Mark DeVries

Mark DeVries requested a deeper dive into the benefits derived from Rocket's technology investments, asking for specific, quantifiable examples of improved conversion rates, efficiency savings, and incremental revenue generation.

Answer

Varun Krishna (President and CEO, Rocket Companies) explained that Rocket, as a homeownership business, views AI as an accelerant rather than a disruption risk due to the industry's regulated and repetitive nature. He stated that AI increases capacity, improves conversion, removes friction, and expands lifetime value, with these gains being 'very visible in Q4' because Rocket owns and deeply embeds AI into its technology stack. He emphasized that AI strengthens economics by automating aspects from lead integration and distribution to conversion, cost to originate, and recapture, with these metrics integrated into company operations and accountability.

Mark DeVries requested more specific and quantifiable examples of the benefits Rocket Companies is deriving from its investments in technology and AI, such as improved conversion rates, efficiency savings, or incremental revenue generation.

Answer

President and CEO Varun Krishna explained that Rocket, as a homeownership company, views AI as an accelerant rather than a disruption risk due to the industry's regulated, complex, and repetitive nature. He highlighted that AI is deeply embedded in Rocket's proprietary technology stack, increasing capacity, improving conversion, removing friction, and expanding lifetime value. These gains were visible in Q4, with AI automating aspects from lead integration and distribution to reducing the cost to originate and driving recapture.

Mark DeVries from Deutsche Bank requested an update on any new learnings since closing the Redfin acquisition and how management feels about the previously stated synergy guidance.

Answer

CEO Varun Krishna emphasized the strategic importance of Redfin for accessing the top of the purchase funnel and praised the rapid day-one integration, highlighting co-branding, pre-qualification buttons, and preferred pricing. He shared promising early data on high-quality lead flow. CFO Brian Brown reaffirmed confidence in achieving or exceeding the $200 million synergy target ($60M revenue, $140M expense), stating that significant actions on the expense side have already begun.

Mark DeVries asked about Rocket's subservicing strategy following the announced merger with Mr. Cooper Group, focusing on the retention of subservicing agreements and the potential for growth in that business line.

Answer

CFO Brian Brown affirmed that Rocket fully supports Mr. Cooper's subservicing business, highlighting its impressive scale. While noting the companies must operate independently until closing, he pointed to Mr. Cooper's own earnings call commentary about an increasing subservicing pipeline. Brown stated that post-closing, Rocket intends to honor all contractual provisions with subservicing clients.

Mark DeVries asked for the source of purchase market share gains, specifically whether they were concentrated in the direct-to-consumer or partner channels.

Answer

CFO Brian Brown confirmed that market share gains came from both channels. He noted the retail channel benefited from top-of-funnel growth and servicing retention, while the partner channel grew both overall share and wallet share with existing brokers. CEO Varun Krishna emphasized the cross-channel strategy as a key strength, allowing technology to be leveraged across the platform.

Mark DeVries requested details on how Rocket's rate lock volumes for both purchase and refi performed during the brief Q3 period when mortgage rates fell to around 6%, and how gain on sale margins were affected during that surge.

Answer

CFO Brian Brown described the period as a 'case study' proving that rates in the low 6% range unlock significant refinance demand. He emphasized that Rocket's ability to scale capacity instantly through technology, without hiring, is a key differentiator. CEO Varun Krishna attributed this scalability to investments in their proprietary AI-powered LOS, Rocket Logic, which is on track to save 800,000 team member hours annually.

Mark DeVries asked about the outlook for realizations in 2026 compared to 2025, the factors contributing to court congestion, and whether there is room to adjust duration assumptions in fair value models to mitigate negative marks.

Answer

CEO Christopher Bogart stated that Burford Capital does not provide guidance on realizations due to the unpredictable pace of litigation, which he described as a 'conveyor belt' that twists and turns. He attributed court congestion to pandemic-related backlogs, a lack of new judge appointments, and the system's inability to expand operations, which delays settlement pressure. CFO Jordan Licht confirmed that the company continuously reviews its models and has the flexibility to set longer duration assumptions at the outset of cases to better reflect expected timelines.

Mark DeVries asked about the outlook for realizations in 2026 compared to 2025, the factors contributing to court delays, and the possibility of adjusting duration assumptions in fair value models to mitigate negative marks.

Answer

CEO Christopher Bogart stated that Burford Capital does not provide guidance on realizations due to unpredictability, attributing current delays to court backlogs from the pandemic impacting settlement pressure. CFO Jordan Licht confirmed that the company continuously reviews and can adjust duration assumptions in its models to reflect longer case timelines.

Mark DeVries of Deutsche Bank asked for an update on the YPF case, seeking clarity on the timing for the Second Circuit's appeal hearing on the share turnover order, the potential timeline for a judgment on the broader appeal, and the specific drivers of the YPF-related unrealized gains during the quarter.

Answer

CEO Christopher Bogart detailed the two-part legal process for the share turnover appeal, noting a decision on the stay is expected relatively soon, but the timing for the main appeal judgment is unpredictable. CFO Jordan Licht added that the unrealized gains were driven by a combination of the court ruling, duration, and interest rate changes, but declined to provide a specific breakdown of these factors.

Mark DeVries of Wolfe Research inquired about the YPF litigation, asking if the IMF's fund disbursement to Argentina is contingent on the YPF settlement. He also asked for qualitative insight into the quarter's new commitments and their risk distribution, questioning if they were linked to the new U.S. claim family mentioned by management.

Answer

Chief Investment Officer Jonathan Molot clarified that while the IMF's general policy requires a country to be in good faith dialogue to resolve outstanding debts, the disbursement of funds is not directly conditional on a pre-existing resolution. Chief Executive Officer Christopher Bogart confirmed that the launch of a new, cross-collateralized U.S. claim family was a significant driver of the quarter's new business activity, contributing to the volume of comparatively low-modeled risk commitments.

Mark DeVries asked for clarification on the drivers of the fourth-quarter unrealized losses and sought color on the nature and risk-adjusted returns of recent new commitments.

Answer

CFO Jordan Licht explained that unrealized losses are driven by both discount rate changes and the reclassification of gains from unrealized to realized upon case resolution. CIO Jonathan Molot added that new commitments represent a diverse mix, including lower-risk, shorter-duration corporate monetizations and higher-return, longer-duration matters like patent or international arbitration cases.

Mark DeVries inquired about the productivity benefits of Sequoia and Endpoint in rollout markets, the potential for the efficiency ratio to be structurally better than the 60% target, and the outlook for a multi-year tailwind in commercial refinance activity.

Answer

Mark Seaton (CEO) reported that Endpoint's AI-powered version is performing better than expected, and Sequoia is achieving 40% automation rates for refinance transactions, showing savings. He believes the efficiency ratio can surpass 60% due to a more data-driven model but needs to demonstrate this at scale. He confirmed a belief in a multi-year commercial refinance tailwind, driven by lenders writing shorter duration loans (2-3 years), which increases refinance frequency without impacting premiums.

Mark DeVries asked about the productivity benefits observed from Sequoia and Endpoint in their rollout markets compared to pilot stages, and if First American could provide guidance on potential margin lifts. He also questioned if the efficiency ratio would be structurally better, potentially making the 60% target obsolete, and if the higher commercial refinance activity due to shorter duration loans represents a multi-year tailwind.

Answer

CEO Mark Seaton stated that Endpoint's performance in its single office rollout was better than expected, and Sequoia achieved 40% automation for refinance search/examination, showing savings. He noted that while benefits are seen, the scale is too small to quantify margin lift yet. Mark Seaton believes the efficiency ratio can be better than 60% due to the transition to a more data-driven model. He confirmed that shorter duration commercial loans are indeed creating a multi-year refinance tailwind, with premiums similar to purchase transactions.

Mark DeVries asked about the reasons for reduced share repurchases in Q3, the conditions for becoming more active, the target debt-to-capital ratio, and the current M&A landscape.

Answer

CFO Matt Wagner explained that the company paused buybacks to evaluate capital allocation, confirming they will repurchase opportunistically, and reiterated a long-term debt-to-capital target of 20%, currently comfortable at 22.5%. CEO Mark Seaton noted an increase in M&A opportunities on both title and non-title sides due to the prolonged sluggish market, but emphasized a disciplined approach to acquisitions.

Mark DeVries asked about the reasons for the reduced share repurchase activity and what conditions would lead to more aggression. He also inquired about the target debt-to-capital ratio and potential M&A interest as a use of excess capital, specifically if residential market weakness is driving more seller pressure.

Answer

CFO Matt Wajner stated the buyback program was paused to evaluate capital uses, but they remain opportunistic. He reiterated a long-term debt-to-capital target of 20%, noting the current 22.5% is comfortable given the market cycle. CEO Mark Seaton confirmed an increase in M&A opportunities, both title and non-title, due to the prolonged sluggish market, and acknowledged that residential weakness is indeed creating more pressure from potential sellers, while emphasizing a disciplined approach to M&A.

Mark DeVries from Deutsche Bank inquired about the primary drivers of the significant strength in commercial average revenue per order (ARPO) and the reasons behind the increased proportion of commercial revenue coming from refinances.

Answer

CEO Mark Seaton explained that the commercial strength is broad-based, driven by high-liability transactions in industrial, multifamily, and data center sectors, leading to a 30% increase in fee per file. He noted that the shift towards refinance, which now constitutes 46% of commercial revenue, is a cyclical trend driven by a 'refi wall' of maturing loans, which he expects to continue for another year before normalizing back to the historical 30% level.

Mark DeVries from Deutsche Bank inquired about the specific drivers behind the significant strength in commercial average revenue per order (ARPO) and the reasons for the increased percentage of commercial business coming from refinances.

Answer

CEO Mark Seaton explained that the commercial strength is broad-based, with a 33% revenue increase driven by a 30% rise in fee per file, not order volume. Key sectors include Industrial (especially data centers) and Multifamily, with 11 transactions exceeding $1 million in premium. He also noted an expected acceleration of deals in Q4 to capture expiring renewable energy tax credits. Regarding refinances, which rose to 46% of commercial revenue, Seaton attributed it to a cyclical "refi wall" of deals from 2020-2021 maturing, a trend he expects to continue for another year before normalizing back to the historical 30% level.

Mark DeVries from Deutsche Bank inquired about the primary drivers of the significant strength in commercial average revenue per order (ARPO) and the reasons behind the increased mix of refinance transactions in the commercial segment.

Answer

CEO Mark Seaton explained that the commercial ARPO strength is broad-based, driven by high-liability transactions across asset classes like Industrial and Multifamily, including numerous data center deals. He noted that while order counts are up slightly, the fee per file has increased 30%. Seaton also mentioned an anticipated acceleration of deals in Q4 due to expiring renewable energy tax credits. He characterized the rise in commercial refinances as a cyclical trend, stating the market is in the middle of a "refi wall" that will likely persist for another year before normalizing.

Mark DeVries requested an update on the rollout of the Endpoint and Sequoia platforms, the status of a proposed rate cut in Texas, and whether commentary on macro uncertainty impacting commercial was based on tangible evidence.

Answer

CEO Mark Seaton reported that the Sequoia pilot exceeded expectations and a California rollout is underway. For Endpoint, a national rollout plan is being developed for the end of the year. He confirmed the company is operating under the assumption the Texas rate cut will take effect July 1. He clarified that concerns about a commercial slowdown are based on historical recessionary patterns, not current weakness, as the pipeline remains strong.

Mark DeVries inquired about the drivers behind the strong Q4 commercial business results, asking about the breadth of the recovery, the impact of large deals, and the growth outlook for the second half of 2025 against a strong prior-year comparison.

Answer

CEO Ken DeGiorgio confirmed the strength was broad-based and included 14 large deals, a significant increase from the prior quarter. He noted positive trends continued into January with 24% revenue growth. DeGiorgio expressed confidence in full-year growth for 2025, even with tough H2 comparisons, attributing the recent surge to factors like Fed actions, post-election certainty, debt maturities, and improved price discovery between buyers and sellers.

Mark DeVries asked about the potential for further securities repositioning, the relative impact of commercial versus purchase volumes on investment income, and the market traction of Attorney Opinion Letters (AOLs).

Answer

CFO Mark Seaton stated the bulk of the portfolio repositioning is complete, though a smaller action is being considered. He clarified that commercial volume is more impactful to investment income, representing about 60% of escrow deposits. CEO Kenneth DeGiorgio noted that while there's a slight uptick in AOL usage, it remains small as they are not a faster, better, or cheaper alternative to title insurance.

Mark DeVries asked about OneMain Financial's long-term strategy regarding whole loan sales, specifically how the company balances funding diversification with potentially sacrificing returns versus relying solely on unsecured market funding.

Answer

Jenny Osterhout (CFO) stated that whole loan sales provide funding flexibility and diversification, with the current $2.4 billion program offering attractive pricing. Doug Shulman (Chairman and CEO) added that it provides significant strategic optionality, allowing OneMain to leverage its platform to generate various lending products and potentially offload those not desired on its balance sheet, enhancing the franchise's future capabilities.

Mark DeVries asked about OneMain Financial's decision to no longer provide revenue growth guidance, inquiring if revenue growth should generally track managed receivable growth or if the ramping up of the pass-through program could introduce revenue lumpiness. He also questioned the long-term strategy for whole loan sales, specifically the trade-off between giving up returns and leveraging strong funding flexibility through unsecured markets.

Answer

Jenny Osterhout (CFO, OneMain Financial) explained that with flat year-on-year yields, revenues are expected to rise with asset growth (6%-9% managed receivables). She noted that the whole loan sale program, with about half of the $2.4 billion executed in 2026, will provide some revenue benefit through higher quarterly gains on sale and servicing income. She views whole loan sales as a funding flexibility tool, with decisions based on economics, terms, and diversification benefits. Douglas Shulman (Chairman and CEO, OneMain Financial) added that the program offers strategic optionality, allowing them to generate diverse lending products and consider selling those they don't want on their balance sheet.

Mark Devries questioned how long the credit improvement tailwind from the front book/back book mix shift would persist and sought clarification on the reasons for the expected moderation in origination growth.

Answer

EVP & CFO Jenny Osterhout responded that while it's difficult to give a specific timeline, the positive trends in both early and late-stage delinquencies suggest continued benefits. Regarding growth, she explained the moderation is due to lapping the successful growth initiatives from the prior year, leading to tougher comps, and reiterated confidence in the full-year 5% to 8% receivables growth guidance.

Mark DeVries asked about the expected trajectory of the loan loss reserve ratio for the year if strong credit trends hold, and what specific conditions would prompt an acceleration of growth in the card and auto businesses.

Answer

CFO Jenny Osterhout explained that the reserve ratio's path is complex, depending on credit performance, product mix, and macro overlays, stating they will 'wait and see' given current uncertainty. CEO Douglas Shulman noted that growth in card and auto is being paced due to macro uncertainty, and they would likely accelerate once they feel 'fully out of the woods' from the recent inflation-driven credit cycle.

Mark DeVries sought clarity on the ultimate target for the allowance coverage ratio, questioning if the CECL Day 1 level is still relevant given the mix shift toward lower-loss auto and higher-loss card products. He also asked for a more specific breakdown of the CECL reserve for the credit card portfolio.

Answer

CFO Jenny Osterhout explained that while improving portfolio credit should gradually lower reserves, the macroeconomic uncertainty prevents them from changing assumptions yet. She noted that the product mix, especially the immature card portfolio, also plays a role. Osterhout projected the overall reserve could come down by about 50 basis points over time but would not return to CECL Day 1 levels. She specified that without the card portfolio, the consumer loan reserve would be closer to 11.2%, compared to the current blended 11.5%.

Mark DeVries from Deutsche Bank sought to confirm if improving delinquency trends relative to seasonality is the key indicator for future charge-off declines. He also asked about the company's policies and outlook for loan recoveries, given the current inventory of charged-off receivables.

Answer

CFO Jenny Osterhout confirmed that the trajectory of delinquency is the primary indicator for future loss performance and expressed optimism based on current trends and the quality of the 'front book'. Regarding recoveries, she stated that performance remains strong and above pre-pandemic levels, with Q3 results in line with the prior quarter. She expects similar performance going forward as they continue to optimize their collection strategies.

Mark DeVries from Deutsche Bank asked about the impact of significant product refreshes, like the Platinum card, on engagement and spend levels among existing customers, specifically whether they change their card usage and if there's a delay in their awareness and adoption of new benefits compared to new customers.

Answer

CEO Steve Squeri explained that existing customers adopt new benefits quickly, though not as immediately as new customers. He noted rapid engagement with benefits like Lululemon, Resy, and hotel credits. He highlighted the Platinum app's role in simplifying benefit enrollment, which contributed to a 30% uptick in travel bookings in Q4 and a 20% increase in Resy restaurant spending, indicating successful engagement from both new and existing cardholders.

Mark DeVries questioned the impact of significant product refreshes, like the Platinum card, on existing customer engagement and spend. He asked if existing customers change their card usage with new value, and if there's a delay in their awareness and engagement compared to new customers.

Answer

Steve Squeri, Chairman and CEO, noted that existing customers engage quickly, though not as immediately as new customers who are drawn by the new value proposition. He highlighted the Platinum travel app as a key driver, leading to a 30% uptick in Q4 travel bookings and a 20% increase in Resy restaurant spending, indicating a highly successful launch that engaged both new and existing cardholders.

Mark DeVries sought to understand the contribution of the Platinum Card refresh to the acceleration in bill business growth, particularly regarding the quick availability of credits like Resy and Lululemon. He also asked for insights into the demand strength for the consumer versus business Platinum product.

Answer

CFO Christophe Le Caillec stated that while specific partners saw increased engagement (e.g., 2x increase in customers for listed partners), the overall impact of the Platinum Card refresh on total bill business growth for the quarter was small. He attributed the billing strength primarily to macro changes, such as the rebound in airline spending. Management did not provide a specific breakdown of demand strength between consumer and business Platinum products in the answer.

Mark Devries of Deutsche Bank asked about the upcoming Platinum card refresh, questioning if the value proposition would see a similar meaningful step-up relative to the fee as in the past, and about the risk of overwhelming customers with complex benefits.

Answer

Chairman and CEO Stephen Squeri confirmed the strategy is to always add significantly more value than any potential fee increase. He explained that benefits are designed to be easy to use and diverse, so customers can derive substantial value without needing to use every single feature. CFO Christophe Le Caillec added that the costs of new benefits are recognized immediately, while the increased fee revenue is amortized over time, a dynamic built into their financial planning.

Mark DeVries inquired about the potential impact of steeper tariffs on specific business segments and what proactive risk management measures are in place.

Answer

CEO Stephen Squeri identified small businesses as the segment that would likely be impacted first by tariffs. He explained that consumers tend to self-regulate risk by spending less. Squeri assured that risk models are continuously updated and highlighted that the current card member base is more premium than in 2019, with new Millennial and Gen Z cardholders showing stronger credit profiles.

Mark DeVries asked what CEO Steve Squeri has learned from recent customer conversations about their optimism and how historical billed business has responded to rising confidence levels.

Answer

CEO Stephen Squeri confirmed that rising confidence was evident in Q4's results, pointing to strong travel spend, especially front-of-the-cabin bookings, as a key indicator. He also cited a survey showing improved small business sentiment, which correlated with higher organic SME spend. However, he cautioned that while hopeful, the company needs to see this trend continue beyond one quarter before altering its full-year plan.

Mark DeVries of Deutsche Bank asked about the potential impact of Federal Reserve easing on the company's billed business growth, beyond the effects on net interest income.

Answer

CFO Christophe Le Caillec stated that it is too early to see any direct impact on spending patterns from recent small rate changes. However, he expressed an expectation that an accumulation of rate cuts would eventually improve consumer and small business confidence, which in turn would provide support for a recovery in organic spending growth.

Mark DeVries inquired about the unexpectedly rapid prepayment speeds observed in PennyMac Financial's servicing book during Q4 and sought clarification on the expectation for consistent MSR cash flow realization. He also asked about margin differentiation between purchase and refi across channels.

Answer

Chairman and CEO David Spector confirmed that the market was generally surprised by increased prepayment speeds, noting intense competition, especially for higher-balance loans, and a lack of expected margin expansion. He affirmed that MSR cash flow realization is projected to be consistent with Q4 levels. Spector added that margin pressure was seen across both purchase and refi, with a strategic mix shift in consumer direct impacting overall channel margins due to mix rather than just refi pressure.

Mark DeVries sought to understand the confidence behind projections of continued reductions in the average cost to service loans. He also asked about any accounting implications from the upcoming change where PFSI will initially acquire all conventional correspondent loans.

Answer

Executive Daniel Perotti attributed confidence in lower servicing costs to both economies of scale and ongoing process automation. Executive David Spector added that technology initiatives like chatbots and workflow enhancements will drive further efficiencies. Regarding the accounting change, Perotti stated there would be no significant impact, as loans destined for PMT would be on PFSI's books for only 1-2 days.

Mark DeVries asked about the Broker Direct channel, specifically the lag time for new brokers to ramp up production and the size of recent additions. He also requested clarification on the Q4 outlook for the production segment.

Answer

David Spector (executive) explained that share gains are driven by brokers seeking a strong second alternative, supported by PFSI's technology and expanded product offerings like jumbo and second liens. Daniel Perotti (executive) clarified the Q4 outlook, stating that while production income will remain strong, it may not match Q3 levels if rates stay elevated, but the company still expects an overall operating ROE in the high teens.

Mark DeVries asked whether the level of net incremental growth investments, which are expected to impact 2026 earnings by $0.35-$0.40 per share, should be anticipated to continue at the same rate or trail off in 2027.

Answer

President and CEO Dave Yowan stated that the company is currently focused on executing its 2026 plans and is not providing a 2027 outlook. He highlighted the significant growth rates and large addressable markets for Earnest's products (personal loans, refi, Grad PLUS), suggesting sustainable growth opportunities beyond 2026.

Mark DeVries from Deutsche Bank asked whether Navient expects the same level of net incremental growth investments in 2027 as the $0.35-$0.40 per share impact projected for 2026, or if that impact is expected to trail off.

Answer

President and CEO Dave Yowan stated that the company is currently focused on executing against 2026. He highlighted that Earnest is focused on products with high growth rates and addressable markets (personal loans in pilot, refi market expansion, Grad PLUS opportunity), suggesting large and sustainable growth room, but declined to provide a 2027 outlook.

Mark DeVries asked for quantification of Ally Financial's 'upper threes' Net Interest Margin (NIM) target and whether the implied NIM run rate at the end of 2026, combined with sub-2% retail auto net charge-offs, suggests the company will be near a 15% Return on Equity (ROE) run rate by year-end, or if other factors are needed.

Answer

Russell Hutchinson, CFO of Ally Financial, indicated that 'upper threes' NIM, considering the sale of the card business, aligns with previous discussions of a 4% NIM target. He affirmed that the three unchanged pillars for mid-teens returns are high-threes NIM, sub-2% retail auto NCOs, and capital/expense discipline. Mr. Hutchinson stated that Ally has achieved two of these (sub-2% NCOs and capital/expense discipline) and is on a clear path to achieving the third (high-threes NIM), without needing changes to current business operations.

Mark DeVries followed up on NIM commentary, asking for a quantification of the 'upper threes' target. He also inquired if the implied NIM run rate by the end of 2026, combined with sub-2% retail auto charge-off guidance, suggests Ally Financial will be near a 15% ROE run rate, or if additional capital efficiency or operating leverage improvements are needed.

Answer

CFO Russell Hutchinson clarified that 'upper threes' NIM refers to approximately 3.8%, considering the 20 basis point impact from the credit card business sale. He reiterated that the mid-teens ROE target is based on three unchanged pillars: high-threes NIM, a sub-2% retail auto NCO rate, and continued capital and expense discipline. Mr. Hutchinson stated that two of these three pillars are currently met (sub-2% NCO and capital/expense discipline), with high-threes NIM being the remaining item, and no change to business operations is needed to achieve the target.

Mark DeVries asked for the key drivers that would determine whether Ally's 2025 Net Interest Margin (NIM) lands at the high or low end of its 3.4% to 3.5% guidance range.

Answer

CFO Russ Hutchinson explained that the NIM guidance range accounts for several variables. The primary factors include the future path of interest rates (covering scenarios from flat rates to faster-than-expected cuts), the competitive environment for deposits, and the timing of deposit beta evolution towards the expected 70% cumulative target. He stated the range covers various rate trajectories and their potential impact on both asset yields and funding costs throughout the year.

Mark DeVries asked how the unique accounting for the EV leasing business affects Ally's ability to achieve its 4% net interest margin (NIM) target. He also questioned if recent credit curtailments could impact the ability to originate loans at strong, accretive yields.

Answer

CFO Russ Hutchinson explained that the current accounting for EV leases books the economic benefit in the tax line, depressing NIM. A potential switch would add ~6 bps to Q3 NIM but would not fundamentally alter the path to the 4% target. He added that while lower swap rates will pressure Q4 origination yields, they will remain accretive, and unwinding curtailments over the medium term provides a future yield tailwind.

Mark DeVries asked for further clarification on the credit outlook, specifically whether the 25 basis points of delinquencies attributed to loan modification eligibility changes still imply flat or slightly higher charge-offs given the year-over-year increase in delinquencies. He also inquired about revisited marketing strategies to re-accelerate origination growth in 2026.

Answer

CEO Jon Witter stated that the change in loan modification program terms accounts for the majority of the year-over-year change in delinquency rates, considering delinquencies to be plus or minus flat within normal operational variability. He affirmed confidence in consistent roll rates and the long-term net charge-off metrics of 1.9% to 2.1%. Regarding originations, Jon Witter highlighted strong 6%+ growth for the quarter, emphasizing continuous improvements in marketing efficiency and underwriting models, which have reduced annual originations by $600-$700 million while improving quality. He expressed confidence in maintaining and growing market share, including competing for the emerging Plus Reform opportunity.

Mark DeVries asked for a follow-up on the credit outlook, specifically whether charge-offs would remain flat or increase given the year-over-year rise in delinquencies, even after accounting for changes in loan modification eligibility. He also questioned the marketing strategy and plans to re-accelerate origination growth for 2026.

Answer

CEO Jon Witter clarified that the majority of the year-over-year delinquency change is due to modification program term adjustments, with roll rates remaining consistent. He reaffirmed confidence in the long-term net charge-off metrics. Regarding originations, Jon Witter highlighted strong 6%+ growth, continuous marketing efficiency improvements, and strategic underwriting refinements, expressing optimism for continued growth and competition in the Plus Reform opportunity.

Mark DeVries of Deutsche Bank asked if the $4.5-$5 billion opportunity assumes a market share comparable to the current 60%+ range and what percentage of that incremental volume would need to be sold. He also inquired about the potential for new competition and Sallie Mae's barriers to entry.

Answer

CEO Jonathan Witter confirmed the market share assumption is comparable. CFO Pete Graham added that with the increased volume, the bank's balance sheet growth could push to the 'higher single digits' with loan sales or other mechanisms funding the rest. Witter expressed confidence in Sallie Mae's ability to compete due to superior data, at-scale systems, and strong school relationships.

Mark DeVries asked how student loan asset-backed securities (ABS) have traded since Sallie Mae's February loan sale and what the potential gain on sale would be if a similar sale were executed at current market spreads.

Answer

CFO Peter Graham responded that while markets have seen volatility, the student loan ABS market is currently stable and functioning well. He did not provide a specific gain-on-sale estimate but conveyed his belief that there has not been a persistent, material widening of spreads since the February transaction. He affirmed that the company will continue to monitor the market to find the optimal time for its next sale.

Mark DeVries of Deutsche Bank questioned the 6% to 8% origination growth guidance for 2025, noting it implies a slowdown in the second half, and asked why 2024 share buybacks were below the amount planned at the 2023 Investor Forum.

Answer

CEO Jon Witter explained the 2025 origination growth reflects a larger spring season but a more normalized fall season comping against an outsized fall 2024. CFO Pete Graham clarified that higher-than-planned balance sheet growth consumed some capital intended for buybacks, and the repurchase plan's design led to fewer shares being bought as the stock price rose sharply in late 2024.

Mark DeVries asked if there would be a gain/loss on the FFELP loan sale, whether Q3 originations reflect a new run-rate market share post-Discover's exit, and about any observed changes in payment behavior from borrowers with federal loans.

Answer

CFO Pete Graham confirmed no significant gain or loss is expected on the FFELP sale. CEO Jon Witter stated that the 13% originations growth suggests Sallie Mae captured its share of the exiting competitor's volume and that this could be a new run rate, though it must be re-earned each season. Witter added that the company has not seen any negative impact on its portfolio from the resumption of federal loan payments.

Mark Devries asked for elaboration on the encouraging signs of the Walmart program, specifically how its value proposition compares to the last partnership, the optimism for its size, uptake, engagement, and customer types. He followed up by asking if delinquency trends are more favorable than normal seasonalities and the implications for DQs and charge-offs in the next 6-12 months.

Answer

Brian Doubles (President and CEO) highlighted the Walmart program's leading-edge technology (OnePay app, API stack), strong value proposition (5% cashback for Walmart Plus members), alignment with the Walmart Plus loyalty program, and strong digital and in-store placement, expressing excitement for it to become a top five program. Brian Wenzel (EVP and CFO) confirmed that delinquency trends have been performing better than seasonal expectations, leading to credit aperture adjustments, and expects a migration back to generally seasonal trends moving forward, positioning the company well for 2026.

Mark DeVries from Deutsche Bank questioned Synchrony's capital levels, asking if the 10-11% CET1 target range is still appropriate and what the expected pace is for managing down to that level. He also asked if the latest share repurchase authorization was sized to provide flexibility for potential growth outperformance.

Answer

CFO Brian Wenzel confirmed that the target remains 11% CET1 and that the company is on a multi-year path to reach it, highlighting their track record of returning capital. He explained that the $2.5 billion authorization was determined after modeling various scenarios and is a good starting point, but they have the option to discuss an increase with the board later if warranted by business performance and market conditions.

Mark DeVries asked what Synchrony has learned from competitors implementing similar pricing changes and questioned the drivers behind the implied seasonal step-down in the year-end reserve coverage guidance.

Answer

EVP and CFO Brian Wenzel responded that based on competitive screening, peer actions in the partnership space are generally similar, and Synchrony feels comfortable with its current strategy, which is resonating with customers given the low attrition. Regarding the reserve rate, Wenzel explained that the guidance for the year-end rate to be in line with the prior year is based on the forward-looking view of loss content from current delinquencies and a stable macro view, and that the company feels comfortable with this outlook.

Mark DeVries from Deutsche Bank asked for updated thoughts on the strategic appeal of holding the Title and F&G businesses together, and questioned the drivers behind the significant increase in personnel expenses.

Answer

CFO Tony Park stated that the board remains pleased with F&G's performance, its earnings contribution, and its strategic shift to a more fee-based model. CEO Mike Nolan and CFO Tony Park explained that higher personnel costs were driven by a very strong recruiting quarter, strategic investments in technology, and $12 million in elevated health claims, which are expected to normalize in 2026.

Mark DeVries from Deutsche Bank inquired about the five-year outlook on holding F&G as a separate business and questioned the significant increase in personnel expenses, particularly the drivers behind the active recruiting and elevated health claims.

Answer

CFO Tony Park stated that the board is pleased with F&G's performance, which contributed 32% of adjusted earnings, and is excited about its move to a more fee-based, less capital-intensive model. CEO Mike Nolan added that the strong recruiting quarter had a 20 basis point impact and reflects front-loaded expenses for future revenue. Tony Park further clarified that a $12 million increase in elevated health claims, which flow through personnel costs, also contributed to the expense increase and is expected to normalize in 2026.

Mark DeVries of Deutsche Bank AG asked for the rationale behind investing in F&G's capital raise and how its expected return compares to alternatives. He also inquired about the M&A pipeline and whether larger transactions were being contemplated.

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CFO Tony Park explained the F&G investment was twofold: to support F&G's growth opportunities and to maintain FNF's ownership stake above 80% to preserve the option for a future tax-free spin-off. CEO Mike Nolan stated that he expects more title M&A activity this year, focusing on smaller tuck-in agent acquisitions, but would not discount a larger transaction in ancillary or technology businesses if an attractive opportunity emerged.

Mark DeVries asked for more color on the drivers behind the accelerating growth in open orders for the title business in January and questioned whether F&G realizes critical synergies from FNF's ownership that are essential for its growth.

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CEO Mike Nolan explained that while it's hard to confirm market share gains on a monthly basis, the strength in purchase and refi orders, even with higher rates, points to significant pent-up demand. Regarding F&G, F&G CEO Chris Blunt stated the business has operated on a stand-alone basis, but acknowledged benefits from FNF's capital support and cybersecurity expertise. Mike Nolan added that the FNF-driven ratings upgrade was critical for F&G's channel expansion. CFO Tony Park noted F&G would likely maintain its ratings now even if it were independent.

Mark DeVries of Deutsche Bank followed up on the commercial outlook, asking if optimism for the office sector is based on current pipeline activity or future expectations. He also questioned if F&G's current capital is sufficient for its growth opportunities and inquired about any potential impact from recent hurricanes on Q4 closings.

Answer

CEO Mike Nolan clarified that the optimism for the office sector is based on seeing some initial transactions and, more significantly, on feedback from their commercial leadership team regarding client expectations for 2025. F&G CEO Chris Blunt affirmed that F&G is capital self-sufficient and does not anticipate needing a capital infusion from FNF. Regarding hurricanes, Mike Nolan estimated a minor impact on the Florida direct market, potentially around $1 million in revenue per month for a couple of months.

Mark DeVries asked how Navient plans to manage its adjusted tangible equity ratio and what drove the reduction in the loan loss reserve coverage ratio despite rising delinquencies.

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CFO Joe Fisher explained the adjusted tangible equity ratio target depends on the loan mix but is expected to remain north of the 8% long-term guide. He clarified that the reserve coverage ratio declined due to a mix shift towards higher-quality refinance loans, which carry a lower lifetime loss expectation and thus require a lower allowance.

Mark DeVries asked how expected paydowns on the FFELP portfolio align with debt maturities and how the company's strategic repositioning has affected its access to funding markets. He also inquired about the drivers behind the sharp increase in FFELP delinquencies.

Answer

CFO Joe Fisher stated that Navient has ample funding flexibility and does not need to access markets for multiple periods, though it would do so opportunistically. He attributed the rise in FFELP delinquencies to a combination of the general economic environment and challenges in borrower outreach due to the ongoing noise surrounding federal loan forgiveness policies.

Mark DeVries sought an update on the growth of the in-school lending business and the timing of the Government Services sale, asking if the recent impairment meant a future sale would not be a P&L event.

Answer

CEO David L. Yowan reported a successful peak season for in-school lending, noting that market share remains in the low-single digits and that the CFPB settlement is not expected to be a catalyst for growth. Regarding the Government Services sale, he stated they are in active discussions but offered no specific timeline, confirming that the goodwill impairment was taken to reflect the likely value in a potential transaction.

Mark DeVries asked about the current pipeline for bulk MSR and whole platform acquisitions, the company's capital flexibility for such deals, and whether expected returns remain accretive to the new 16-20% ROTCE target. He also questioned if the company is still considering a monetization of its Xome business.

Answer

CEO Jay Bray confirmed the bulk MSR market is returning with attractive levels and expressed bullishness on future industry consolidation opportunities. CFO Kurt Johnson added that while returns may not be at 'cycle best' levels, they are solid, risk-adjusted, and fit within the 16-20% ROTCE target. Regarding Xome, Bray stated that the company's strategic thinking has not shifted; they believe monetization of all or part of the asset makes sense at the right time to extract its full value.

Mark DeVries of Deutsche Bank inquired about the current state of the pipeline for bulk servicing acquisitions and Mr. Cooper's flexibility and capacity for more deals following the Flagstar acquisition. He also asked if the company's approach to the correspondent channel has shifted from opportunistic to a more committed, long-term strategy to gain market share.

Answer

Chairman and CEO Jay Bray stated that while the bulk market has slowed, there is still activity, and Mr. Cooper expects it to pick up in the first half of the next year. He affirmed the company has ample capacity and dry powder to act on opportunities, with a strong tangible net worth to asset ratio even after the Flagstar deal. Bray confirmed a strategic shift in the correspondent channel, stating '100%' that the company now has a reason to win and is committed to taking more market share, viewing itself as the best buyer of MSRs in any channel due to its cost structure and retention.