Home Point Capital Inc.

Good morning and welcome to HomePoint Capital's first quarter 2021 earnings call. During today's presentation, all callers will be placed in a listen-only mode and following management's prepared remarks, the call will be open for questions. Please be advised that today's conference call is being recorded. I will now turn the call over to Gary Stein, Head of Investor Relations at HomePoint Capital. You may begin.

Thank you, Operator. Welcome to our first quarter 2021 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 the slide presentation, which is available in the events section of the HomePoint 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 HomePoint's most recent SEC filings, including the company's annual report on Form 10-K which was filed on March 12th, 2021, for risk factors related to 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 HomePoint's earnings release, which is available on the company's website. I'd now like to turn the call over to Willie Newman, President and Chief Executive Officer.

Willie Newman Thanks, Gary, and good morning, everyone. During our prepared remarks, I'm going to touch on some highlights regarding our first quarter performance. I'll then discuss a few elements of our differentiated business model that are driving our long-term growth. After that, Mark will provide more details on our results for the first quarter of 2021, as well as our financial outlook. We'll then open up the call to take your questions. First, as I did last quarter, I'd like to thank our outstanding team of more than 4,100 HomePoint associates for their extremely hard work and relentless dedication. I would also like to thank our more than 6,600 third party partners and our more than 400,000 customers. As we go through our results this morning, I speak for the entire leadership team in noting that HomePoint would not be where it is today without the tremendous support and commitment we receive every day from all of you. We entered 2021 with significant positive momentum, and this was reflected in our results for the first quarter. We generated a record funded origination volume of 29 billion for the quarter, which is up more than three and a half times compared to the first quarter of 2020, and up 23% from last quarter. For the last 12 months ended March 31, our total funded volume was $83 billion. From a financial perspective, our strong funded volume helped drive total revenues in the first quarter of $422 million, which was a more than six-fold increase compared to our revenues of $68 million in the year-old quarter. For the last 12 months ended March 31st, Our total revenues exceeded $1.7 billion. Our net income was $149 million for the first quarter of 2021, and it was $767 million over the last four quarters. From an operational perspective, we ended the first quarter of 2021 with more than 6,000 broker partners and 620 correspondent partners. In total, our third-party partner relationships, which are a cornerstone of our differentiated business model and a key driver of our long-term growth, have increased by 63% year-over-year and by 11% since last quarter. Looking at our mortgage servicing portfolio, we ended the first quarter serving more than 409,000 customers, up over 60% year-over-year. At the same time, the total balance of our servicing portfolio nearly doubled from the first quarter of 2020 to reach $110 billion. This strong growth in our servicing book as well as increases in valuation were also positive contributors to our quarterly results. As Mark and I will discuss this morning, the combination of rising interest rates and, most notably, a unique set of competitor dynamics in the wholesale channel has created a challenging near-term operating environment and put pressure on our margins. However, we believe this presents us with an opportunity to scale and optimize our business for the long term by more rapidly growing our broker network, accelerating productivity and efficiency initiatives across our business, and building sustainable long-term value for our stakeholders. I'd like to spend a few minutes talking about some of these points in more detail. Having launched HomePoint just six years ago, we are a relatively new entrant in a residential mortgage origination market with incumbents that have been operating for decades. Against this backdrop, we have grown at a tremendous rate. According to Inside Mortgage Finance, in the fourth quarter of 2020, we were the third largest wholesale lender by origination volume and the seventh largest non-bank lender in the United States. We have been able to achieve this rapid success due to our differentiated business model, which has been designed to capitalize on the large and growing wholesale market in a way that leverages scale and optimizes returns with lower fixed costs. One of the key drivers of our growth in the wholesale channel is our use of in-market, highly experienced sales executives to acquire and build relationships with broker partners across the country. As I mentioned, we ended the first quarter with more than 6,000 broker partners and which highlights the significant success we have had in attracting brokers to our platform. The change in competitive dynamics in the wholesale channel starting in early March has created a strategic opportunity for HomePoint. This is evidenced by the accelerated pace at which we are engaging with brokers and adding them to the HomePoint platform. We expect this pace to continue and are increasing our year end target to 8,000 broker partners. Once brokers are added to the platform, Our in-market sales executives work closely with them to encourage usage and ensure they have a seamless mortgage transaction experience. As these brokers begin to use our platform, we are confident they will execute an increasing number of their transactions with us, enabling us to grow our wallet share per broker over time. We expect that this in turn will drive continued growth in market share. Another key element behind HomePoint's rapid growth has been our differentiated approach towards process and technology. We have built a flexible infrastructure that is highly componentized, integrating best-in-class third-party and proprietary solutions to maximize our flexibility and efficiency. This approach has enabled us to leverage the latest technological innovations while avoiding the burdens associated with building and supporting in-house proprietary systems. In response to the change in competitive dynamics in the wholesale channel, we have accelerated our efforts in both process improvement and technology implementation. with a dual objective of increasing both efficiency and the partner experience. I am very pleased with the progress we have made so far to pull forward into the first half of 2021, a number of initiatives we had originally planned to execute later in 2021 and 2022. This highlights HomePoint's nimbleness in our ability to pivot in response to changing market conditions. We believe the accelerated implementation of these initiatives will lead to greater competitiveness in any environment. One last element I'd like to touch on is our in-house servicing. which provides a critical link between us, our customers, and our broker partners. In addition, in-house servicing provides balance to our business model by enabling us to create value in a variety of interest rate environments. These benefits were evident in our first quarter results, which saw overall growth in our servicing book, as well as a meaningful increase in the value of our mortgage servicing rights as interest rates rose throughout the quarter. Taking a step back, we delivered a solid set of results during the first quarter, which is driven by the continued strong growth in funded volumes and new broker relationships, as well as the natural hedge, which is provided by our high-quality in-house servicing platform. Although the current environment remains challenging, we believe this is temporary. We are intently focused on managing those elements within our control as we navigate through this period. However, as we look beyond short-term quarter-to-quarter volatility, we are confident we will emerge from this period of turbulence as a stronger and more efficient leader in the residential mortgage origination space, delivering both long-term growth and profitability. With that, I'd like to turn the call over to Mark.