Home Point Capital Inc.

Good morning, and welcome to HomePoint Capital's fourth quarter 2021 financial results 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 opened for questions. Please be advised that today's conference call is being recorded. Please go to the IR website to obtain the earnings materials. I will now turn the call over to Ginger Wilcox, Head of Investor Relations at HomePoint Capital. Thank you. You may begin.

Thank you, Operator. Welcome to our fourth 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 a slide presentation, which is available in the event 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 12, 2021, 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 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.

Thanks, Ginger, and good morning, everyone. During my prepared remarks, I'm going to briefly review our results for the fourth quarter and year-ended December 31st, 2021. I'll also talk about the key focus areas for our business 2022 as we navigate through what we believe will be the most challenging part of the mortgage cycle. After that, Mark will provide more details on our results as well as insights into what we are seeing so far in the first quarter. We'll then open up the call to take your questions. In the fourth quarter, we generated funded origination volume of $21 billion compared to $24 billion in the fourth quarter of 2020 and $21 billion in the third quarter of 2021. For the full year 2021, we generated record origination volume of $96 billion, which is a 55% increase over 2020. Our origination volume was propelled by the strong expansion we made to our partner base throughout the year. In the fourth quarter, we had 560 new broker partners and in total for 2021, our third party partner relationships increased by nearly 50%. We ended the fourth quarter with more than 8,000 broker partners and 676 correspondent partners. Our new broker partners represent a significant opportunity and provide us with a springboard for market share growth in 2022. Looking at our servicing portfolio, we ended the fourth quarter with nearly 426,000 customers, which is up 22% year-over-year and down 1% from the third quarter. As Mark will discuss shortly, during the fourth quarter, we completed a Ginnie Mae MSR sale with approximately $175 million in proceeds. Even with MSR sales, our total balances grew 45% to $128 billion during 2021. As discussed last quarter, we are evolving our servicing strategy by more actively managing and strategically monetizing the value of our MSR assets. The liquidity generator will be used to strengthen our balance sheet by reducing outstanding debt and for investment in our partner experience. From a financial perspective, in 2021, we recorded total net revenue of $962 million and net income of $166 million. Notably, even with the challenges presented in 2021, we generated a 21% return on equity, comfortably above our 15% minimum target. In the fourth quarter, we generated total net revenue of $181 million and net income of $19 million, or 14 cents per diluted share. As we have discussed previously, there has been significant pressure on margins, particularly in the wholesale channel. Additionally, interest rates are rising, which has put pressure on mortgage origination volume. To offset some of that margin pressure, we continue to accelerate our efforts to deploy new technology that will lower costs and improve the efficiency of our operations. In the fourth quarter, we made meaningful progress in expense management with a $23 million reduction in a direct origination cost versus the prior quarter. Looking at 2022, the mortgage industry is entering a challenging part of the mortgage cycle with higher rates leading to a shrinking refinance market while industry capacity remains at an all-time high. We are focused on navigating through this downturn while continuing to enable future growth. As such, these are HomePoint's priorities. Liquidity. We have thoroughly evaluated our balance sheet and are monetizing non-strategic assets at attractive levels. As previously noted, these proceeds will be primarily used to reduce leverage, improve our financial ratios, and create headroom for future growth. Rigorous cost management. we have continued to reduce our direct cost to originate. In addition, through our recently announced relationship with ServiceMat, we expect to transition our servicing platform to a lower variable expense construct. This also provides flexibility for active MSR management. Additionally, we are in the process of executing a zero-based cost review of our corporate functions. Finally, we will continue to invest in the most significant growth opportunities and be well positioned to grow our wholesale market share. We strongly believe that efficiencies driven by the broker wholesale lender partnership will accelerate market share growth in the channel. With regards to liquidity, we have agreements in place to sell MSRs and other non-strategic assets, which are expected to generate proceeds in excess of 700 million. These sales are anticipated to close in the first and second quarters of 2022. On the expense side, we have been aggressively managing costs and originations since early 2021. In a sense, the competitor-driven dislocation in wholesale benefited us in that it forced us to look closely at costs before the overall market started to contract. This gave us a head start, and we intend on leveraging that momentum as others are just starting the cost management process. Specific to servicing, as noted, we have entered into an agreement with ServiceMac to manage our servicing operations. Servicing is very much a scale business, and as we transition to active MSR management, it became evident that the most effective way to get the advantages of scale was to partner with a like-minded operator. For HomePoint, the result is lower and variable costs with the benefits of a growing platform investing in capabilities. Additionally, ServiceMac will take on our servicing associates, which will both enable the transition and provide for continuity with our customers and partners. While we believe the environment requires what may be considered defensive actions, we fully intend on continuing to play offense where we believe the greatest opportunities lie. For us, that means wholesale. As we've seen in previous cycles, including 2018 and 2019, a purchase-centric origination market creates enormous opportunity for mortgage brokers and the wholesale channel because of the inherent cost advantages created by the alignment between brokers and wholesale lenders such as HomePoint. This, in turn, drives more loan officers to brokerages which fuels market share growth in the wholesale segment. According to select 2020 HMDA data, the rates and fees offered to consumers through the top 10 wholesale lenders as compared to the top 10 retail lenders resulted in a $2,600 average benefit to consumers. More recent securitization data is supportive of this advantage for consumers ongoing. This is a compelling benefit that will become even more valuable as interest rates rise and affordability increasingly becomes an issue. The last time interest rates rose materially, starting in 2018, the number of loan officers joining brokerages increased by 28% in the following year. We expect an even greater rate of growth in 2022. At HomePoint, we have strategically built our business for this type of cycle with our focus on the wholesale channel. Mortgage brokers have strong relationships with local real estate professionals and a partnership with wholesale lenders like HomePoint can provide a better experience for the consumer. As rates go up, consumer desire for the lowest possible interest rates, closing costs, and fees will be even stronger, which brokers are best positioned to deliver. In addition, the transition of our servicing operation to ServiceMac will enable the redeployment of technology and process resources to support growth of the wholesale channel, including expanding product offerings and enhancing the partner experience. We are especially focused on growing wallet share from the over 8,000 partners we are already engaged with. Even considering widely expected contraction in the overall mortgage market, we continue to navigate through the competitive environment as one of the top mortgage lenders in the country. Our position as a leader in wholesale lending puts us in great position to both drive and leverage growth in the channel. In summary, we will continue to build on the strengths of our flexible business model to protect and ultimately grow our book value. With that, I'd like to turn the call over to Mark.