Home Point Capital Inc.

Good morning and welcome to the HomePoint Capital second quarter 2022 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. At this time, I'd like to turn the conference over to Leslie Ali, Chief Investor and Industry Relations Officer. Thank you. You may begin.

Thank you, Operator. Welcome to HomePoint's second 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 HomePoint Investor Relations website. Before we begin, I'd like to remind you this call may include forward booking 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 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 HomePoint's earnings relief, which is available on the company's website. Now I'd like to turn the call over to Lily Newman, President and Chief Executive Officer.

Thanks, Leslie, and good morning, everyone. During our prepared remarks, I'm going to discuss the factors that contributed to an extremely challenging environment in the mortgage industry during the second quarter of 2022. I'll also discuss how we continue to strategically position HomePoint for long-term sustainability and success through our focus on the channel that is best for consumers and loan originators, wholesale. After that, Mark will provide more details on our results for the second quarter, as well as some initial insight into the third quarter. We'll then open the call to take your questions. The market volatility and competitive pressures the industry faced in the first quarter intensified in the second quarter. This has created a larger, more systemic challenge for the entire industry as excess capacity becomes more of a drag on expenses and ultimately profitability. The overall mortgage market was down over 40% year over year in the first half of 2022. And during the month of June, mortgage applications for new home purchases were down 12% year over year. standing at the lowest level since April 2020, according to the Mortgage Bankers Association. The second quarter share of refinancing was also the lowest it had been in the past six quarters, at 24% of overall origination volume. At HomePoint, our financial performance was impacted by several non-recurring items driven by volatility in the financial markets. Operationally, we continue to make progress on costs, as well as improving our liquidity and leverage position through the divestitures of non-strategic assets and business lines. However, the revenue opportunity continues to be challenged both in production and margin levels. Mark will provide more detail on our financial results. Looking forward, competitor actions have added to the challenges of a down origination cycle, resulting in historical lows in market level margins. Our response to this strategy continues to evolve, but the primary components remain consistent. Lower costs, focus on liquidity, and position for wholesale channel growth. Focusing on the growth dimension of wholesale, the migration from retail to broker is accelerating. In 2021, 6,353 loan originators migrated from retail to broker, or 529 per month. Year-to-date 2022, the average is over 800, with July being the highest month so far as 1,022 loan originators migrated from retail to broker. In addition, interest in converting from retail to brokerage is skyrocketing. With interest at these dramatically heightened levels, we are very bullish on the growth prospects in wholesale. While there's no question that the current competitive environment is a contributing factor to dramatically increased interest, the fundamentals are what will drive sustainable growth in wholesale. Previously, we had described our in-depth analysis of select HMDA data from 2020 that showed that brokers working with HomePoint and other wholesale lenders provided an over $8,000 lifetime benefit to consumers on loans originated through the wholesale channel. We have updated the analysis based on recently released data from 2021, which shows that brokers have increased their cost advantage to consumers to over $9,400. The data also showed a continuation of brokers being substantially more effective at reaching into minority communities. This data demonstrates sustainability of the advantages provided by mortgage brokers. This advantage is fueled by one primary driver, choice. Mortgage brokers have choices, and retail loan officers do not. This creates alignment between the broker and the consumer, and the competition forces HomePoint and other lenders to put their best foot forward in price, product, and service delivery. The result is that consumers win. At HomePoint, we are very well positioned to benefit from the accelerating migration from retail to broker. We have broad access to brokerages and their loan originators throughout the country, with more than 8,700 brokerages approved as HomePoint partners. That equates to over 43,000 loan originators across all 50 states. The largest distributed retail network has 4,000 loan originators. In the second quarter, we transacted with nearly 3,600 brokerages and more than 8,100 loan originators. there is a tremendous amount of upside opportunity for increased broker activation within our current network of partners, let alone the growth opportunity in the channel. With our sole focus on the channel that provides the greatest benefit to consumers and loan originators, we are optimistic about our long-term prospects. In the interim, we will remain highly focused on taking the actions required to navigate through the most challenging mortgage market in years. With that, I'd like to turn the call over to Mark.