we in? Obviously, it's very difficult to forecast. Similarly, on the OpEx cost cutting, which areas are you most focused on? Where have you found the most low-hanging fruit in terms of getting towards profitability? How should we think about your actions in the near term going forward here? Yeah, thanks for the question. As far as the kind of the path, you know, certainly during 2023, to your point, there's a number of variables that are involved. I think what you've seen is that we're continuing to grind down costs, to a point where, you know, assuming reasonable margins and reasonable level of volume, we can get back to operational profitability. Mark, you want to talk a little more about some of the elements of the path? Yeah, absolutely. Let's start with expenses because that's certainly the easiest to control. In terms of low-hanging fruit, I mean, all of it's hard because you have to make difficult decisions, and it's across the board. There's no one particular area that we're focused on. It's across the board. Just to help you dimensionalize that, if you look at our third quarter, we had about $116 million of expenses. As we noted on the call, included in there were one-time costs related to severance from actions we took in the third quarter. That was about $13 million, and then the goodwill impairment was about $11 million. That would take us to about $92 million of expenses. As we mentioned, the actions we took resulted in a circa $100 million a year of reduction in salary and benefits. That's about $25 million a quarter. That would take us down to about $67 million or under $70 million of quarterly expenses. From there, I would expect to see us continue to moderate that level relative to volume. If volume continues to decline, variable costs will come out. We'll make additional capacity decisions as well. It could be we find our expenses somewhere in the low 60s or even below. That's where that would be. Secondly, as we start to move into the purchase season of 2023, and to the extent that's a more normalized period, we should expect to see margins continue to be in that upper 70s approaching 100 basis points area. That's the path to profitability. To Willie's point, we're on that path. We're looking to accomplish this in 2023. I feel like we've got a good approach to our expenses and, you know, the focus on margins is really gonna be helpful too. Yeah. The thing I would add to that is, you know, and we talked about it in our prepared remarks, is the servicing portfolio is really performing at historic levels, from a prepayment standpoint. That's supportive of, you know, kind of supporting us through the challenges of the origination environment. It's also generating quite a bit of cash for us. Kind of back to that point about liquidity. Liquidity really being the most important thing at this point for, from our perspective, is that it's generating the type of liquidity, that coupled with these expense management actions, kind of gets us to the point where we can navigate through the environment, and get back to that path to profitability. Got it. Thank you. I'll ask one follow-up. You mentioned in terms of purchase. As the market becomes more purchase heavy, obviously the pricing strategy versus volumes, keeping that in mind, what can you do or are you still focused on initiatives to lean into purchase? Is that a benefit or an aspect of the broker channel that you can lean into? How are you thinking about purchase versus refi, obviously in the context of broader market share, as the market continues to contract? Sure. Well, you hit on it, is that the most important initiative that we have going is to do business with mortgage brokers. They're perfectly positioned to do purchase volume because they're in market. They have the referral sources established in order to do that. It really is for us. The organizational focus that we have, which is to continue to evolve from an efficiency standpoint, improve the experience, focus on quality, all those things bode very well to support our broker partners into a purchase market. It's really kind of the blocking and tackling that we've already established. Got it. Thank you. Ladies and gentlemen, just another reminder. If you would like to ask a question, you're welcome to press star then one. Our next question is from Mihir Bhatia of Bank of America. Please go ahead. Hi. Thank you for taking my questions. I did wanna go back a little bit to your comments about, you know, I think you mentioned 72 basis points in October. I was curious, how much of that is being driven by your focus on profitability and you giving up additional volume? I'm just, I guess, what I'm trying to solve for a little bit, you know, in regarding your comments on your path to profitability, is there enough volume at those margins that you've talked about, you know, the high 70-100, I think you mentioned for next year, 75-100 for next year. In that range, do you expect there to be enough volume that your cost cuts will be enough, or will you need to make more? Yeah, I think that is the challenge that we have, and a lot of that depends on size of market. We do believe that broker share will continue to grow. As we said during our prepared remarks, every indication is that is happening. It really is incumbent upon us to continue to focus on those fundamentals that I had mentioned earlier, in order to get the volume level up, to the point where that combination results in us being operationally profitable. Okay. Then in terms of just the movement towards the broker channel by... Are you seeing any effects yet? You know, there's been a few competitors who've gone out of business. Are you starting to see more incoming or any like, I guess, any benefits from that, from all the competitors leaving the channel, et cetera? I would say that we're seeing benefit in the level of the dialogue that we have with our broker partners and with new broker partners as well. You know, again, we mentioned during our prepared remarks the migration of loan originators into the broker segment, specifically with our partners, which if you look at the flow, 2,700 in a quarter is a significant increase in flow over kind of the average over the last year and a half, which has been material. I think transactionally, obviously, it's a very competitive environment out there. The bar is set high in wholesale. That's frankly one of the reasons why originators are migrating to broker. Again, it's incumbent upon us to make sure that we can reach that bar in order to continue to grow market share and drive volume in. Okay. Thank you. Thank you for answering my questions, and I will echo Rick's comments. I appreciate you being as transparent as you can in this type of an environment. Thank you. Our next question is from Kevin Barker of Piper Sandler. Please go ahead. Good morning. Thanks for taking my questions. Could you help us understand what the gain on sale margins look like through the third quarter and then what you're seeing in the month of October? I believe you referenced last quarter you had about 35 basis points of margin in July. What'd that look like in August and September? Mark, do you wanna take that? Sure. For the full quarter, Kevin, we ended up at 51 basis points. If we started the quarter at about 35, we finished at 51. That gives you a sense of that trajectory. For October, our gain on sale margins were 72 basis points. Okay, great. Obviously some progress there. Do you expect that to continue to move higher as you focus on higher margin business through the fourth quarter and into early 2023? Yeah, I think, I mean, Kevin, I think we can expect in that range. You know, we on a daily basis look at moving margins up, moving margins down. You know, there is some sort of volume toggle that we have. Again, we're emphasizing the margin over volume. You know, I think we feel pretty comfortable with those levels, and we're trying to press it higher. Okay. Do you expect to proactively continue to sell MSRs? With that, are you seeing the market for MSRs continue, you know, seeing bids, you know, near 5.5x-6x servicing multiple? Yeah. I think as we mentioned, we'll be opportunistic. I think at this point, you know, we feel really good about the liquidity position we have, so there's not a need to sell MSRs for us. The performance itself has really been supportive of the effort that we're making to reset the origination side of the business. Again, opportunistic. We're not seeing sales at the levels that you mentioned. Again, if and as valuations or multiples move up, you know, we may take advantage of that opportunity. Right now, we feel very comfortable with our position kind of across the board from an asset standpoint. Okay. You know, Ginnie and the FHA have put out these rules, which have been pretty controversial around capital. They got deferred another year for a lot of people to get prepared. Could you help us understand where you stand in relation to the risk-based capital rules for Ginnie Mae? I understand there's like a corporate structure versus subsidiary that may impact that, but could you just give us an idea of where you are on that, and what you can do to manage around those rules? Mark, you wanna take that? Yeah, sure. Yeah, it's been deferred for, you know, for another year, which is fine, I guess. We would be in compliance if the rules were in place today. In terms of running through the detailed calculations, I'm not really prepared to do that on the call, but I can say that if the rules were in place, let's say at year-end, we would be in compliance. Do you feel like you're well above those levels by a large margin, or is it something that you're gonna need to manage over time just given what, you know, how restrictive they are around MSRs? You know, we're always gonna be managing, you know, those types of things, monitoring it and managing it. At this point, I'm comfortable with where we are. That's not to say I would take it for granted. We'll be managing it like we do everything else. Okay. Thank you, Mark. We have reached the end of the question and answer session. I would now like to turn the call back over to Willie Newman for closing comments. Please go ahead, sir. Well, I just wanna, you know, thank you. Appreciate everybody's comments, questions. You know, well, as we've talked about, we're very focused on wholesale, on executing and getting back to operational profitability. With that, thanks very much. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your line.