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.

Thanks, Willie, and good morning, everyone. 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. HomePoint generated quarterly funded origination volume of $9.3 billion in the second quarter of 2022. Last quarter, we began reporting on partner activation as represented by the number of brokerages locking a loan. As Willie noted, in the second quarter of 2022, we had 3,573 active brokerages, up 10% from the prior year. Certain non-recurring expenses impacted our financial performance in a few key areas during the second quarter. The credit markets deteriorated during the quarter, which resulted in a material charge to our inventory held for sale outside of agency execution as well as our repurchase reserves. In addition, our investment in Longbridge, which is in the process of being sold, had a material adjustment in valuation based on the same credit market conditions. Finally, regarding our MSR sales activities, the timing of which pools were marked compared to when the trades executed impacted GAAP accounting figures. In the origination segment, Gain on sale margin attributable to the channels before giving effect to the impact of capital markets and other activity was 60 basis points in the second quarter of 2022 versus 74 basis points in the second quarter of 2021 and 61 basis points in the first quarter of 2022. Bottom line margins for the quarter were 42 basis points, largely due to increased expenses related to the inventory of sales outside of agency execution as I just described. the widening of credit spreads resulted in charges of $38 million in the quarter. We have continued to be aggressive in our efforts to reduce cost. Total expenses of $119 million in the second quarter of 2022 improved 40% versus the second quarter of 2021 and improved 13% from the first quarter of 2022. This was primarily driven by a 17% quarter-over-quarter reduction in expenses in the origination segment. Additionally, We executed cost management initiatives in the second quarter that are expected to provide savings of $31 million on an annualized basis. We have also strategically resized our warehouse providers, which we expect to reduce our cost of funds relative to underlying indices. The transition of our in-house servicing platform to Service Mac is almost complete and will be finalized in the third quarter. This move will convert a fixed cost into a lower variable cost and enhance our ability to manage the MSR asset. During the second quarter, we maintained a strong liquidity position and continued to take actions to divest from nine core operations and assets to enhance that position, as well as advancing the consolidation of our platforms and operations. Additionally, we completed another sale of select MSRs for a total purchase price of approximately $257 million, as well as the sale of certain assets within our delegated correspondent channel. In order to further reduce leverage during the second quarter, we bought back $50 million of senior secured debt. As a result, we recognized a gain of $9 million on early extinguishment of debt. We will continue to monitor our overall disposition and look for opportunities to reduce long-term debt with a financial benefit. The HomePoint Capital Board of Directors also has suspended the quarterly dividend at this time due to the current challenging environment in order to preserve cash flow and shareholder value. Before I finish my prepared remarks, I would like to briefly discuss our forward action plan and financial outlook. As we look at the third quarter of 2022, we expect the competitive pressure on margins that have existed in the first half of the year to continue. In addition, overall mortgage origination volumes for the second half of the year will continue to be challenged and the share of refinancing is expected to be low in an elevated interest rate environment. As such, we anticipate the need to take further cost reduction and liquidity actions. We will continue to optimize our operational efficiency and further reduce costs while focusing on our simplified wholesale focused model. Additionally, we will monitor the MSR market for opportunities to additionally enhance our leverage and liquidity positions. We believe that our sole focus on the channel that most benefits the consumer, coupled with continual enhancement to the partner experience, will provide the opportunity 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, sir. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. Confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your 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. We have a first question from the line of Doug Harter with

Credit Suisse, please go ahead.

Thanks. Just hoping you could give a little more color on your response to kind of the 3Q competitive pressures. You know, I guess how you would balance kind of being more aggressive on price versus, you know, trying to get more volume versus, you know, trading off volume and trying to hold the line on margin more so.

Hey, Doug. Good morning. Yeah, as we said during the prepared remarks, it's really evolving day to day. And our bias right now is towards more margin, less volume versus more volume, less margin. That said, obviously, there's, you know, the volume opportunity on a macro basis is relatively limited. So what I would say, though, further is that We're not afraid of getting smaller as an organization. We've proven the ability to grow rapidly as the cycle improves. We obviously believe that wholesale is the right channel to be in. All the data points to that. It does evolve literally day to day, but at this point, we're biased more towards margin, less towards production.

Got it. As you mentioned, one of the the key aspects for the broker is choice. Can you just give any insight as to kind of how your conversations are going with brokers and kind of how they view the importance of multiple partners versus, you know, kind of being with kind of the largest?

Sure. I generally, yeah, I like to be more data-driven than anecdotal, so this is a lot of anecdotal information, but When we have conversations with our partners, there is a desire to do business with HomePoint in particular, but more generally to make sure that they have multiple options to choose from. It really is the kind of baseline value prop that brokers provide, and it really is what aligns brokers with consumers because ultimately consumers get a better deal as we've proven out through the HMDA data. So at certain points in time, obviously competitive pressures or pricing elements may be such that that it somewhat forces our partners to go in a different direction. But we believe that there's widespread interest in continuing to do business with HomePoint, and we do believe its margins, whenever they do start to normalize more, that will be the beneficiary of that based on the reach we have, the network we have.

Great. Thank you. Thank you. We have next question from the lineup. Rick Shane with JP Morgan. Please go ahead.

Thanks, guys, for taking my questions this morning. First of all, as we look at the P&L, I think two things stand out as we think about trying to return to profitability. One is that when we look at the gain on sale, the loss on sale this quarter was $15.7 million. It's about a third of your revenue in the channel basically going back to inefficient edges and reps and warranty provisions. How do you narrow that? And then can you put that in the context of on a contribution margin basis, the company lost $58 million this quarter. $15.7 of that was from other loss on sale. You've talked about $33 million a year of annualized savings. So let's just say another 10-ish or less, but let's just say $10 million of quarterly savings. So net, there's about $25 million of noise that can come out or expenses that can come out. That only cuts the contribution loss in half. How do you get back to profitability if the industry is going to face volume headwinds?

Mark, do you want to start with that?

Yeah, thanks. Thanks for the question. So we should decompose that 15.7 for a minute. This quarter was unfortunately a quarter with the rapid increase in rates. Our mark and additional reserves required for rep and warrant and repurchase was about $38 million, and that's all embedded in that 15.7. That 38 typically in an average quarter is going to run one to two a month, call it $5 million per quarter. So that's escalated by about $33 million this quarter. If you normalize for that, we would have been actually positive on our hedge results. So that is unique to this quarter, and it's mostly attributed to the rapid rise in rates and the impact it would have on the value of those types of loans. So that's that topic. As Willie said, we're not afraid to get smaller. We're going to need to get smaller. We were built for a certain scale, and that's a little bit of what we're dealing with right now is that the level of volume is not where it needs to be. So we are going to have to get smaller. We're going to have to get more cost out. And I wouldn't think of the current margin environment being the normalized margin environment. It's going to be higher than that, but I also wouldn't think we're going to be burdened as much by those capital market type of activities going forward.

Got it. So I guess let's dive in a little bit deeper on that hedge then. I guess I'm confused what... causes that inefficiency because presumably the rate movements, assuming you're choosing the right instruments, the rate movement should be captured, should even capture the volatility. Is it a function of your fallout adjusted lock volume because so much pulls through with rates moving that you're just simply under hedged? Help us understand where that disconnect is because it's a pretty big differential.

Yeah, so again, we were actually positive in our capital markets activities this month if you normalize out for the one-time charge related to the rep and warrants provisions. I'm not sure. Got it.

Okay, so it was... I'm sorry. So it was all rep and... I misunderstood that. Okay, that's helpful.

Yeah, let me make sure I'm clear. 15.7 was what you see there. of that amount, excuse me, 38 million of it was related to this mark-to-market activity that I mentioned.

Got it. And are you getting a higher percentage of early payment defaults? Is that why the rep and warranty expense is going up?

No. Most of it, in fact, is clean and actually performing, which is great news. It's, you know, Dock defects, things like that, that would cause things to get kicked out. That activity has escalated a little bit because we're doing more whole loan sales and other types of things. But it's pretty minor defects. The issue with that is more so these are loans that were originated some time ago when we were looking at a 3% mortgage market. Now you're looking at acquiring a coupon of 5% to 6%. So when you try to repurchase and then resell those loans, you end up taking a pretty substantial discount on it.

Yeah, so let me step in. So there really are three components that all kind of, you know, unfortunately came together in the second quarter. One is, as Mark mentioned, you know, it's really mostly a look back when you're looking at these loans that have some form of defect and or repurchase. And those loans were originated in a different rate environment. Second are credit spreads. And credit spreads did widen out during the second quarter. We've seen stability in those spreads since the second quarter. And then the third is kind of the volume. And the volume is somewhat influenced by your prior originations. And Rick, as you know, in 2021 was kind of our peak originations year. And so as we migrate and repurchases lag back to that, you know, the prior origination year, give or take. So as we migrate through that, you know, and we're already migrated to the peak, then we would expect a lower frequency as well.

Okay, great. Hey, Willie, I'd love to talk a little bit about market share and the broker channel. So you guys have defined the market as about 16,000 brokers. You've said your target is to have about half of the brokers on your system and then get about 30% market share or have 30% of those brokers be brokers. 30% of brokers be active on your system. It looks to me like the number of brokers signed up is on target, but that your share of active brokers is closer to 21% or 22% versus 30%. And going back to the prior question, in an environment where there's such competition for broker business, how do you move the dial there? Because that seems to be the other place there's a disconnect between aspiration and reality.

No, Eric, it's a really good question. I mean, obviously that share gets buffeted a bit by, you know, pricing actions, et cetera. So really kind of when you look at it as a little bit more of a long-term indicator as opposed to what happens kind of I'll say month to month or especially when competitor actions are as they are in the current environment. I think one of the things that, you know, everyone's kind of talking about margins these days, but I think quietly what we've done kind of behind the scenes is that if you look at our NPS score in July, it's 84, you know, just under 84. If you look at our app to clear to close or our cycle time, it's 18 days and it's been consistently, 18 business days and it's been consistently there. Our purchase mix now is over 80%. So we've been laying the foundation for as things get back to normal from a competitive standpoint, that we're going to be able to compete very effectively from a service delivery perspective, and we think over time that's what will increase share. Got it. Okay. Thank you very much.

Thank you. We have next question from the line of Mihir Bhatia with Bank of America. Please go ahead.

Good morning, and thank you for taking my questions. I apologize, but I do want to go back to the gain on sale margin just in the quarter and you know what the noise in it may be a little bit and maybe just to understand like you know the look back and the repurchase that's going on is that on non-QM executions you had done in the past I guess how much of this is still out there potentially continuing you know like in the third quarter and fourth quarter will you like you know as you mentioned a lot of these policies were issued previously and they're now you're having to buy them back. I'm just trying to understand what's going on there because I think you also mentioned there was like, you know, the credit spreads move in the non-agency. You have to take a mark on your non-agency. So maybe you can help me clarify that a little bit. Mark, do you want to start?

Sure. So this is not non-QM. We haven't engaged in non-QM activity. So this would still be our core Fannie, Freddie, Ginny type of products. So that's number one. Number two, in terms of the escalation, It's a lot more to do with the volume levels. Remember about a year ago, we were doing substantially more volume than we're doing today. So if we were doing the same level of volume today as we were doing then, it wouldn't seem like a big number. So the stuff that's being repurchased now, the rate of it is not much different than it's been before, but it's off of a larger denominator. And then the third element of it is just the value of those loans are less because of the rapid increase in rates and the credit spread widening. In terms of my expectation going forward, we took the charge this period, reflecting where the market is now. To the extent the market recovers, there might even be a pickup there, but we feel like we've marked it to where the current observable marks are right now. So the risk there, I suppose, is if rates continue to rise or credit spreads continue to widen, create a risk in terms of that value, but that could also go in our favor.

Okay. Understood. And then the, maybe on the, I wanted to clarify the assets held for sale on your balance sheet. I think that's your long bridge stake. I thought in your queue you had mentioned you expected that sale to close in two queue. Is that just delayed? Is that, I guess, what's the update on that process?

Yeah, so we're still working with the regulators in a couple different states to get things done. So we do expect that we'll close in the third quarter, but we're still working with regulators. So that's where we're at.

Okay. Okay. And then just finally in terms of your capital allocation, I just wanted to totally appreciate you prioritizing liquidity here. and understand the suspension of dividend given the dynamic. You did buy back some shares. I was curious, did you repurchase any debt during the quarter? And just how are you thinking about that? It looks like you did buy back shares, but how are you thinking about that in terms of just balancing the need to preserve cash versus how attractive your stock can be? And certainly your debt is yielding pretty high yields.

Mark, do you want to take that?

Sure. So we did, in fact, repurchase debt during the second quarter. We repurchased about $50 million worth of debt and added discount to your point. So we recognized about a $9 million gain on early extinguishment of debt. We felt comfortable doing that because our capital needs are, frankly, less in a lower margin or lower volume environment. So with that, the capital allocation policy of the company continues to be support, first and foremost, the business. And then secondly, we'll look at opportunities to optimize the balance sheet. With lower volume, we felt that we had capital available to us to take advantage of where the debt is trading at this point. And so we'll continue to balance that and look at that. But the highest priority will be making sure we have sufficient liquidity to manage the business.

And then just my last question, maybe just turning to the outlook from here, you know, I understand you're not giving guidance, but maybe at least tell us how July has trended. Have you seen an impact on market margins? And I understand you're focusing your business on margin, which can affect volume, but what was July like? Did you all have, because of giving the competitors big price announcements out there, did you see a big sharp decline in volume as you focused on margin? or less of an effect than you would have thought, just maybe any updates you can provide us just as we think about the back half of the year?

Mark, do you want to take that?

Sure. So, and we certainly did see an impact from this, and a lot of that impact is what Willie was referring to in terms of our need to continue to evolve and adapt. But, yes, certainly, you know, a big move was made in the marketplace and it did impact our margins and volumes. So where we finished the second quarter, where we showed about 64 basis points of wholesale top line margin, it was significantly lower than that in July. And looking at that, we recognize that we need to focus more on margin and getting margin back to a good place, and then letting volume be what we feel is a normalized level of volume in this type of market environment, and then manage our costs accordingly. So the short answer to your question is, yeah, we were certainly impacted in July, and that's the pivot that we need to make here in the third quarter.

Yeah, to give a little more granularity. So we were in the 30s in July, and what I mentioned about really kind of dynamically reviewing it is, Yeah, we expect a push-up from there. There will be some sort of impact on volume, which is why we're choosing not to give guidance on volume at this point, because we want to give ourselves the strategic flexibility to be able to manage this very dynamically.

No, that's fair. We understand, I think. Thank you. Thank you for taking my questions.

Thank you. To ask a question, participants may press star 1 on their telephone keypad. We have a next question from the line of James Fawcett with Morgan Stanley. Please go ahead.

Thanks. Yeah, this is Sandy B for James. On cost cutting, any specific areas where your efforts have been most focused, headcount or otherwise, and just within that, what inning do you feel like you're in just as you execute on these cuts and work towards a more normalized cost base?

Sure, I'll start. So it really has been across the organization. As Mark mentioned, our corporate infrastructure was built for, originally built for a multi-channel, large-scale servicing platform, embedded type of a business. And as you know, we've divested most of the other businesses, all the other businesses other than wholesale at this point, as well as consolidating our servicing platform and the service max. So a big area of focus has been corporate. From a business standpoint, I think probably there's really two components to it. One is continually refining our productivity models based on the technology advances we've made as well as process improvements. And then secondly, it's just simply calibrating to the potential volume that we see out there. So it really has been very broad-based and will continue to be. As far as aiding goes, I think we're pretty close to where we need to be in organizationally, at least from a timing standpoint, the amount of the adjustment that we have to make is still to be determined. But we expect by the end of the year to be the right size as an organization for whatever the market presents to us.

Got it. Okay. And one follow-up here. updates on strategy, particularly regarding MSR sales that we should be aware of? I know you talked on capital allocation. I think that's relatively straightforward, but any changes in terms of thought process around trade-offs between obviously retaining MSRs versus selling them, particularly as the market goes through consolidation?

Mark, you want to take that?

Sure. So we... We did execute some MSR sales here in the second quarter, and we'll continue to look at the MSR market, our liquidity needs. The default is always to retain MSR, and that's what we do, and then we'll opportunistically look to sell. Right now, our leverage is in a reasonably good place at 1.2 times, and we have sufficient liquidity at over $600 million of liquidity. So as we sit here right now, we're comfortable with where we are, but We will continue to look at the market. We'll look at opportunities to sell, and that part of our strategy really hasn't changed. So there may be future sales of MSR, just depending on the marketplace, the opportunity, and our liquidity position.

Perfect. Okay. Thank you, guys. Thank you.

We have next question from the line of Kevin Barker with Piper Sandler. Please go ahead.

Good morning. Good morning. I understand the dynamic nature of cutting expenses in this environment, but can you maybe quantify a little bit how much expense decline could happen here on the third quarter just on a run rate basis? Given you exited the correspondent channel, you've also made a long bridge, and there's a few other initiatives that have been put in place. So if we think about a run rate, you know, going into the third quarter, then into the fourth quarter. How much of a decline should we expect as we go through the back half this year? Thanks.

Mark, do you want to take that? Sure. So we took actions already in the second quarter that should, on an annualized basis, result in about a $31 million a year save just in salaries and benefits alone. So call that $8 million a quarter, and that's what's already been executed. As Willie mentioned, we're continuing to evolve that strategy further in the third quarter. You know, these things don't happen instantaneously, so I think you're going to see more of – you'll see the change more so in the fourth quarter than you'll see it in the third quarter, but actions will have to be taken in the third quarter to affect that. We're not really prepared to give guidance in terms of what those numbers are going to be. As Willie said, it's evolving. There's a lot of things we need to look at in terms of infrastructure as well as headcount. So that process is underway.

So from an infrastructure standpoint, do you feel like you've gotten to a point where you've simplified the operating businesses to where you want to be longer term and now it's more just purely execution? Yeah, I think so.

Go ahead, Willie. Yeah, I think so. I mean, I think strategically, we are positioned where we want to be at this point. And obviously, the Long Bridge sale is still out there. But operating-wise, we've divested of what we intended divesting of. We've consolidated what we intended consolidating of. There's still some infrastructure elements that we need to look at from an overhead perspective, Kevin. But as Mark mentioned, that's kind of evolving as we speak. But strategically, I think we're positioned where we want to position. We're positioned in the channel that provides the greatest benefit to consumers and loan originators. Okay.

Thank you, Willie. Thank you, Mark.

Thank you. We have next question from the line of Steve Delaney with JMP Securities. Please go ahead.

Thanks. Good morning, Willie and Mark. How are you? The comments about the unusual second quarter charge, $38 million, and you indicated that, you know, 33 million of that should be abnormal. So about 24 cents a share, and excluding that charge, your results would have come in fairly close to the consensus, which I think was negative 5 cents. Could you just point us to the key factors, focusing on the $33 million number? What are the factors in the marketplace that that would drive a partial recovery of some of that, some of that charge. Thank you.

Yeah, I'll start Steve. So yeah, I think Mark had mentioned it, but you know, there's kind of a couple of things, credit spread, there's really two things, credit spreads and rates down. So if rates go down you know, we should see some, there would some balancing out of the discount associated with the difference between prior rates and current rates that we had experienced in the second quarter. The second are credit spreads, which I had mentioned. It started to stabilize, at least in the segments that are germane to this loan type or this type of asset. So those would be the two factors.

Okay. And these charges were made against specific loan inventory. Is that correct? Or were they buildings operating reserves like on reps and warranties and that type of thing?

Mark, you want to grab that?

Sure. Yeah, it was a little bit of both. So we have balances on our balance sheet right now. And so those would take a mark to market. And then you take a reserve for risk of future repurchases.

Yes.

And, you know, you have to consider that those will take higher losses too.

Okay. Thanks for the comments. Thank you. We have next question from the line of Jay McCandless with Redbush Securities. Please go ahead. Jay, your line is unmuted. You may go ahead and ask your question.

Please unmute yourself if you have muted on your device. Thank you.

Sorry about that. So the first question on the competitive dynamic, in addition to, I guess, one competitor being aggressive on price, you also had another competitor that's going to leave wholesale. I guess, does that open up any opportunities for HomePoint? And I appreciate the color on what you said on July. I'm assuming those trends continued into August, if you could provide some color on that as well.

Yeah, sure, Jay. So I think, you know, certainly a competitor leaving, you know, may open things up. I think it's a very competitive market with a number of strong participants. So I think, you know, one more or less is not going to make a huge difference. But I think it is indicative that being scaled in multiple channels of origination is really challenging. So having the level of investment that's required to be in retail, to be in wholesale, to be in direct, and you combine all those, I think it's really challenging. So for those that are multi-channel, I think... You know, it makes it very challenging strategically to participate compared to our level of focus on that one, the one channel in particular. As I mentioned on, you know, competitive dynamic in August, you know, we're really toggling between volume and margin, and we are biased towards more margin. So, you know, that's what we would expect to happen. But, you know, like I said, it's literally a day-to-day exercise at this point.

Okay. That's great. Thanks for taking our questions. Thank you.

Ladies and gentlemen, we have reached the end of the question and answer session, and I'd like to turn the call back over to Leslie Ali for closing remarks. Over to you.

Thanks, Operator. And thank you, everyone, for joining us this morning for our quarterly earnings call. Please feel free to contact me if you have any questions, and we look forward to speaking with you again next quarter.

Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.