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spk05: We believe the strategy protects us against volatility in our earnings and liquidity. Our strategy for hedging the servicing portfolio is dynamic, and we adjust our hedge positions in reaction to changing interest rate environments. We believe our servicing portfolio is well protected against potential rising defaults. As of March 31st, the weighted average FICO was 736, the weighted average coupon was 3.5%, and the weighted average LTV at origination was 72%. These characteristics contributed to a low delinquency rate with only 1% of the portfolio more than 60 days past due at quarter end and should generate reliable ongoing revenue during these uncertain economic times. A major component of Vision 2025 is to align our expense base with the smaller mortgage market and create efficiencies to improve operating leverage and financial performance over time. Our total expenses for the first quarter of 2024 decreased by $7 million, or 2% from the prior year quarter. The primary drivers of this decrease were lower personal related costs, driven by headcount falling by approximately 600 FTE during the period and lower marketing costs. Our expenses would have decreased more substantially if it hadn't been for the cyber incident, which added $15 million in net costs to our results. Our volume-related expenses consisting of commissions and direct origination expenses increased by $2 million from the year-ago quarter despite low origination volumes. Part of the cyber-related costs incurred during the quarter were to support our loan officers by compensating them for lost commissions. We expect these costs to correlate with volume again starting with the second quarter. Restructuring-related and asset impairment charges total $4 million, up from $1.7 million in the first quarter of 2023, primarily due to the ongoing impact of our Supplemental Productivity Improvement Program, targeting $120 million of annualized earnings improvements expected to benefit 2024. Through the end of April 2024, we have confirmed $112 million, or 93% of our targeted improvements. These were primarily achieved through decreased third-party vendor spend, salary expenses, and reduced real estate-related costs. We expect to action the remainder of the plan savings in the second quarter. During the first quarter, we also accrued $1.1 million of legal expenses related to the expected settlement of legacy litigation compared to none in the prior year quarter. Excluding the cost of the cyber incident, restructuring and asset impairment charges, and the litigation settlement accrual, we accomplished meaningful operating expense savings, reducing adjusted expenses by 8% from $313 million in the first quarter of 2023 to $288 million in the first quarter of 2024. Looking ahead to the second quarter, we expect origination volume of between $5 billion and $7 billion, and we expect pull-through weighted lock volume of between $4.5 billion and $6.5 billion. Volume guidance reflects the seasonal increase in home buying activity tempered by the recent increase in interest rates, increasing costs to the consumer. We also expect our second quarter margin to be between 260 and 290 basis points, which also reflects the recent increase in interest rates. During the second quarter, we expect expenses will increase somewhat, primarily due to higher commission, marketing, and origination expenses reflecting increased volume quarter over quarter, offset somewhat by the absence of cyber-related costs after the first quarter. As we mentioned on our last call, we are continuing to evaluate our capital structure, including options available to address our unsecured notes maturing in the fourth quarter of 2025. We believe that by addressing these notes in the near term, we will de-risk the outlook for the company for the benefit of all stakeholders. We'll share more as we get closer to executing on our plan. Our cost reset has allowed us to maintain a strong liquidity position, ending the quarter with over $600 million of cash, and at the same time, supporting reinvestment in critical platforms and programs. While the recent increase in interest rates has put pressure on market volume expectations, we continue to aggressively focus on our plan to return to profitability. With that, we're ready to turn it back to the operator for Q&A. Operator?
spk01: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. And if you are called upon to ask your question and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, please press star one to join the queue. Your first question comes from the line of Doug Harter from UBS. Please go ahead.
spk06: Sorry about that.
spk04: Can you just confirm the expense guidance that you just gave that expenses will, you're looking for them to be up even with the absence of the $15,000 or $15 million of cyber-related expenses?
spk05: Yeah, that's correct. It's just driven really by the pull through of funding volume expectations going up from Q1 to Q2.
spk04: All right. I appreciate that. And then turning to the 2025 debt maturity, can you talk about any progress that you've made there and thoughts around timing as to when there could be some resolution on that maturity?
spk05: Sure. Again, it's David Hayes. As mentioned in our prepared remarks, we are actively looking at that. We've engaged some advisors and are working through a series of options on that front. I think we talked about this a little bit on the last quarter call, too. You know, we don't envision seeing or wanting to see these bonds go current, so we're looking to, you know, take care of them the second or third quarter. It's been a pretty constructive market, so we're going to transact when it makes the most sense for the company, but it's on the near-term horizon.
spk06: Thank you.
spk01: Again, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from the line of Kyle Joseph of Jefferies. Please go ahead.
spk00: Hey, good afternoon. Thanks for taking my questions. Just on the MSR sales, the square, do you guys bleed that out over time? Was that done in bulk or just any color on bids there too?
spk06: Sure.
spk02: This is Jeff DeGaran. You know, as we've stated before, we're always monitoring the MSR market and we'll, you know, we'll opportunistically transact where it makes sense. It was a relatively small or immaterial amount of the portfolio where we took the opportunity to transact and we'll continue to do, you know, behave the same way going forward.
spk00: Got it. And then just quick follow-up for modeling, you know, what do you think in terms of cash balances going forward?
spk05: Yeah, we're going to, you know, it's obviously still a pretty challenging market, so we're going to continue to maintain this posture of having sort of heightened levels of liquidity. You know, we've kept the balances over $600 million. We'll continue to try to manage that number around similar levels for the remainder of the year.
spk00: Got it. That's it for me.
spk06: Thanks for taking my questions. There are no further questions at this time.
spk01: Frank Marto, I turn the call back over to you.
spk03: Okay. Thank you, operator. And thanks to everybody again for joining us today. We appreciate the questions. And on behalf of Dave and the rest of the team, you know, I want to thank everybody and our key stakeholders for their support. We're going to continue to keep everybody appraised as we progress through our Vision 2025 imperatives. So, again, thank you again, and have a great day.
spk01: This concludes today's conference call. You may now disconnect.
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