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Operator
Greetings. Welcome to the Cherry Hill Mortgage Investment Corporation first quarter 2022 earnings 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. Please note, this conference is being recorded. I'll now turn the conference over to your host, Garrett Edson. You may begin.
Garrett Edson
We'd like to thank you for joining us today for Cherry Hill Mortgage Investment Corporation's first quarter 2022 conference call. In addition to this call, we have filed a press release that was distributed earlier this afternoon and posted to the investor relations section of our website at www.chmireet.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Examples of forward-looking statements include those related to interest income, financial guidance, IRRs, future expected cash flows, as well as prepayment and recapture rates, delinquencies, and non-GAAP financial measures, such as earnings available for distribution, or EID, and comprehensive income. Forward-looking statements represent management's current estimates, and Cherry Hill assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in the company's filings with the SEC and the definitions contained in the financial presentations available on the company's website. Today's conference call is hosted by Jay Lown, President and CEO, Julian Evans, the Chief Investment Officer, and Michael Hutchby, the Chief Financial Officer. Now, I will turn the call over to Jay.
Jay Lown
Thanks, Garrett, and welcome to today's call. First quarter was certainly eventful for both Cherry Hill and other agency-focused REITs, as markets endured the considerable widening of mortgage spreads, inflation hitting 40-year highs, a war in Eastern Europe, and continued market concerns about supply chains not at full capacity. As the Fed began to telegraph its strategy to fight inflation, rates spiked meaningfully during the quarter, and that has further progressed into May. The U.S. 10-year Treasury finished the quarter at 2.34%, 83 basis points above year-end. At the same time, economic data held the line for most part, with unemployment remaining near historic lows and close to or at full employment levels. The Fed has telegraphed significant rate hikes in the months ahead to combat high inflation, and started with a 50 basis point move last week. Markets globally are digesting the velocity of future hikes and the Fed's intentions around reducing its balance sheet. We are actively adjusting our investment portfolio as we evaluate the impact these actions will ultimately have on the broader economy as well as mortgage-related assets. For the quarter, Improving prepayment speeds continue to aid our earnings available for distribution, or EAD, a non-GAAP financial measure. In the first quarter, we generated GAAP net income applicable to common stockholders of $25.6 million, or $1.40 per share, and EAD of $6.2 million, or $0.34 per share, exceeding our quarterly dividend level of $0.27 per share. On an annualized basis, our dividend yield is 16% based on the recent average of our closing price of our common stock. As a reminder, EAD is just one of several factors we consider in setting our dividend policy. Book value for common share finished at $7.27 as of March 31st. During the quarter, we reduced the size of our RMBS portfolio in an attempt to mitigate the impact of spread widening and minimize the impact on book value and NAV. Spreads widened during the quarter on average about 25 basis points, which accounted for nearly three quarters of the decline in book value in this period, in line with our previously provided fourth quarter basis risk sensitivity profile. We were able to stabilize the book value reduction in March and we are pleased to report that the book value was up slightly in April. Julian will provide more details on our portfolio performance shortly. As a reminder, our current book value performance per common share is a function of preferred stock, making up a significant portion of our overall equity profile. On a net asset value basis, which doesn't account for the difference in common or preferred equity, our performance in the quarter was more effective with NAV down approximately 8% quarter over quarter, before taking into account any common stock issuances pursuant to our ATM program. We believe our NAV performance shows our strategy of pairing RMBS with agency MSRs partially mitigated the full effect of spread widening in agency RMBS. That said, we remain committed to stabilizing and growing our NAV and book value. We continue to be constructive on MSRs given our view on interest rates over the near term, and they provided a good amount of assistance relative to our book value performance in the quarter. We would note, however, that with the 10-year at the 3% mark, the ability for the MSR portfolio to continue to hedge the RMBS portfolio begins to become less effective as the current coupon for agency RMBS is now well above the weighted average note rate of our MSR portfolio. That said, we continue to believe MSR and RMBS assets complement each other well. As a result, we expect to remain disciplined in our approach to investing in MSRs given the rise in rates, the competition, and robust pricing. As prepayment speeds further decline in a higher-rate world and behavioral modeling risk increases, we continue to believe the best approach remains being selective in adding or replenishing MSR assets. During the first quarter, we acquired approximately 500 million UPP and Fannie and Freddie MSRs via flow purchases. As noted before, we continue to believe the strategy of marrying MSRs with agency RMBS provides for attractive risk-adjusted returns and aids in protecting the portfolio from the full extent of current coupon spread widening. At the end of the quarter, leverage was 3.6 times. comparable with the end of the prior quarter. We ended the quarter with $52 million of unrestricted cash on the balance sheet, maintaining a solid liquidity profile. Our recapture efforts remain strong, with a 19.6% recapture rate on our MSRs in the quarter. Recapture rates should continue to decline as mortgage rates rise, though prepayment speeds net of recapture should continue to improve. Looking ahead, as the Fed continues meaningfully tightening rates and providing greater clarity around its balance sheet reduction program, we believe the mortgage basis should stabilize later in the year. Our intention is to raise leverage back to more historical levels and to take advantage of opportunities in agency RMBS as spreads normalize and rates begin to peak. In the meantime, we continue to keep a firm hand on our balance sheet, And when we see attractive investment opportunities, we will look to invest prudently. With that said, I'll turn the call over to Julian, who will cover more details regarding our investment portfolio and its performance over the first quarter.
Garrett
Thank you, Jay.
Jay
The first quarter was characterized by a rising rate environment that had long been anticipated. as inflation took center stage and the Fed signaled a clear shift in its policy in order to fight inflation and reduced its balance sheet. The assumption of pending rate hikes was known to the market. However, the pace and the size of future hikes is still very much uncertain, which is evidenced by the broad range of forecasts produced by market pundits, as the Fed works to return inflation to neutral and to engineer a soft landing for the U.S. economy. In March, the Fed took its first step by hiking rates 25 basis points. But with the Fed Chair noting that taming inflation is absolutely essential, we were not surprised to see the Fed hike rates an additional 50 basis points last week, and we expect there will be many more to come in the coming months. In the meantime, the market has attempted to get ahead of the Fed and has priced in multiple rate hikes for this year. At quarter end, MSR had a UPB of $20.4 billion and a market value of approximately $246 million. During the quarter, we purchased approximately $500 million UPB of new MSRs through our flow programs, as Jay mentioned. At the end of the first quarter, the MSR portfolio represented approximately 45% of our equity capital and approximately 21% of our investable assets, excluding cash. Meanwhile, our RMBS portfolio accounted for approximately 40% of our equity. As a percentage of investable assets, the RMBS portfolio represented approximately 79%, excluding cash at quarter end. During the quarter, we continued to experience CPR improvements in both our MSR and RMBS portfolios. Our MSR portfolio net CPR averaged approximately 13% for the first quarter, down materially from approximately 19% net CPR in the previous quarter. The decline was driven by rapid rise in interest rates, which resulted in the mortgage production coupon escalating from 2.5% to 4% in less than 90 days. The reduction in MSR CPR was supported by the rapid change in mortgage production coupons, which drove slower prepayment speeds in the quarter, as well as a relatively solid recapture rate of 20% versus 23% in the fourth quarter. Going forward, we should expect a lower recapture rate but stable or improved net CPR given the escalated levels of interest and mortgage rates. Similarly, the RMBS portfolio's prepayment speeds exhibited the same themes. The portfolio's weighted average three-month CPR reduced to approximately 11% in the first quarter compared to approximately 12% in the fourth quarter. As mortgage rates have moved higher, mortgage securities have become less refinanceable. As of today, nearly the entire mortgage universe is out of the money in terms of refinancing. We would expect prepayments to continue to slow, but begin to form a foundation if we remain at these levels of interest rates or higher. As of March 31st, the RMBS portfolio, inclusive of TBAs, stood at approximately $940 million, compared to $1.4 billion at previous quarter end. The reduction was driven by selling of securities, rising interest rates, as well as mortgage spread widening. Quarter over quarter, The size of the RMBS portfolio was reduced to lower basis risk and protect book value as interest rates rose. Both TBA and specified pools were sold during the quarter to limit exposure. As an offset, we did reinvest some of the proceeds into this higher yielding, lower dollar priced environment. At the end of the first quarter, the 30-year securities position represented 94% of the RMBS portfolio versus 89% at the end of the fourth quarter. Shorter-duration securities made up a smaller portion of the RMBS portfolio. 20-year securities and other collateral positions represented 6% of the portfolio at quarter end. For the first quarter, we posted a three-spot 0.06%. net interest spread versus a 2.46 net interest spread reported for the fourth quarter, driven by a continuation of better prepayment speeds. The spread was also aided by improved interest expenses on our payer swaps, which offset higher repo costs. At quarter end, portfolio leverage stood approximately 3.6 times at the aggregate level. Looking forward, the Fed is still at the beginning of the fight to minimize inflation. As of last Wednesday, the Fed hiked for only the second time this year, and it just announced and laid out its plan for reducing its balance sheet. For now, the market has front-run the Fed, expecting it to raise the Fed's fund rate the equivalent of an additional 175 basis points this year to combat inflation. We are focused on the Fed's ability to achieve its goal of fighting inflation and maintaining solid GDP growth, which will be a delicate balance at best. We expect elevated levels of volatility and limited liquidity in the markets. And as such, we will continue to evaluate and alter the portfolio as necessary as the year progresses.
Garrett
I will now turn the call over to Mike for our first quarter financial discussion.
Mike
Thank you, Julian. Our gap net income applicable to common stockholders for the first quarter was $25.6 million, or $1.40, for weighted average share outstanding during the quarter. while comprehensive loss attributable to common stockholders, which includes the mark-to-market of our held-for-sale RMBS, was $17.9 million, or 98 cents per share. Our earnings available for distribution attributable to common stockholders was $6.2 million, or 34 cents per share. Our book value per common share as of March 31st was $7.27, compared to a book value of $8.56, as of December 31st. We used a variety of derivative instruments to mitigate the effects of increases in interest rates on a portion of our future repurchase borrowings. At the end of the first quarter, we held interest rate swaps, swaptions, TBAs, Treasury futures, and options on Treasury futures, all of which had a combined notional amount of $1.4 billion. You can see more detail with respect to our hedging strategy in our 10-Q as well as in our first quarter presentation. For GAAP purposes, we have not elected to apply hedge accounting for our interest rate derivatives, and as a result, we record the change in estimated fair value as a component of the net gain or loss on interest rate derivatives. Operating expenses were $3.5 million for the quarter. On March 10th, Our board of directors declared a dividend of 27 cents per common share for the first quarter of 2022, which was paid in cash on April 26, 2022. We also declared a dividend of 51.25 cents per share on our 8.2% Series A cumulative redeemable preferred stock and a dividend of 51.5625 cents on our 8.25% Series B fixed to floating rate cumulative redeemable preferred stock. both of which were paid on April 18th, 2022. At this time, we will open up the call for questions. Operator?
Operator
And at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would 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 start keys.
Garrett
One moment, please, while we poll for questions. Our first question comes from the line of Mikael Goberman with JMP Securities.
Operator
Please proceed with your question.
spk10
Hi, good afternoon, gentlemen. You guys said book value was up slightly in April. I'm wondering... What would you ascribe that relatively good performance to?
Jay Lown
So, Julian, you want to talk about that?
Jay
Sure. I mean, look, I think some of it happens to deal with coupon positioning. You know, as we moved into the second quarter, we have a little bit more focus being up in coupon. We also, in terms of the lower coupons, have some short positioning there. I'd also say we had pretty good swap hedges on, especially in the front part of the curve as things were moving higher. We also had some additional futures hedges on in the portfolio, and they were mainly in the back part. And our MSR also rose in value during that time. So I think it was just a good combination of being properly hedged for what we thought was going to happen in April and tactically doing it.
spk10
Well done and best of luck in continuing that performance. I'm wondering how much spread widening do you guys think is still possible in MBS and also kind of parallel to that maybe how much sensitivity MSR values have to further spread widening or moves up in rates?
max
You want to talk about the, I'll take the MSR, but I'll have Ray talk about the MSR.
Jay Lown
Julian, I'll start off on the MBS side.
Jay
Yeah, I mean, I think we, I guess in terms of investors, are trying to find out with the Fed what is neutral in terms of interest rates. I think the market is looking for some type of stability. We do view mortgages as being quite attractive. at this point in the market, but we also have elevated volatility. The continuous sell-off, I think, has made them attractive from a yield and a dollar price perspective and even on a LIBOR OAS perspective, but they still have more room to go, I think, if the market deems that the Fed has a lot more rate hikes to do in terms of moving past neutral. They're assessing that neutral is probably 2.5, 275 in terms of interest rates, But they also have also described that they're going to have some hikes in fiscal year 2023. So if we have to go meaningfully above neutral, I would say there's probably at least another 15 to 20 widening that has to occur in mortgages. But if we can find some stability in rates, In terms of around here or, let's say, near 350 max, I think we can have some support and mortgages can begin the process of firming up.
max
Ray, you want to talk about the MSRs, please?
Ray
Sure. I mean, on the MSR front, I think given the speed at which we saw rates rise, you know, it's really dampened the impact. from prepayment slowdown due to spread widening on, you know, coupons that are or note rates that are now, you know, 100 basis points out of the money. I suspect as, you know, the year goes on and new acquisitions occur that are more towards where par sits today, which is, you know, low five, that'll start to grow again. But right now, with the speed of how quick everything happened, I think even production that's coming in the door right now is is like 4.5 note rate, which sits 75 bps below par.
spk10
All right, that's helpful. Thank you. And one more, if I could, just a housekeeping question. I know your queue is probably coming out soon, but is there any change to the DTA level from 20.6 million at the end of the year?
Mike
Yes, the DTA came down to approximately 16. Hang on, let me pull it up.
Jay Lown
It was 16 and change million at the end of Q1.
Garrett
All right. Thank you very much, guys. No problem. Our next question comes from the line of Henry Coffey with Wedbush.
Operator
Please proceed with your question.
Ray
Good afternoon, everyone, and thanks for taking my call. So I'm looking at slide 15 in your deck, which is very instructive. But the thing that sticks out is that when you talk about book value change and interest rate sensitivity, that the big problem is basis risk. In other words, spreads widening. And if I'm reading this correctly, you're saying that if basis stays the same, book value stays the same at 727, a 25 basis point widening would take book value down to 647. And then on interest, yeah, and is that a real possibility? And it does, I mean, in listening to you, it does sound like something that hasn't occurred because your book value's up a little bit, but could occur. And then the offset from rates just isn't that large.
Jay Lown
But 100% that the rate sensitivity is significantly less than the basis risk. And I think it's been that way. It's always been that way. Right. And nobody really focused on it when the Fed was tightening or easing over the last two years. But clearly, you know, a lot of book value gains for agency REITs during that time was attributable to spread tightening. And for better or for worse, however, everybody kind of portrayed that message, you know, reality is a lot of risk resides in basis risk exposure because it's not something that traditionally agency reads hedge for in a significant way. So if the question is, how much do we think there is to go? Julian tried to, I guess, give you some feel for what might happen. A lot of this is Fed dependent. in terms of the market's comfort level about how this landing is and terminal rates going into the tightening. And while they are clearly doing a better job today of conveying their intentions, a lot of things could impact what they do going forward relative to growth, recession, macroeconomic events, the war in Ukraine. So I think we're just trying to really manage through that from the perspective of trying to understand what the right hedge ratio is for the assets in terms of where they could fully extend to, as well as managing what we think the contribution is from the MSR to offset some of that, which I think I said in the script, as we approach 3% on the 10-year, the ability for the MSR to assist in terms of limiting the effect of spread-widening decreases just based on the pure fact that the current coupon, as Ray mentioned, is somewhere in the fours versus the current coupon on our portfolio, which is in the mid-threes. Does that help?
Ray
There's no real... Yeah, no, how aggressive are you willing to be in terms of leaning in one direction or the other, put differently, how aggressive would you be on the MSR book given that rates are moving higher?
Jay Lown
In terms of?
Ray
Mortgage rates are moving higher, and I know it gets more complex after that.
Jay Lown
I don't understand the word aggressive. Aggressive in what sense?
Ray
Buying more MSRs with more leverage and selling down RMBS. Yes. In other words, increasing the mix of MSRs, selling RMBS, buying more MSRs, either with additional leverage or through liquidating the other side of the business. So I would describe getting more aggressive on MSRs as simply buying more.
Jay Lown
Okay.
Ray
And I'll let you work out the details.
Jay Lown
Sure. So, you know, look, given that 40%… approximately 40% of the equities in the asset. There's no real desire to take it to, say, 60 today. But we do have an interest in acquiring servicing assets that we think meet our risk return hurdles in terms of characteristics that we like. We don't have any intention to sell a significant portion of that that portfolio today, I think one of the hardest things Ray will tell you about MSRs is managing prepayment risk. And given that the portfolio has a weighted average note rate that's low today, that's great for cash flows. So that's critical. But what we have done, which I think probably hasn't gone to notice, is we've reduced the size of the MBS portfolio a fair amount. And so what we've done to try to limit our exposure to the basis risk is to de-lever that MBS portfolio. And I believe we've taken it down a couple hundred million over the last four months in an effort to kind of reduce our exposure to the basis. And should we feel that we have more to go, it wouldn't surprise me if we made a decision to continue to do that more aggressively.
Ray
And where would the cash go? there's some cash that comes out of that. I'm looking at your numbers.
Jay Lown
Yeah, it's not, you know, look, it's, you know, the leverage on that is obviously higher, that cash. Maybe it's held in cash, you know, maybe we buy some MSRs, but, you know, honestly, we think that at some point during the year, these mortgage spreads will normalize. And, you know, as again, we said in the script, I think at that point we would, return to that space fairly aggressively and look to invest capital in that area.
Garrett
Great. Thank you. Our next question comes from the line of Matthew Howlett with B. Riley.
Operator
Please proceed with your question.
Matt
Oh, hi, Jay. Hi, everybody. Thanks for taking my question.
Jay Lown
Hi, Matt.
Matt
You know, the first on the net CPR for the MSRs, It was 12.7. I know the recapture came down, but the overall CPR came down. My question to you, where could that go first? Where could growth CPRs go in MSRs? Could it be 5%, 6% CPR? And kind of what do you think how far low the net CPR could go on that portfolio?
Jay Lown
Well, I'll try to get Ray to limit the amount of time he'll spend on this because he could spend a half an hour on the phone with us talking about that. But Ray... Tell Matt what you think based on our portfolio and what you think lifetime speeds and short-term speeds could go relative to the current portfolio.
Ray
Yeah, I mean, I think that, you know, I look back to prior to the pandemic, you know, 2017, I want to say, 2018. when, you know, rates were rising and, you know, we actually had out-of-the-money MSRs. And where were Prince back then? And they were definitely in the, you know, mid to high single digits. And those were not nearly as out-of-the-money as the portfolio sits today. I'm always hesitant to kind of think six is possible, but it does seem like it's in the realm of possibility, given that, you know, everything's 150 basis points out of the money or more.
Matt
Okay, so you said five or six before recapture, possibly.
Ray
Yeah, I suspect recapture will become quite negligible, and CPR on a gross basis will just sit more or less around the mid-singles, and it'll be on gross and net.
Matt
So from a P&L perspective, if I looked at that servicing fee income and the servicing income line, the servicing cost line was up a little bit. It improved sequentially. holding everything constant like the portfolio, should we expect that line item, that net service income to continue to improve if speed, if amortization continues to go lower and lower?
Ray
Well, I mean, from an improvement standpoint, that line item is largely driven by the size of the portfolio, you know, so it's a 25-point strip essentially on the UPB, so As far as the UPB increasing, that drives it higher. But slowdown in speeds just means that your rate of decline diminishes. It doesn't necessarily mean that it's going to grow.
Matt
Okay, because you're modeling it and you're running it at a certain speed. Okay, so I'm just trying to get – I guess where I'm going with this, and I want to go to the RMBS portfolio. You did a 300 basis point plus spread, and it's one of the highest I've seen in this space. So congrats to you and the team. I guess where I'm going with this, do you think will that come in as the Fed's repo costs, or do you have that hedged out?
Jay
I mean, well, our swap position is going to offset that once some of the payer swaps reset. Do I know if it'll be a perfect one-to-one? There's always a lag of, let's say, you know, two to three months each time the swaps are kind of resetting to where the Fed is moving the Fed's funds. Right now, it looks like it's moving in tandem. Our interest expense is kind of declining a little bit, or at least holding flat. So, for the moment, it looks pretty good. But I would say, as we get to a point of where we believe there is a high in rates, we will do some movements or make some changes to the portfolio. you know, as we said, as time goes on, we will make changes to the portfolio in terms of the environment and things like that. But for right now, I think it looks pretty good.
Matt
I guess where I'm going on this, Jay, is just you've got a great earnings available for distribution number. You're covering the dividend. You're putting out a very high ROE to common shareholders. I mean, the way it sits now, it looks pretty fairly stable. I mean, what, you know, what could go wrong? I mean, sort of what, what do you expect? What can you tell me in terms of, you know, I know the environment is changing, but where you get the book position today, do you feel like you can still do a pretty strong, you know, uh, earnings EAD number for at least a near term?
Jay Lown
Yeah. So with respect to, is it different? You know, the question probably sounds like it's the dividend, um, secure in the near term. And, you know, to Julian's point, um, lot of things relative to how fast the Fed tightens and how that impacts you know our funding costs etc really determines a lot of things that you're talking about and so you know clearly so far things have worked out well for us you know it seems the Fed isn't planning on doing 75 basis points or 100 basis points and tightening so you know if things are stable with respect to how the Fed approaches this tightening cycle, you know, the board will certainly, you know, think about that when it decides and determines what the appropriate dividend level is for the company.
Matt
Right, gosh, I mean, would you just look at the tradeoff where you're not getting really paid for a high team's yield and just, you know, would you rather just more focus on growing equity value? You have some preferred that I guess are callable up here, you know, I know markets wide, but just When you look at the company going forward, would you like to really grow book value and retain more income? I know there are some restrictions on that, but just curious.
Jay Lown
Yeah, look, so I'm not going to speak for the board on the call, but what I can tell you is everything that you just mentioned is discussed and has been discussed at the board meetings, and we meet again in June, and I imagine it will be another pretty healthy conversation.
Matt
Great, and then Jay, just one broader question on the mortgage industry with excess capacity and where we are. Any just sort of thoughts on how high mortgage rates could go and just general health of the U.S. mortgage industry given your involvement in it?
Jay Lown
Good question. I don't spend a ton of time on the origination side. Obviously, originators volumes are down meaningfully and they're very focused on cutting costs and margins and I think it'll be interesting to see how all these guys do you know post March relative to the most recent uptick in rates and what they're planning on doing relative to cutting their margins to maintain volume or whether they start to get religion we've seen you know some decent layoff announcements. We've seen some companies come out and say publicly that they're not planning on laying off. But we're definitely seeing through the daily origination volumes coming through decent drops in volume on a regular basis. And from the people that we talked to in the space, while volumes had maintained themselves fairly well through April, to a lot of people that indicated that just a delay in the timing of pipelines that were started towards the beginning of the year. And our expectation is that volumes will continue to drop on the origination side, and originators will be forced to make some pretty hard decisions around profitability. But I say that mostly in the conventional space, because we just don't really follow the GINI space.
Matt
Could it possibly see some The bulk market, just have you addressed that at all, and could you ever see packages that come out? I know pricing sounds pretty rich right now, but just curious on that side of it.
Jay Lown
Yeah, right. We follow the bulk market, and we've been active in the bulk market recently. But, Ray, do you want to spend a second on talking about the bulk market?
Ray
Sure. You know, definitely I've seen a lot of volume come out thus far this year. You know, it has been a little bit difficult from the standpoint of, you know, we talked earlier about utilizing MSR for spread widening and the protection benefits there. Everything that's been coming to market has been basically originated in the last 12 months. So there's nothing that is not fully priced or darn close to fully priced. And that's not been our strong interest to, you know, double down there. But I think from the flow space or as we see originations coming out right now, that'll probably go into the bulk market over the next few months. I think that's where, you know, our interests lie more in terms of the risk return profiles of MSRs. But definitely there's a lot of bulk volume out there. And if you're, you know, confident with the CPRs at, you know, seven for life, you know, it's, It's there for the taking.
Matt
That's a good point. So what you're saying is with the current coupon now and then, that could be interesting down the road on the newer production in terms of looking at those and running those speeds maybe a little differently than what's already been originated.
Garrett
Yeah, exactly. Great. Well, thanks, everybody.
Operator
And we have reached the end of the question and answer session, and I'll now turn the call back over to Jay Lown for a closing remark.
Jay Lown
Thank you, Alfredo. Thank you, everybody, for joining the call today. We look forward to talking to you in a few months to report on our second quarter results. Have a great evening.
Operator
And this concludes today's conference, and you may disconnect your line at this time. Thank you for your participation.
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