UWM Holdings Corporation Class A

will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to remove yourself from the queue, please repress star one. Thank you. And Blake Colo, you may begin your conference.

Good morning. This is Blake Colo, Chief Business Officer and Head of Investor Relations. Thank you for joining us and welcome to the second quarter 2024 UWM Holdings Corporation's earnings call. Before we start, I would like to remind everyone that this conference call includes forward-looking statements. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to our earnings release that we issued this morning. Our commentary today will also include non-GAAP financial measures. For information on our non-GAAP metrics and the reconciliations between the GAAP and non-GAAP metrics, For the reported results, please refer to the earnings release issued earlier today, as well as our filings with the SEC. I will now turn the call over to Matt Ishbia, Chairman and CEO of UWM Holdings Corporation and United Wholesale Mortgage. Thanks, Blake, and thank you everyone for joining us today.

For a while now, we've been saying 2024 would be a better year for the industry than 2023. And although it hasn't been that much better yet, our production at UWM has been winning. The market might be getting better soon, which we'll talk about a little bit later, but industry value in the first half of 2024 versus 2023 is about the same. Most people are living in a purchase-driven market, but there's still tremendous upside that lies ahead. UWM has been winning. We had an amazing quarter, which we'll go through the details, but the market might be getting better here soon. While rates have stayed higher for longer, the broker channel continues to post share increases as the latest data shows the highest channel market share since 2008. So we continue to see the data on mortgage loan officers migrating from retail to wholesale. We're excited about that upside and it's starting to happen. Now there's tremendous buzz on our campus. as many of you saw at UWM Live. And those that were here saw firsthand our continued focus and investment in technology, which put UWM and the broker community in position to handle the significant increases in production that we anticipate when the Fed cuts rate multiple times over the next 12 to 15 months. Now, let's look at the second quarter performance. Whether we compare year over year or sequentially, the second quarter was a great quarter. We closed $33.6 billion in total production within our guidance with over 27 billion coming from purchase. Our production is up 6% from the second quarter of 23, and more impressive, up 22% compared to the first quarter this year. In fact, it was our highest quarterly production since the first quarter of 2022. Our gain margin was 106 basis points at the higher end of the guidance, and we generated net income of over 76 million, and that includes a decline of $115 million on fair value MSRs, which is tied to interest rates and out of our control. In the second quarter, we announced the number of products and technologies that add speed and capacity to broker channel that really just didn't exist in 2020 and 2021. We're really excited to see these things come into action. First, Mortgage Matchup, our consumer-facing website, is now the official mortgage partner of the MBA and WNBA, and we're seeing more and more people going to this website every single day. Track Plus, which enables UWM to handle everything from the closing process from title, closing, disbursement, so the broker no longer has to go outside and work with a third-party title company or anyone outside, and it saves the consumer thousands of dollars many times. This is a huge game changer, and we're taking advantage of it right now, and so are our brokers. We scaled PA Plus, which is Processor Assist Plus, allowing brokers and their processors to choose which part of the loan process they let UWM Loan Coordinator handle. This immediately adds capacity to our brokers, which will become more critical as rates come down. Finally, we continue to invest heavily in our bolt underwriting system. This allows brokers to get initial approval in as little as 15 minutes and also is allowing our underwriters to do more business every single day with technology pulling the weight on a lot of the underwriting processes. The full impact of these investments will be apparent when we enter a refined market. where you will see UWM and the brokers able to add significantly more increase in volume than the rest of the market, while still maintaining speed and the service we are known for. To put it bluntly, UWM and the broker community are thriving and are ready for when rates drop, and they will drop. You guys know me and know I'm excited about the business, and I'm excited as ever. But my 21 years of work is I never felt UWM is more prepared for the opportunity we are right now. We are prepared, and we've been building for this opportunity, and we're super excited. Now I'm going to turn things over to Andrew Hubacher, our CFO, and then I'll come back and chat later.

Thank you, Matt. We were pleased with our second quarter financial performance, reporting positive GAAP net income for the quarter and year-to-date. Importantly, we also remain profitable operationally and on an adjusted EBITDA basis before considering the net change in fair value of MSRs, which is largely outside of our control. Total production volume of 61.3 billion year to date is an approximate 13% increase from the first six months of 2023 and gain margin of 107 basis points is up from 90 basis points in the same period last year. These increases in volume and gain margin have allowed us to continue to invest significantly in our people, our technology, and in the growth of the broker channel while maintaining profitability. During the second quarter, We continue to execute on our consistent strategy of opportunistically selling MSRs, and we have generated close to $2.4 billion in net proceeds from bulk and excess sales through the end of the second quarter. Proceeds from these sales have been used to de-lever our balance sheet, increase production, and invest in our business, while also maintaining a consistent dividend for our shareholders. These sales have been targeted at our higher coupon MSRs and allowed us to significantly de-risk the portfolio. Most of our bulk and excess sales in the first six months of 2024 were of servicing rights on loans with coupons above 5.5%, and approximately one-third of our bulk sales were of Ginnie Mae collateral. The weighted average coupon of our portfolio declined from the end of 2023 to 4.31%, even with year-to-date new production at higher rates. As of the end of the quarter, our capital and leverage ratios continue to fall within expected and targeted ranges in the current environment. We ended Q2 with total cash of just under $700 million and no outstanding borrowings on our MSR or unsecured lines of credit, so liquidity and access to liquidity remain very strong. We continue to be prepared, operationally and financially, for different market cycles. Okay, I'll now turn things back over to our Chairman, President, and CEO, Matt Ishbia, for some closing remarks.

Thanks, Andrew. I'll close with a few points before the Q&A. More and more American consumers are seeing the advantage of getting their mortgage through Mortgage Broker Channel. It's undeniably the fastest, easiest, and most affordable way to get a mortgage, and the latest share numbers validate this. As I said before, in Q1, we saw the Broker Channel achieve the highest share of industry in the last 15 years. I would say that UWM and the broker community are in a much stronger position heading into the next refi market than we were in 2020. But regardless of the market, we'll remain the best mortgage lender in America. Our focus will continue to be on providing elite service and technology to mortgage brokers so they continue to serve the American consumers. Having been the number one wholesale lender for a decade now and number one overall lender for the last three years, as well as the top purchase lender in America, our focus turns to making the broker channel number one. To us, the broker channel is achieving over 50% market share. That may take us three years, five years, or 20 years. But this is the target and this is what we're going to focus on because it's best for the consumers, it's best for mortgage brokers, it's also best for UWM. We're going to win as a team. Now, turning to guidance, we expect Q3 production to be anywhere between $31 and $38 billion and our gain margin between 85 and 110 base points. With that being said, the last couple of days of the market has really made an inflection point where we can look at could the refi boom be here right now? Now, if the 10-year stays where it's at right now, and mortgage interest rates stay where they are right now, we will beat this guidance from a production perspective. But I'm more excited about the fourth quarter and beyond if the 10-year and rates stay where they're at. Obviously, rates could go back up five minutes after I talk on this call, and it will be exactly what I guided you. I want to make sure you guys know 31 to 38 and 85 to 110 is in line, and we expect to be in those numbers. But there is a lot of upside ahead. The best part about the upside is this. We are the most prepared mortgage company in America. We've been building for this. We've not laid people off. We have been prepared for the opportunity. I always said the mini refi boom or a full refi boom, the first six months is when you make all the money. And if that's what we're about to hit, we are in the best position ever at UWM. And I'm proud to share that with the shareholders and excited about the future. And if the market turns back, we're still going to dominate in the purchase market we have been for the last couple of years. So we're excited about what's ahead. We'll see what happens. I'm really excited to see the third quarter, fourth quarter, and the upside and the possibilities ahead with UWM. Now, at this time, I'll turn it over to the Q&A, and we'll go through there.

And thank you. At this time, I would like to remind everyone, in order to ask a question, press star and then the number one on your telephone keypad. If at any time you would like to remove yourself from the queue, please repress star one. And at this time, we will pause momentarily to assemble our roster. We will now begin the Q&A session. And your first question comes from the line of Bose George with KBW. Your line is open.

Hey, good morning. Actually, in terms of rate expectations of the market, the Fed does cut by a couple of hundred basis points as a forward curve is suggesting, but the yield curve steepens and say the 10-year doesn't go down that much. Do you think we could see a pickup in arm production and that sort of contributes to overall volume increases?

Yeah, thanks for the question. Obviously, it's hard to predict all the opportunities and possibilities out there. The Fed cutting rates as much as you just described would be a massive movement in the markets in general. I'd have a hard time thinking the 10-year would not follow in some impactful way. Also understand the difference between how much the 10-year versus the 30-year fix. Could arms become more relevant? Yes. I still believe 30-year fix will be the prevailing product for the foreseeable future. But the Fed cutting rates, even 25 basis points, which everyone in the market expects, September 17th, 18th, whatever, will move the markets from a perspective of consumer demand, consumer awareness. It's the best marketing piece in the world right there when the Fed cuts rates. It will lead every news station and every consumer will call their mortgage broker. And we think that will be more impactful than even the rate movement down. So we'll see how that all shakes out and what the impact will be. But we're on the cusp. We're not quite there yet, but we're on the cusp of a potential very interesting time here that we're very, very well prepared for and we've been waiting for here at UWM.

Okay. Great. Thanks. And then actually on the Track Plus program, how much do borrowers save from that? And then in terms of how do you guys essentially sort of work with title insurers to sort of I guess, reinsure that, or how does the structure of that program work?

Yeah, well, there's a bunch of different nuances and parts to it, but the key is the consumer saves thousands or thousands, with an S at the end, on many transactions, if not all transactions, through TrackPlus. It's a really simple, easy way to close your loan. We're trying to make the process faster, easier, and cheaper. It does all three. There's all different nuances. with how we handle the risk, but from a perspective, we look at it as we're taking on little to zero risk at all in our organization, and we're saving consumers a lot of money, and it's disrupting the title world, and it's going to happen because it's better for consumers. We're always what's better for consumers, and I'm sure you read about FHFA's title pilot. That's going to be better for consumers. What's better for consumers wins, and that's why we're winning because brokers are better for consumers. It doesn't happen overnight, but it's all happening, and title's another example of that.

Okay, great. Thank you.

Thank you.

And your next question comes from the line of Derek Summers with Jefferies. Your line is open.

Hey, good morning, everyone. To follow on to kind of track plus and PA plus, could you provide any kind of incremental color on maybe adoption rates by your broker partners or any other color on how those products are trending?

Yeah, thanks for the question. So a couple things. The adoption rates actually have gone up significantly in the last two, three months, what's happening is they're really just built for scale. There's two parts of the equation. Back in 2020 and 21, when refis hit, brokers lost market share. They didn't gain as much because, one, we were well prepared. I would say pretty well prepared, not as good as we are today, but brokers were not. What we built with PA Plus and Track Plus is we're taking the guesswork out of it. The brokers don't have to hire up. The title companies don't have to hire up. Nobody has to hire up because UWM's technology and innovation and that we've hired up and are prepared is able to handle the scale. Remember, it's not just UWM handling the scale because if brokers can't triple their business or double their business, how am I going to do that? How am I going to grow at a significant level if they can't? And so PA+, Track+, is basically taking the guesswork out of the game and saying, we've got the scale for everybody, brokers, and UWM included, and Track Plus and PA Plus. So the adoption has been pretty great, but it's not going to be at the level that we expect because right now they don't need a scale because the market doesn't warrant it right now. Right now the market is still where the market was, where we're going through and going through the same numbers we've been seeing. So it's not creating – it's not a huge scale right now, but it does remove a lot of bottlenecks in the industry – in the broker's world, and it makes it so it's faster, easier, and cheaper – And the word is scale. We're prepared for scale for not only for UWM, but for our brokers and PA plus and track plus does that.

Thank you. Helpful commentary there. And then just to circle back to your commentary on guidance, is there a 30 year mortgage rate in mind where, you know, the floodgates really open on a refi rally or, or how are you thinking about that?

Yeah. I mean, I think it's, I don't know if I have an exact number to give you, but what I would say is, you know, the market where we're at now, if the 10-year ticks down a little bit more from where it is today, like the range we're in right now is good, but we're on the cusp, right? So I can't give an exact number, but I do think that if the 10-year drops, you know, down below the 3.75 range and we start getting in those ranges lower than that, it will spur a refinance boom. um and so we're not there yet and you know like i said after i talk on this in 10 minutes and it already has gone up a little bit today um that you know everything is exactly what i guided you 31 to 38 but there is a lot of upside and what i'll tell you is we're the most prepared company for that upside and so if the if the rates drop uh more substantially and refis become relevant you know we could do a substantial amount of more business and when i say substantial i mean like significantly, significantly more on a monthly basis. Not for this quarter, most likely, because this quarter is already almost baked, if you think about it. We're midway through August almost. But for the fourth quarter, it could be exorbitantly higher numbers and with a rate drop of a little bit further.

Great. Thank you. That's all for me. Thank you.

And your next question comes from the line of Doug Harder with UBS. Your line is open.

Thanks. Matt, can you just talk a little bit more about some of the investments you made this quarter and how you think about the incremental scale and volume and, you know, kind of how your expenses would look in a, you know, kind of in a significantly up volume environment?

Yeah, no, thanks for the question. So my expenses look very similar in a very, you know, we built this in, like we didn't lay people off. We've been building, we've been preparing. I have about 8,000 people. I don't know the exact number, but roughly 8,000 people at our company right now. You know, we are prepared. We built some amazing technology, which I don't even want to speak to on this because it's just, you'll see it when you see it, but we got some amazing things that we built and are ready for scale. And that's what I've been talking about. Like we are the most prepared. We've obviously been dominating for the last two and a half years. Every quarter I come on and tell you what we're going to hit. We hit it. We've been outperforming every other mortgage company in America. And it's not even close. And we are the most prepared mortgage company. Now, does that mean we're going to do the most volume of everyone when refis come? There's a lot of refi-only shops out there, right? But we are extremely prepared. We are not going to miss a beat. Like the amount of volume that we got in today or yesterday versus what we've been getting in before is significantly higher. And we can maintain that and manage that and handle that. And so I guess my perspective is the technology, the investment in people, in training, in all aspects of a technology innovation process has been significant. And it's not just been the last three months I've been doing it. We've been doing it for the last two and a half years, waiting for the day. I'm not saying we're at the day, but we're getting close to that day. And when that day comes, which we all know is going to come, the best mortgage company in the country is going to thrive. And we're excited about that. And the brokers are going to thrive. And we're excited about that. And our shareholders will get that benefit.

I appreciate the insight, Matt. Thank you. Thank you.

And your next question comes from the line of Brad Capuzzi with Piper Sandler. Your line is open.

Thank you for taking the question. Just following up on TrackPlus, can you discuss a timeline or plan to extend this beyond online refi transactions? Say that again? On TrackPlus, I know you mentioned that UWM Live, that right now the capabilities for it are just online refi transactions. Is there a timeline or plan to extend that out beyond just refined transactions?

Yeah, so there's two parts. There's track and track plus. Track allows for purchases. Track plus is just refinance transactions right now. Once again, you know, we can handle the purchase business. Title companies can handle the purchase business. Brokers can handle the purchase business. We all understand that market. What track plus, along with PA plus, along with a lot of things are built for is the market doubling in a week's notice, right? So think about, like, Can the title companies handle double the volume? Can a broker handle double the volume? Can UWM handle double the volume? Well, the answer to the UWM question is yes, we can. The answer to the broker question is yes, they can because of PA+. And the answer to the title company question is I have no idea. I don't really care because UWM can handle it with Track+. So we're taking it into our own hands to handle double the volume and then one day notice, right? And so Track+, is built for that. And so it's online refinances. virtual closings. It's making the process faster, easier, cheaper for consumers. I have not built, although I have the ability to build it, I'm focused on scale. And so we have not focused on, hey, can we advance it to in-person refinances or in-person purchases? Although we can do some of that with track. But my big focus is what am I going to do if the tenure or the rates drop overnight? And like I said, it almost happened Thursday, Friday, we're getting close. and we're prepared for it, and that's what TrackPlus is built for. And so the adoption, back to the earlier question, the adoption has been, I won't give a number, but substantially higher in the last three weeks or four weeks than it was two months ago because people are starting to feel it. And what I've been pushing people is, are you an early adopter? You better try this stuff and understand how TrackPlus and PA Plus, all this works, so when the rates do drop and that opportunity comes, You know, can you double your business? You don't have to worry about it because UWM has got your back and we will see that happen. And so we're very well prepared and we're excited about it.

Thanks. And then can you just give an update on the dynamics playing out within the broker channel? You know, have you seen pricing be more rational and you're still seeing continued pullback from peers in that channel? Thanks.

Yeah, I mean, I think pricing's been rational for a while. I feel like I'm not concerned about wholesale. Like, the truth is, all parts of the market, if the rates drop a little bit further than they are today, right, everyone's going to get busy. And then what happens in rational pricing, as maybe you're describing, or pricing in general, will change because people will start, you know, a lot of our competitors bring in 75 to 100 loans a day. That's how small they are, right? We're much bigger than all of them. Them going to 200 homes, can they double their business? I don't know if they can. And so what happens is they back off pricing. And so that will happen. But that's not just wholesale. That's retail. That's the whole industry. People that are not prepared, and that's why we want to be prepared, so we don't have to do that. Our pricing, our margins, I feel really good about where our margins are. I feel really good about our volumes. We're very, very profitable as it stands today. Now, the one thing to recognize, when rates do drop and all these things, and you say rational pricing, but MSR values are going to plummet. Right? So all these companies have huge MSRs and hopefully you've realized Andrew, Blake, our team of people here did an amazing job with our MSRs. If anyone caught that our WAC is lower now than it was at the end of the first quarter after we just did $33 billion of rates around the 7% range. Imagine that, right? And so we've de-risked significantly. So we'll still have an MSR write-down, but we'll have an origination write-up if you think of it that way. We do a lot of business. Everyone's going to have an MSR write-down. So balancing those things, understanding what's happening is important going forward. But I think that it will be interesting to see can people handle it. So pricing rational, like margins will go up. They don't go down in a refi boom. They go up. How much they'll go up, I'll hopefully be able to guide to next quarter if the rates drop a little bit further than they are. Right now, I feel good about our range. because we're still off the lows, which I was a couple quarters ago, 75 to 100. We're 85 to 110, and we're going to be in that range this quarter. Now the question is, if rates drop further, I expect margins to go up, and I'll guide that for the next quarter if that happens.

Thanks for taking my questions. Thank you.

And your next question comes from the line of Eric Hagan with BTIG. Your line is open.

Hey, thanks. Good morning. Hope you guys are well. Hey, following up on that point, I mean, how stable do you feel like margins are if rates are lower? Like even within the refi and purchase channels specifically, what do you feel like maybe accounts for differences in margins between those two channels if rates are lower?

Capacity. It's just capacity. That's what accounts for differences. People can't handle it. So what's going to happen is if rates do go lower. Right now, 85 to 110, it's all day. It's simple. It's easy. It's clean. I feel really good about hitting those numbers, 31 to 38 billion. Now, if rates drop, like I said, let's just make up a number. I'm at 350 on the 10-year, okay? Three and a half, right? If it goes there, all bets are off, right? It could literally, you know, we could double our business, right? And margins could go from the 100 range to the 130 range. Like, it could go to those numbers. I don't want you to quote those numbers. I'm just giving you ranges here. that if the tenure goes down substantially, that's going to happen to everybody. Everyone's going to get flooded with refinances because there's trillions of dollars of loans in the 7%, 6.5% to 8% ranges. And so if all of a sudden 30-year fix is 5.5%, 5.75%, man, people are going to refinance. And when the Fed lowers rates, people are going to think about refinancing. They're going to start calling and reaching out. And MortgageMatchUp.com, going to independent mortgage brokers, that's going to happen. And so MSR write-downs will be massive, origination volumes and gain on sale will go up. And so how does that balance out? You can determine how you want. Obviously, nobody controls the MSR write-ups and write-downs. We never take credit when it goes up. We don't want to take credit when it goes down. We want to focus on origination. And we're not that far away from those numbers. But once again, I'm out watching the market this morning. It could be already at four for all I know, the 10-year and And we're 380, 390, I don't even know what it's at. But whatever it's at, you can't control it. So we just have to be the most prepared company. That's my job as the CEO and chairman, and I think we're doing it.

Hey, we like it. Following up on the MSRs, any perspective on how you see the demand for MSRs developing with lower rates? Do you see the risk of lower MSR values impacting the demand side from the folks who typically show up to buy MSRs?

I don't know if I'll see it. So first off, we sold a lot opportunistically in understanding the market and understanding where the rates were. Do I see, you know, for us, we don't buy MSRs. We originate them. We originate loans where there's nobody in the country that originates more loans than us, obviously, which originates more MSR. And so do I see it slow down? I don't know if I'll see a slowdown of people buying MSRs because that's the only way they can originate. They have to actually have the servicing loan to have a chance. That's not how UWM is. We don't need the loan to have a chance. Our brokers get the loans because they're out there and they're the best for the consumers. And so I'm not as concerned about will people not buy. People are going to still be buying. I'm not really in the mood to sell right now. We feel like we've de-risked significantly, and we're all about origination. A thousand percent of our focus is on origination, being prepared, helping brokers be prepared, and making sure we deliver to the shareholders what I've been telling everyone. And I think we've been doing that. So it'll be interesting. I don't think it'll be a massive shift, but because a lot of those servicers buy beyond cash flows. They buy for a chance to refinance.

Yep, yep. I appreciate you guys. Thank you so much.

And your next question comes from the line of Mark DeVries with Deutsche Bank. Your line is open.

Yeah, thanks. I was hoping to get a sense of... what kind of improvements you think you're making with the technology investments in your time to close and kind of how durable that would be under significantly higher volumes and what that might mean for your potential to take even more share within the broker channel if we get a surge in volume.

Yeah, so turn times are a huge deal. Speed to close with all the technology. So I'll talk about my technology, but all the world with trigger leads and all the things that go on, people need to close loans faster. Then you get a borrower bought in, close the loan fast and efficiently. When rates do drop, you're going to see everyone's turn times back up. We're the fastest in the country right now, 13, 14, 15 days. We're the fastest in the country by a long shot. We will maintain that across the board, or if we get a little bit worse, we get worse by a day. Everyone else is 40, 45. They might go to 50, 60 days. Some places might go to 70 days to close loans. That's what happened before, and that's what will happen again. And so our gap will widen significantly. because of our technology and because of our service levels and because of our staffing levels. Now, with that being said, the technology we've invested in, I'm going to hold some of that back, some of the things that we've done, because some of the stuff we've done I think is going to really wow a lot of people and some really interesting things. I'd rather not get into all the details as of yet because it's not ready to be talked about, but we have built a lot of – we have 1,700 technology people at our company every day working on technology for one focus, growing the broker channel, helping brokers win, helping UWM win, making things faster, easier for consumers. That's what we focus on all day. We don't have people in different countries and all around the country, all around America, working from home. They're in our office, and we have one team, one focus, and one goal in all in one building. And so we're all focused on it. There's some great technology stuff. Some of it you've seen or heard about, PA+, Track+, Bolt, all of these things, but then there's some you have not heard about, but we are really excited about it. But the biggest thing for you is, as you know, speed matters. Speed will matter for consumers, saving $100 and $150, and for brokers and for originators, it matters. And they lose loans, they trade loans, they compete with people for loans, and closing loans fast matters, and we are the fastest in the country by a long shot.

Got it. Thank you.

And your next question comes from the line of Terry Ma with Barclays. Your line is open.

Hey, thank you. Good morning. Just had to follow up on the gain on sale margin. It's been pretty consistent the last two quarters above 100 basis points. So I guess the question is kind of what gets you to the low end and maybe going forward, what gets you comfortable kind of raising the low end of the guide?

Yeah, well, so obviously a lot of things move. So people think, you know, we do, I think, 108, 106 back-to-back quarters, which are pretty good numbers. But if I felt confident that we would never be in the 85 range, I would move that off the bottom. I won't say that it's never, it cannot go back down. That's why I have the range between 85 and 110. There's a lot of movements, right, like with a lot of volatility in markets, which we've seen actually, as we're all aware of, that actually makes hedging and margins very, very tough to come by. MSR valuations go up and go down. That impacts the valuations on pricing on a day-to-day basis, hour-to-hour basis. And so I don't feel that it's like if I felt more confident that, hey, it could never be 85, I would change the number. So 85 to 110 is the guidance. I feel good about that. Do we try to have bigger margins? Absolutely. Do I feel good about our margins? Absolutely. But there's still, you know, 50 days left in this quarter. There's a lot of movement that could happen. Rates could go up, rates could go down, volatility impacts things, hedges, a lot of aspects. And so keeping that range is good. We feel good about 85 to 110. And then to the question about what will make me move off the bottom, I think if the rates drop a little bit further, I could see myself moving off that bottom next quarter. I think that if we see a steadiness again this quarter, and rates take a little bit more of a dip, I feel confident in our capacity ability that I could move that number the next quarter on the bottom up a couple different levels, one level or two level potentially. And we'll look at that. But not yet. It's not there. I still think 85 to 110 is the number. And like I said, I haven't looked at the market. It could be 85 to 110 next three quarters for all I know based on what the market does. But I'm excited about moving off that number hopefully next quarter if the rates come down a little bit further.

Okay, got it. That's helpful, Collar. And then just on the MSR sales, you guys mentioned you'd be opportunistic, but you also mentioned you'd de-risk meaningfully at this point. So I guess going forward, can you maybe just talk about your appetite to sell higher coupon loans, just given the demand still there?

Yeah, we're opportunistic with everything with selling MSRs. We're not really focused on it. We had a strategy coming in this year. The strategy was to de-risk, was to sell MSRs, and the first three to six months of the year and prepare for scale, technology, operationally, and it's playing out how we expect it. And so I'm not saying we won't sell any more MSRs because people call us all the time to try to buy them. However, it's not a focus of mine right now. My focus is on origination, on scale, and dominance in this industry right now, and that's what we're focused on right now. So will we sell more? Possibly, but it's not a focus of mine right now or our organization because we're focused on those other things.

Great. Thank you.

Thank you.

And your final question comes from the line of Ryan Shelley with Bank of America. Your line is open.

Hey, guys. Thanks for the question. I just had a quick one on expenses here. I noticed that direct loan production costs were up pretty significantly in the quarter. If you could just provide any color there and as well as G&A, just any color you could provide there and factors to consider looking forward. That'd be great. Thanks.

Yeah, so there's a lot of nuances, a lot of different things, but I guess I'd say naturally when you do more production, you're going to have more loan production expenses, right? We help cover credit reports. The credit report costs are going up. A lot of different things are going up, but I really don't focus on expenses that much because I focus on winning. and focused on growing. And right now is a growth mode, not an expense. Like you've even heard a lot of my competitors who've been playing the game of cutting expenses. You don't hear them talking about that anymore because the game's changed. We're focused on winning, which is revenue, which is origination, gain on sale, more brokers growing, loan officers converting the broker channel, and being prepared for the refinance opportunity, along with the purchase opportunity, which I haven't hit on much because All I'm talking about refinances, when rates drop a little more, more people will sell their houses. Purchases will pick up. Inventory will pick up. It's going to be a big swing of opportunity. And so the expense game, our expenses will go up consistently with our volume. But it's like it's tied to loan production. and it's not really relevant. Our G&A and our overall expenses from team members, we're in a pretty good spot. We're still hiring, but we're not hiring extremely high numbers because we've got our team, we've got our technology, we've got our systems, and we feel really good about where we're at. So the focus right now is on growth, scale, and being prepared, and we are. Liquidity is great. We've de-risked on MSRs. Expenses, yeah, we'll watch them, but that's not the game right now. The game is winning, and we're going to focus on winning right now. Thank you.

Got it. Thanks. Appreciate the question.

And that will wrap up our question and answer portion. I would like to turn the call back over to Matt Ishbia for closing remarks.

Well, thank you very much. Thanks for all the questions. Really appreciate the support and the great questions that were there today. If you have any other follow-up, of course, Blake Cole is always available on our team. And I look forward to a great quarter and talk to you next quarter. Have a good one.

Ladies and gentlemen, this concludes today's conference call, and you may now disconnect.